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As filed with the Securities and Exchange Commission on November 21, 2022

Registration No. 333-267920

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 2

TO

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

BED BATH & BEYOND INC.

and the Subsidiary Guarantors listed on Schedule A hereto

(Exact name of registrant issuer as specified in its charter)

 

 

New York

(State or other jurisdiction of incorporation or organization)

5700

(Primary Standard Industrial Classification Code Number)

11-2250488

(I.R.S. Employer Identification Number)

650 Liberty Avenue

Union, New Jersey 07083

(908) 688-0888

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Arlene Hong

Executive Vice President, Chief Legal Officer and Corporate Secretary

650 Liberty Avenue

Union, New Jersey 07083

(908) 688-0888

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

With copies to:

David Lopez

Helena Grannis
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
Tel: (212) 225-2000

  Daniel J. Bursky
Joshua T. Coleman
Fried, Frank, Harris, Shriver &
Jacobson LLP
One New York Plaza
New York, New York 10004
Tel: (212) 859-8000

 

 

Approximate date of commencement of proposed sale of the securities to the public: The offering of the securities will commence promptly following the filing of the Registration Statement. No tendered securities will be accepted for exchange until after this Registration Statement has been declared effective.

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.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) 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, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross Border Third Party Tender Offer)  ☐

 

 

Each Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until each Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 

 

 


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Schedule A — Table of Subsidiary Guarantors

 

Exact Name of Subsidiary Guarantor    State or Other
Jurisdiction of
Incorporation or
Formation
   I.R.S. Employer
Identification Number
 

BBB Canada LP Inc.

   Delaware      26-1607777  

BBB Canada Ltd.

   Canada      98-0564461  

BBB Value Services Inc.

   Tennessee      45-1775809  

BBBYCF LLC

   Delaware      81-0835533  

BBBYTF LLC

   Delaware      81-1726838  

BBBY Management Corporation

   New Jersey      22-3259534  

Bed ‘N Bath Stores Inc.

   New Jersey      22-2732034  

Bed Bath & Beyond Canada L.P.

   Ontario      98-0564465  

Bed Bath & Beyond of California Limited Liability Company

   Delaware      22-3612362  

Buy Buy Baby, Inc.

   Delaware      52-1942010  

BWAO LLC

   Delaware      45-5291562  

Chef C Holdings LLC

   Delaware      81-5106069  

Decorist, LLC

   Delaware      46-1344917  

Harmon Stores, Inc.

   Delaware      22-2036555  

Liberty Procurement Co. Inc.

   New York      52-2279383  


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LOGO

Dear Bed Bath & Beyond Noteholder:

Bed Bath & Beyond Inc. (“BBBY,” “we” or the “Company”) has developed a series of debt exchange transactions to strengthen its balance sheet by addressing its upcoming 2024 debt maturity and deleveraging its long-dated debt. We believe these transactions provide us with a comprehensive solution that offers the best path forward for the future of our Company and is in the best interests of all of our stakeholders.

We are making offers (the “Exchange Offers”) to exchange our 3.749% Senior Notes due 2024 (the “2024 Notes”), our 4.915% Senior Notes due 2034 (the “2034 Notes”), our 5.165% Senior Notes due 2044 (the “2044 Notes” and, together with the 2024 Notes and the 2034 Notes, the “Old Notes”) for new 3.693% Senior Second Lien Secured Non-Convertible Notes due 2027 (the “New Second Lien Non-Convertible Notes”), new 8.821% Senior Second Lien Secured Convertible Notes due 2027 (the “New Second Lien Convertible Notes”) and new 12.000% Senior Third Lien Secured Convertible Notes due 2029 (the “New Third Lien Secured Notes” and, together with the New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes, the “New Secured Notes”). Holders of the 2024 Notes will have the option to exchange their 2024 Notes for New Second Lien Non-Convertible Notes, or New Second Lien Convertible Notes. Holders of the 2034 Notes and the 2044 Notes will have the option to exchange their 2034 Notes and 2044 Notes for New Third Lien Secured Notes. In conjunction with the Exchange Offers, we are also soliciting consents (the “Consent Solicitations” and, together with the Exchange Offers, the “Transactions”) from holders of the Old Notes to certain proposed amendments (the “Proposed Amendments”) to the indenture governing the Old Notes (the “Old Notes Indenture”). The details of the Exchange Offers and the Consent Solicitations are described in the accompanying prospectus, which we urge you to carefully read in its entirety.

We believe the successful completion of the Transactions will significantly reduce our debt and interest expense and will place us in a stronger financial position going forward. Successful completion of the Transactions also reduces the risks that the maturity of the 2024 Notes pose on our current and future business by addressing the maturity of these notes.

The Exchange Offers and the Consent Solicitations

If you tender (and do not validly withdraw) any or all of your Old Notes in the Exchange Offers (which will also constitute a delivery of your consent to the Proposed Amendments in the applicable Consent Solicitation) at or prior to 11:59 P.M., New York City time on December 5, 2022, unless the applicable Exchange Offer and Consent Solicitation is extended or earlier terminated (such date and time with respect to each Exchange Offer, as the same time may be extended, the “Expiration Time”), you will be eligible to receive, at your option, the following consideration per $1,000 principal amount of Old Notes:

 

   

2024 Notes: either $1,000 principal amount of 3.693% New Second Lien Non-Convertible Notes or $410 principal amount of 8.821% New Second Lien Convertible Notes.(1)

 

   

2034 Notes: $217.50 principal amount of 12.000% New Third Lien Secured Notes.

 

   

2044 Notes: $217.50 principal amount of 12.000% New Third Lien Secured Notes.

 

(1)

Note, however, that on or after the first anniversary of the issue date of the New Second Lien Non-Convertible Notes (which we expect to be on December 7, 2023), we may redeem for cash all or a portion of the New Second Lien Non-Convertible Notes at a redemption price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, together with accrued and unpaid interest to, but excluding, the redemption date.

In addition to the consideration above, we are also offering holders of the Old Notes early participation payments if they decide to tender their Old Notes prior to 5:00 P.M., New York City time on October 31, 2022 (the “Early Participation Time”). Holders of the 2024 Notes will receive an additional $15 of New Second Lien

 

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Non-Convertible Notes per $1,000 of 2024 Notes tendered in exchange for New Second Lien Non-Convertible Notes and an additional $15 of New Second Lien Convertible Notes per $1,000 of 2024 Notes tendered in exchange for New Second Lien Convertible Notes if they tender their 2024 Notes before the Early Participation Time. Holders of the 2034 Notes and holders of the 2044 Notes will receive an additional $7.50 of New Third Lien Secured Notes per $1,000 of 2034 Notes and 2044 Notes tendered in exchange for New Third Lien Secured Notes if they tender their 2034 Notes and 2044 Notes prior to the Early Participation Time.

Without successful completion of the 2024 Exchange Offer, our 2024 Notes mature in August 2024 and there is no assurance regarding alternative transactions that may be available to address the maturity of our 2024 Notes over time and/or the terms of any such alternatives.

Deadline for Participating

THE DEADLINE FOR PARTICIPATING IN THE EXCHANGE OFFERS IS 11:59 P.M., NEW YORK CITY TIME ON DECEMBER 5, 2022, UNLESS EXTENDED OR EARLIER TERMINATED.

In order to allow sufficient time for processing, you must contact your broker, dealer, bank, trust company or other nominee significantly in advance of the Early Participation Time or Expiration Time and request it to tender your Old Notes in the Exchange Offers.

None of the Company, the dealer manager, the trustees with respect to the Old Notes and the New Secured Notes, the information and exchange agent, or any affiliate of any of them makes any recommendation as to whether you should participate in the Exchange Offers and Consent Solicitations, and no one has been authorized by any of them to make such a recommendation. You must make your own decision as to whether you tender Old Notes and, if so, the principal amount of the Old Notes as to which action is to be taken.

We urge you to carefully read the accompanying prospectus in its entirety, including the discussion of risks, uncertainties and other issues that you should consider with respect to the Exchange Offers described in the section entitled “Risk Factors.”

The Exchange Offers and Consent Solicitations may be amended, extended or terminated, either as a whole, or with respect to one or more Exchange Offer, if any of the conditions described in the section “Conditions of the Exchange Offers and the Consent Solicitations” are not satisfied or waived, subject to applicable law.

Questions

If you have any questions or need any assistance in connection with the Exchange Offers and the Consent Solicitations, please contact Global Bondholder Services Corporation, the Exchange Agent and Information Agent, by phone at (212) 430-3774 for banks and brokers, and at (855) 654-2015 for all other callers (toll-free) or by email at contact@gbsc-usa.com. We also urge you to read the “Questions and Answers About the Exchange Offers and the Consent Solicitations” in the accompanying prospectus which answer a variety of questions about the Exchange Offers and Consent Solicitations.

We are respectfully requesting your consideration and thank you in advance for your support of this important Transaction and of the Company and its business.

 

Sincerely,
Sue Gove
Chief Executive Officer

 

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The information in this prospectus is not complete and may be changed. We may not complete the exchange offers and consent solicitations and issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities nor a solicitation of an offer to buy these securities in any jurisdiction where the offer and sale is not permitted.

 

Subject to Completion, Dated November 21, 2022

PRELIMINARY PROSPECTUS

LOGO

Offers to Exchange

 

   

any and all of its 3.749% Senior Unsecured Notes due August 1, 2024 (the “2024 Notes”) for (i) new 3.693% Senior Second Lien Secured Non-Convertible Notes due 2027 (the “New Second Lien Non-Convertible Notes”) and/or (ii) new 8.821% Senior Second Lien Secured Convertible Notes due 2027 (the “New Second Lien Convertible Notes” and, such exchange offer, the “2024 Notes Exchange Offer”)

 

   

any and all of its 4.915% Senior Unsecured Notes due August 1, 2034 (the “2034 Notes”) for new 12.000% Senior Third Lien Secured Convertible Notes due 2029 (the “New Third Lien Secured Notes” and, such exchange offer, the “2034 Notes Exchange Offer”)

 

   

any and all of its 5.165% Senior Unsecured Notes due August 1, 2044 (the “2044 Notes” and together with the 2024 Notes and the 2034 Notes, the “Old Notes”) for New Third Lien Secured Notes (such exchange offer, the “2044 Notes Exchange Offer” and, together with the 2024 Notes Exchange Offer and the 2034 Notes Exchange Offer, the “Exchange Offers”)

and

in the case of each of the 2024 Notes Exchange Offer, the 2034 Notes Exchange Offer and the 2044 Notes Exchange Offer, a Solicitation of Consents to Amend the Old Notes Indenture with respect to each of the 2024 Notes, the 2034 Notes and the 2044 Notes, respectively.

 

Title of Old

Notes to be

Tendered

  

CUSIP
Number

   Outstanding
Principal
Amount
  

Early Participation
Payment (per $1,000
principal amount of
Old Notes Tendered) (1)

  

Exchange Consideration for
Tender of Old Notes and
Delivery of Consent (per
$1,000 principal amount of
Old Notes Tendered)(2)(3)(4)

3.749% Senior Unsecured Notes due 2024

   075896 AA8    $215,404,500   

$15 principal amount of 3.693% Senior Second Lien Secured Non-Convertible Notes due 2027

 

or

 

$15 principal amount of 8.821% Senior Second Lien Secured Convertible Notes due 2027

 

  

$1,000 principal amount of 3.693% Senior Second Lien Secured Non-Convertible Notes due 2027(5)

 

or

 

$410 principal amount of 8.821% Senior Second Lien Secured Convertible Notes due 2027

 

4.915% Senior Unsecured Notes due 2034

   075896 AB6    $209,712,000    $7.50 principal amount of 12.000% Senior Third Lien Secured Convertible Notes due 2029    $217.50 principal amount of 12.000% Senior Third Lien Secured Convertible Notes due 2029

5.165% Senior Unsecured Notes due 2044

   075896 AC4    $604,820,000    $7.50 principal amount of 12.000% Senior Third Lien Secured Convertible Notes due 2029    $217.50 principal amount of 12.000% Senior Third Lien Secured Convertible Notes due 2029


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(1)

In addition to the applicable Exchange Consideration, holders of Old Notes will receive the applicable Early Participation Payment in the form of additional New Second Lien Non-Convertible Notes, New Second Lien Convertible Notes and New Third Lien Secured Notes (together, the “New Secured Notes”) per each $1,000 principal amount of the specified series of Old Notes validly tendered at or prior to the applicable Early Participation Time and not validly withdrawn.

(2)

Exchange Consideration per $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at or prior to the applicable Expiration Time.

(3)

Excludes accrued and unpaid interest to but not including the date of settlement of each Exchange Offer, which will be paid in cash in addition to the applicable Exchange Consideration.

(4)

Assuming full participation in the Exchange Offers, the maximum aggregate principal amount of New Secured Notes that could be issued is (A) if all holders of 2024 Notes exchange their 2024 Notes for New Second Lien Non-Convertible Notes, $215.4 million in aggregate principal amount of New Second Lien Non-Convertible Notes (or $218.6 million in aggregate principal amount of New Second Lien Non-Convertible Notes, assuming full participation in the Exchange Offer at or prior to the Early Participation Time), or if all holders of 2024 Notes exchange their 2024 Notes for New Second Lien Convertible Notes, $88.3 million in aggregate principal amount of New Second Lien Convertible Notes (or $91.5 million in aggregate principal amount of New Second Lien Convertible Notes, assuming full participation in the Exchange Offer at or prior to the Early Participation Time), or if all holders of 2024 Notes exchange a portion of their 2024 Notes for New Second Lien Non-Convertible Notes and a portion of their 2024 Notes for New Second Lien Convertible Notes (whether at or prior to the Early Participation Time or after the Early Participation Time and at or prior to the Expiration Time), an aggregate principal amount of New Second Lien Non-Convertible Notes and New Second Lien Convertible Notes not exceeding the foregoing principal amounts, and (B) $177.2 million in aggregate principal amount of New Third Lien Secured Notes (or $183.3 million in aggregate principal amount of New Third Lien Secured Notes, assuming full participation in the Exchange Offer at or prior to the Early Participation Time).

(5)

On or after the first anniversary of the issue date of the New Second Lien Non-Convertible Notes (which we expect to be on December 7, 2023), we may redeem for cash all or a portion of the New Second Lien Non-Convertible Notes at a redemption price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, together with accrued and unpaid interest to, but excluding, the redemption date.


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Each of the Exchange Offers and the Consent Solicitations will expire at 11:59 p.m., New York City time, on December 5, 2022, unless extended or earlier terminated with respect to a series of Old Notes (such time and date with respect to each of the Exchange Offers, as the same may be extended, the “Expiration Time”). Holders of Old Notes may not tender their Old Notes without also delivering a Consent with respect to such Old Notes tendered, nor may holders of Old Notes deliver their Consent with respect to any Old Notes without tendering such Old Notes.

Tenders of Old Notes may be withdrawn at any time at or prior to 11:59 p.m., New York City time, December 5, 2022, but not thereafter, subject to limited exceptions, unless such time is extended with respect to an Exchange Offer (such time and date with respect to each of the Exchange Offers, as the same may be extended, the “Withdrawal Deadline”). To be eligible to receive the Early Participation Payment (as defined below) with respect to any Exchange Offer, holders of the applicable Old Notes must tender their Old Notes at or prior to 5:00 p.m., New York City time, October 31, 2022 (such time and date with respect to each of the Exchange Offers, as the same may be extended, the “Early Participation Time”) and not validly withdraw their Old Notes prior to the applicable Withdrawal Deadline. We may extend the Early Participation Time or the Withdrawal Deadline with respect to any or all of the Exchange Offers, subject to applicable law.

Upon the terms and subject to the conditions set forth in this Prospectus and Consent Solicitation Statement (as it may be supplemented and amended from time to time, this “Prospectus”), Bed Bath & Beyond Inc. (the “Company”) is offering to exchange (i) newly issued 3.693% Senior Second Lien Secured Non-Convertible Notes due 2027 (the “New Second Lien Non-Convertible Notes”) and/or 8.821% Senior Second Lien Secured Convertible Notes due 2027 (the “New Second Lien Convertible Notes” and, together with the New Second Lien Non-Convertible Notes, the “New Second Lien Secured Notes”) for any and all validly tendered (and not validly withdrawn) outstanding 2024 Notes (the “2024 Notes Exchange Offer”), (ii) newly issued 12.000% Senior Third Lien Secured Convertible Notes due 2029 (the “New Third Lien Secured Notes” and, together with the New Second Lien Non-Convertible Notes, the “New Convertible Secured Notes” and the New Convertible Secured Notes, together with the New Second Lien Non-Convertible Notes, the “New Secured Notes”) for any and all validly tendered (and not validly withdrawn) outstanding 2034 Notes (the “2034 Notes Exchange Offer”) and (iii) newly issued New Third Lien Secured Notes for any and all validly tendered (and not validly withdrawn) outstanding 2044 Notes (the “2044 Notes Exchange Offer”) (the 2024 Notes, 2034 Notes and 2044 Notes, collectively, the “Old Notes” and the 2024 Notes Exchange Offer, the 2034 Notes Exchange Offer and 2044 Notes Exchange Offer, collectively, the “Exchange Offers”). In conjunction with the Exchange Offers, we are soliciting Consents (as defined herein) for the Proposed Amendments (as defined herein). We must receive Consents by holders representing a majority of the outstanding principal amount of a series of the Old Notes to adopt the Proposed Amendments with respect to such series. None of the Exchange Offers are conditioned on the receipt of Consents by holders representing a majority of the outstanding principal amount of any series of the Old Notes nor on the adoption of the Proposed Amendments with respect to such series.

Pursuant to the Exchange Offers and Consent Solicitation, in exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at any time at or prior to the applicable Expiration Time and accepted by the Company, participating holders will receive the applicable consideration (with respect to each such series, the “Exchange Consideration”) listed in the table on the cover of this Prospectus under the column heading “Exchange Consideration for Tender of Old Notes and Delivery of Consent (per $1,000 principal amount of Old Notes Tendered).” In addition, in exchange for each $1,000 principal amount of Old Notes validly tendered at any time at or prior to the Early Participation Time (and not validly withdrawn) and accepted by the Company, participating holders will receive the applicable consideration (with respect to each such series, the “Early Participation Payment”) listed in the table on the cover of this Prospectus under the column heading “Early Participation Payment (per $1,000 principal amount of Old Notes Tendered).” Participating holders will receive, in cash, accrued and unpaid interest, if any, on their accepted Old Notes to, but not including, the Settlement Date (as defined herein).

No representation is made as to the correctness or accuracy of the CUSIP Numbers listed in this Prospectus or printed on the Old Notes. They are provided solely for the convenience of the holders.


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If you desire to tender your Old Notes or deliver Consents on the day that the applicable Expiration Time occurs, you must allow sufficient time for completion of the ATOP (as defined below) or other applicable procedures during the normal business hours of DTC (as defined below) on such date. Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee or custodian may establish their own earlier deadlines for participation in the Exchange Offers and Consent Solicitations.

The Companys obligations to accept Old Notes and Consents in the Exchange Offers and the Consent Solicitations are subject to the satisfaction or waiver of certain conditions described herein, including the condition that the Minimum Price (as defined below) be no more than $12.00. In addition, subject to applicable law, the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes, may be amended, extended, terminated or withdrawn at any time if any of the conditions described in the section Conditions of the Exchange Offers and the Consent Solicitations are not satisfied or waived, subject to applicable law. The consummation of each Exchange Offer and Consent Solicitation is not conditioned on the consummation of any of the other Exchange Offers and Consent Solicitations. Each Exchange Offer is conditioned on the lower of (i) the Nasdaq Official Closing Price of BBBY (as reflected on Nasdaq.com) immediately preceding the Expiration Time or (ii) the average Nasdaq Official Closing Price of BBBY (as reflected on Nasdaq.com) for the five trading days immediately preceding the Expiration Time not exceeding $12.00 (such price, the “Minimum Price”).

If any Exchange Offer is consummated, we have agreed to pay a fee (the “Soliciting Broker Fee”) equal to $2.50 for each $1,000 in principal amount of Old Notes that is validly tendered and accepted for exchange pursuant to such Exchange Offer to soliciting retail brokers for holders holding less than $1,000,000 aggregate principal amount of Old Notes that are appropriately designated by their clients to receive this fee. See “General Terms of the Exchange Offers and the Consent Solicitations—Soliciting Broker Fee.

The New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes will be issued pursuant to an indenture and the New Third Lien Secured Notes will be issued pursuant to an indenture (such indentures, the “New Notes Indentures”), dated as of the Settlement Date, by and among the Company, the Subsidiary Guarantors (as defined herein) and Wilmington Trust, National Association, as trustee (in such capacity under each New Notes Indenture, a “New Notes Trustee” and together the “New Notes Trustees”) and collateral agent (in such capacity under each New Notes Indenture, a “Collateral Agent” and together the “Collateral Agents”). For a detailed description of the terms of the New Secured Notes (including with respect to the second lien priority and third lien priority of the New Secured Notes and restrictive covenants to be set forth in the New Notes Indentures), see “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes.”

The New Secured Notes will be fully and unconditionally guaranteed (collectively, the “New Secured Notes Guarantees”) by each of the Company’s subsidiaries that is a borrower or has guaranteed obligations under the Amended Credit Agreement (as defined herein) (collectively, the “Subsidiary Guarantors”) as described in “Description of New Second Lien Secured Notes—Guarantees” and “Description of New Third Lien Secured Notes—Guarantees.”

The New Secured Notes and the New Secured Notes Guarantees will be:

 

   

in the case of the New Second Lien Secured Notes, secured on a second-priority basis by the Collateral (as defined herein) (subject to certain Permitted Liens, as defined in “Description of New Second Lien Secured Notes—Certain Definitions” and “Description of New Third Lien Secured Notes—Certain Definitions”) and on a junior basis to all existing and future Indebtedness (as defined herein) of the Company and the Subsidiary Guarantors secured by the Collateral on a first-priority basis, including the ABL/FILO Obligations, and all other existing and future senior Secured Indebtedness (as defined in “Description of New Second Lien Secured Notes—Certain Definitions” and “Description of New Third Lien Secured Notes—Certain Definitions”) of the Company and the Subsidiary Guarantors that is secured by a first-priority lien on the Collateral;


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in the case of the New Third Lien Secured Notes, secured on a third-priority basis by the Collateral (subject to certain Permitted Liens) and will be secured on a junior basis to (i) all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a first-priority basis, including the ABL/FILO Obligations, (ii) all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a second-priority basis, including the Second Lien Obligations (as defined in “Description of New Second Lien Secured Notes—Certain Definitions”) and (iii) all other existing and future senior Secured Indebtedness of the Company and the Subsidiary Guarantors that is secured by a first-priority or second-priority lien on the Collateral;

 

   

effectively senior to all existing and future unsecured Indebtedness (as defined herein) of the Company and the Subsidiary Guarantors to the extent of the value of the Collateral, including any Old Notes not tendered in the Exchange Offers;

 

   

(i) effectively subordinated to any of the Company’s and the Subsidiary Guarantors’ existing and future Indebtedness that is secured by assets that do not constitute Collateral securing the New Secured Notes, including the equity pledges that secure the Senior Lien Obligations, to the extent of the value of such assets and (ii) structurally subordinated to all existing and future Indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries that do not guarantee the New Secured Notes;

 

   

unconditionally guaranteed by the Subsidiary Guarantors;

 

   

in the case of the New Second Lien Secured Notes, pari passu in right of payment with, and secured on an equal and ratable basis with, all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a second-priority basis;

 

   

in the case of the New Third Lien Secured Notes, pari passu in right of payment with, and secured on an equal and ratable basis with, all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a third-priority basis; and

 

   

senior in right of payment to any of the Company’s and the Subsidiary Guarantors’ future subordinated Indebtedness.

On or after the first anniversary of the issue date of the New Second Lien Non-Convertible Notes (which we expect to be on December 7, 2023), the Company may redeem for cash all or a portion of the New Second Lien Non-Convertible Notes at a redemption price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, together with accrued and unpaid interest to, but excluding, the redemption date. On or after the first anniversary of the issue date of the New Second Lien Convertible Notes and the New Third Lien Secured Notes (which we expect to be December 7, 2023), the Company may redeem for cash all or a portion of the New Second Lien Convertible Notes and the New Third Lien Secured Notes if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption at a redemption price equal to 100% of the principal amount thereof to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Our common stock is listed on The Nasdaq Global Select Market under the symbol “BBBY.” On November 18, 2022, the last reported sale price of the common stock was $3.38.


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Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

 

 

Investing in the New Secured Notes involves risks. See “Risk Factors” beginning on page 38.

 

 

Dealer Manager and Solicitation Agent

Lazard

 

 

The date of this Prospectus is                     , 2022.


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In conjunction with the Exchange Offers, and on the terms and subject to the conditions set forth in this Prospectus, the Company hereby solicits consents (the “Consent Solicitations”) from holders of Old Notes (the “Consents”) to certain proposed amendments (the “Proposed Amendments”) to that certain Indenture, dated as of July 17, 2014 (as supplemented by the First Supplemental Indenture, dated as of July 17, 2014, the “Old Notes Indenture”), between the Company and The Bank of New York Mellon, as trustee (the “Old Notes Trustee”), which will become effective with respect to a series of Old Notes to the extent (a) we receive Consents to adopt the Proposed Amendments by holders representing a majority of the outstanding principal amount of such series of the Old Notes and (b) all tendered Old Notes are accepted for exchange in the applicable Exchange Offer.

The Proposed Amendments would eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens and (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes as further described under “Proposed Amendments.

Holders of Old Notes that tender such Old Notes will be deemed to have given Consent to the Proposed Amendments with respect to the Old Notes. The consummation of the Consent Solicitations is subject to the satisfaction or waiver of the conditions to consummate the applicable Exchange Offer set forth in this Prospectus. The effectiveness of the Consent Solicitations are subject to the receipt of the Old Notes Requisite Consents (as defined herein). The Company may waive any condition at its discretion, subject to applicable law. See “Conditions of the Exchange Offers and the Consent Solicitations.”

The Company has the right to amend, extend, terminate or withdraw any of the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes if any of the conditions described in the section Conditions of the Exchange Offers and the Consent Solicitations are not satisfied or waived, subject to applicable law.

Tendered Old Notes may not be withdrawn and Consents may not be revoked subsequent to the applicable Withdrawal Deadline, subject to limited exceptions. In the event of a termination of an Exchange Offer with respect to a series of Old Notes, the Exchange Offers and the Consent Solicitations with respect to such series will not be consummated, the Proposed Amendments with respect to such series will not become effective, no consideration for the applicable Exchange Offer will be paid, and the Old Notes tendered pursuant to the applicable Exchange Offer will be promptly returned to the tendering holders.

As all Old Notes are held in book-entry form at The Depository Trust Company (“DTC”), no letter of transmittal will be used in connection with the Exchange Offers. The valid transmission for acceptance through DTC’s Automated Tender Program (“ATOP”) will constitute delivery of the Old Notes and Consents in connection with the Exchange Offers. There are no guaranteed delivery procedures for the Exchange Offers.

The Exchange Offers are being made on the basis of this Prospectus and are subject to the terms described herein and those that may be set forth in any amendment or supplement hereto or incorporated by reference herein. Any decision to participate in the Exchange Offer should be based on the information contained in this Prospectus or any amendment or supplement hereto or specifically incorporated by reference herein.

None of the Company, the Subsidiary Guarantors, their respective subsidiaries, the Exchange Agent (as defined herein), the Information Agent (as defined herein), the Dealer Manager (as defined herein), the Old Notes Trustee, the New Notes Trustees or the affiliates of any of them makes any recommendation as to whether holders of the Old Notes should tender their Old Notes pursuant to any of the Exchange Offers and deliver Consents pursuant to any of the Consent Solicitations. Each holder must make its own decision as to whether to tender its Old Notes and deliver Consents, and, if so, the principal amount with respect to any series of the Old Notes as to which action is to be taken. Holders should not construe anything in this Prospectus as legal, business or tax advice. Each holder should consult its advisors as needed to make its decision and to determine whether it is legally permitted to participate in the Exchange Offers under applicable legal investment or similar laws or regulations.

 

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This Prospectus incorporates important business and financial information about the Company that is not included in or delivered with this document. This information is available without charge to holders upon written or oral request to the Company, which may be made in writing or by phone to the following address or telephone number: 650 Liberty Avenue, Union, New Jersey 07083, Tel. (908) 688-0888, Attention: Investor Relations. To obtain timely delivery of such information, security holders must request such information no later than five business days prior to the applicable Expiration Time, which is 11:59 p.m., New York City time, on December 5, 2022, unless extended or earlier terminated with respect to a series of Old Notes.

The Company and other sources identified herein have provided the information contained in or incorporated by reference into this Prospectus. None of the Dealer Manager, the Exchange Agent, the Information Agent, the Old Notes Trustee, the New Notes Trustees or any of their respective affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of such information, and nothing contained in this Prospectus is, or shall be relied upon as, a promise or representation by the Dealer Manager, the Exchange Agent, the Information Agent, the Old Notes Trustee, the New Notes Trustees or any of their respective affiliates.

The Company has not, and the Dealer Manager has not, authorized any person (including any dealer or broker) to provide you with any information other than that contained or incorporated by reference in this Prospectus or to which the Company has referred you. The Company and the Dealer Manager take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. The Company is not making an offer of New Secured Notes in any jurisdiction where the Exchange Offers are not permitted, and this Prospectus does not constitute an offer to participate in the Exchange Offers to any person in any jurisdiction where it is unlawful to make such an offer or solicitations. The information contained or incorporated by reference in this Prospectus may only be accurate on the date hereof or the dates of the documents incorporated by reference herein. You should not assume that the information contained or incorporated by reference in this Prospectus is accurate as of any other date.

The New Secured Notes have not been approved or recommended by any U.S. federal, state or foreign jurisdiction or regulatory authority. Furthermore, those authorities have not been requested to confirm the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense.

 

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TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS      1  
WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION OF CERTAIN INFORMATION BY REFERENCE      2  
ADDITIONAL INFORMATION      3  
FORWARD-LOOKING STATEMENTS      3  
IMPORTANT DATES      5  
QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS      6  
SUMMARY      15  
SUMMARY OF THE TERMS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS      19  
SUMMARY OF NEW SECURED NOTES      24  
RISK FACTORS      38  
SUBSIDIARY GUARANTORS      70  
USE OF PROCEEDS      70  
CAPITALIZATION      71  
GENERAL TERMS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS      73  
PROPOSED AMENDMENTS      77  
ACCEPTANCE OF OLD NOTES; ACCEPTANCE OF CONSENTS; ACCRUAL OF INTEREST      83  
PROCEDURES FOR TENDERING OLD NOTES AND DELIVERING CONSENTS      85  
WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS      89  
CONDITIONS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS      91  
EXCHANGE AGENT; INFORMATION AGENT; DEALER MANAGER      94  
DESCRIPTION OF NEW SECOND LIEN SECURED NOTES      96  
DESCRIPTION OF NEW THIRD LIEN SECURED NOTES      195  
DESCRIPTION OF OTHER INDEBTEDNESS      290  
BOOK-ENTRY SETTLEMENT AND CLEARANCE      295  
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS      299  
NOTICES TO CERTAIN NON-U.S. HOLDERS      309  
LEGAL MATTERS      313  
EXPERTS      314  

 

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ABOUT THIS PROSPECTUS

As used in this Prospectus, unless otherwise stated or the context otherwise requires, “we,” “us,” the “Company,” “our,” or “Bed Bath & Beyond” means Bed Bath & Beyond Inc. and its consolidated subsidiaries. However, in “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes” and related summary sections of this Prospectus, references to “we,” “us” and “our” are to Bed Bath & Beyond Inc. and not to any of its subsidiaries. References herein to “$” are to the lawful currency of the United States.

No person is authorized to give any information or to make any representations other than those contained or incorporated by reference in this Prospectus or in any free writing prospectus. We and the Dealer Manager take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This Prospectus is not an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction where the offer or sale is unlawful. You should not assume that the information we have included in this Prospectus is accurate as of any date other than the date of this Prospectus or that any information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference.

This Prospectus is part of a registration statement that we have filed with the SEC. Before making any decision on the Exchange Offers and Consent Solicitations, you should read this Prospectus and any prospectus supplement, together with the documents incorporated by reference in this Prospectus, any prospectus supplement, the registration statement, the exhibits thereto and the additional information described in the section “Where You Can Find More Information; Incorporation of Certain Information by Reference.”

 

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WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

We file annual, quarterly and current reports, proxy and information statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s website at www.sec.gov. You may also access the information we file electronically with the SEC through our website at www.bedbathandbeyond.com. Please note that our website and the SEC’s website are included in this Prospectus and any applicable prospectus supplement as inactive textual references only. The information contained on the SEC’s website and our website is not incorporated by reference into this Prospectus and should not be considered to be part of this prospectus, except as described in the following paragraph.

The SEC allows us to provide information about our business and other important information to you by “incorporating by reference” the information we file with the SEC, which means that we can disclose the information to you by referring in this Prospectus to the documents we file with the SEC. Under the SEC’s regulations, any statement contained in a document incorporated by reference below is automatically updated and superseded by any information contained in this Prospectus, or in any subsequently filed document of the types described below. Certain information that we subsequently file with the SEC will automatically update and supersede information in this Prospectus and in our other filings with the SEC. Any statement so modified or superseded in this Prospectus or in a document incorporated by reference herein shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus.

We incorporate into this Prospectus by reference the following documents filed by us with the SEC, each of which should be considered an important part of this Prospectus:

 

   

our Annual Report on Form 10-K for the fiscal year ended February 26, 2022, filed with the SEC on April 21, 2022;

 

   

our Quarterly Reports on Form 10-Q for the quarter ended May 28, 2022, filed with the SEC on June 29, 2022, and for the quarter ended August 27, 2022, filed with the SEC on September 30, 2022;

 

   

portions of our Definitive Proxy Statement on Schedule 14A filed with the SEC on June 1, 2022 that are incorporated by reference into Part III of our Annual Report on Form 10-K for the fiscal year ended February 26, 2022;

 

   

our Current Reports on Form 8-K filed with the SEC on March 25, 2022 (excluding Item 7.01), May  27, 2022, June  29, 2022 (Item 5.02 only), July  15, 2022, August  31, 2022 (Items 5.02 and 8.01 only), August  31, 2022, September  1, 2022, September  6, 2022, October 18, 2022, October 26, 2022 (Item 5.02 only), October 28, 2022, November 2, 2022, November 9, 2022, November 14, 2022, November 16, 2022, November 17, 2022 and November 21, 2022; and

 

   

the description of our common stock, par value $0.01 per share, contained in our Registration Statement on Form 8-A, filed with the SEC on May 11, 1992, and any amendment or report filed for the purpose of updating such description.

In addition, all documents subsequently filed by us pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), prior to the termination of the Exchange Offers and Consent Solicitations hereunder, other than information deemed furnished but not filed in accordance with SEC rules and not expressly noted for inclusion in this registration statement, shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents.

We will provide to you, upon request, a copy of each of our filings at no cost. Please make your request by writing or telephoning us at the following address or telephone number:

Attention: Investor Relations

Bed Bath & Beyond Inc.

650 Liberty Avenue

Union, New Jersey 07083

(908) 688-0888

 

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The Company has not, and the Dealer Manager has not, authorized any person (including any dealer or broker) to provide you with any information other than that contained or incorporated by reference in this Prospectus or to which the Company has referred you. The Company and the Dealer Manager take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give to you. You should not assume that the information contained or incorporated by reference in this Prospectus is accurate as of any date other than the date on the front of those documents.

ADDITIONAL INFORMATION

We engaged Global Bondholder Services Corporation to act as the Information Agent and Exchange Agent in connection with the Exchange Offers and the Consent Solicitation. Requests for assistance or additional copies of this document should be delivered to contact@gbsc-usa.com. Questions may be directed to Global Bondholder Services Corporation at (212) 430-3774 for banks and brokers, and at (855) 654-2015 for all other callers (toll-free).

FORWARD-LOOKING STATEMENTS

This Prospectus and the Registration Statement of which this Prospectus forms a part and the documents incorporated by reference herein contain “forward-looking” statements. Many of these forward-looking statements can be identified by use of words such as may, will, expect, anticipate, approximate, estimate, assume, continue, model, project, plan, goal, preliminary, and similar words and phrases, although the absence of those words does not necessarily mean that statements are not forward-looking. Our actual results and future financial condition may differ materially from those expressed in any such forward-looking statements as a result of many factors. Such factors include, without limitation:

 

   

general economic conditions including the recent supply chain disruptions, labor shortages, wage pressures, rising inflation and the ongoing military conflict between Russia and Ukraine;

 

   

challenges related to our relationships with our suppliers, including the failure of our suppliers to supply us with the necessary volume and type of products;

 

   

the impact of cost-saving measures;

 

   

our inability to generate sufficient cash to service all of our indebtedness or our ability to access additional capital;

 

   

changes to our credit rating or the terms on which vendors or others will provide us credit;

 

   

the impact of strategic changes, including the reaction of customers to such changes;

 

   

a challenging overall macroeconomic environment and a highly competitive retailing environment;

 

   

risks associated with the ongoing COVID-19 pandemic and the governmental responses to it, including its impacts across our businesses on demand and operations, as well as on the operations of our suppliers and other business partners, and the effectiveness of our and governmental actions taken in response to these risks;

 

   

changing consumer preferences, spending habits and demographics;

 

   

demographics and other macroeconomic factors that may impact the level of spending for the types of merchandise sold by us;

 

   

challenges in executing our omni-channel and transformation strategy, including our ability to establish and profitably maintain the appropriate mix of digital and physical presence in the markets we serve;

 

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our ability to successfully execute our store fleet optimization strategies, including our ability to achieve anticipated cost savings and to not exceed anticipated costs;

 

   

our ability to execute on any additional strategic transactions and realize the benefits of any acquisitions, partnerships, investments or divestitures;

 

   

disruptions to our information technology systems, including but not limited to security breaches of systems protecting consumer and employee information or other types of cybercrimes or cybersecurity attacks;

 

   

damage to our reputation in any aspect of our operations;

 

   

the cost of labor, merchandise, logistical costs and other costs and expenses;

 

   

potential supply chain disruption due to trade restrictions or otherwise, and other factors such as natural disasters, pandemics, political instability, labor disturbances, product recalls, financial or operational instability of suppliers or carriers, and other items;

 

   

inflation and the related increases in costs of materials, labor and other costs;

 

   

inefficient management of relationships and dependencies on third-party service providers;

 

   

our ability to attract and retain qualified employees in all areas of the organization;

 

   

unusual weather patterns and natural disasters, including the impact of climate change;

 

   

uncertainty and disruptions in financial markets;

 

   

volatility in the price of our common stock and its effect, and the effect of other factors, on our capital allocation strategy;

 

   

changes to statutory, regulatory and other legal requirements or deemed noncompliance with such requirements;

 

   

changes to accounting rules, regulations and tax laws, or new interpretations of existing accounting standards or tax laws;

 

   

new, or developments in existing, litigation, claims or assessments;

 

   

a failure of our business partners to adhere to appropriate laws, regulations or standards; and

 

   

our ability to successfully consummate the Exchange Offers and Consent Solicitations (including the outcome and impact of any legal challenges to any of these transactions).

These statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. These assumptions could prove inaccurate.

Any forward-looking statement we make in this Prospectus, the Registration Statement of which this Prospectus forms a part, the documents incorporated by reference in this Prospectus or elsewhere speaks only as of the date on which we make it. The risks identified above are not exhaustive, and you should be aware that there may be other risks that could adversely affect our business and financial performance. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. In any event, these and other important factors, including those set forth under the caption “Risk Factors” in this Prospectus and the documents incorporated by reference in this Prospectus, may cause actual results to differ materially from those indicated by our forward-looking statements. We have no duty, and do not intend, to update or revise the forward-looking statements we make in this Prospectus, except as may be required by law. In light of these risks and uncertainties, you should keep in mind that the future events or circumstances described in any forward-looking statement we make in this Prospectus, the Registration Statement of which this Prospectus forms a part, the documents incorporated by reference or elsewhere might not occur.

 

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IMPORTANT DATES

Please take note of the following important dates and times in connection with the Exchange Offers and Consent Solicitations. We reserve the right to extend any of these dates (subject to applicable law).

 

Date

  

Calendar Date

  

Event

Commencement Date    October 18, 2022    Commencement of the Exchange Offers and the Consent Solicitations.
Early Participation Time    5:00 p.m., New York City time, on October 31, 2022, unless extended with respect to a series of Old Notes.    With respect to each series of Old Notes, the deadline for holders to validly tender their Old Notes and deliver Consents in order to receive the Early Participation Payment in addition to the Exchange Consideration for such series of Old Notes.
Withdrawal Deadline    11:59 p.m., New York City time, on December 5, 2022, unless extended with respect to a series of Old Notes.    With respect to each series of Old Notes, the deadline for holders who validly tendered their Old Notes and delivered their Consents to validly withdraw tenders of such Old Notes and revoke Consents with respect to such series of Old Notes.
Expiration Time    11:59 p.m., New York City time, on December 5, 2022, unless extended with respect to a series of Old Notes.    With respect to each series of Old Notes, the deadline for holders to validly tender their Old Notes and deliver Consents in order to receive the Exchange Consideration for such series of Old Notes.
Settlement Date    Promptly after the applicable Expiration Time; expected to be December 7, 2022.    The date or dates on which New Secured Notes will be issued to holders in exchange for Old Notes accepted in the Exchange Offers that were validly tendered (and not validly withdrawn) at or prior to the applicable Expiration Time.

 

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QUESTIONS AND ANSWERS ABOUT THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS

The following are some of the questions you may have as a holder of the Old Notes and the answers to those questions. You should refer to the more detailed information set forth in this Prospectus for more complete information about us and the Exchange Offers and the Consent Solicitations.

Q: Who is making the Exchange Offers and the Consent Solicitations?

A: Bed Bath & Beyond Inc., the issuer of the Old Notes, is making the Exchange Offers and Consent Solicitations.

Q: Why are you making the Exchange Offers and the Consent Solicitations?

A: We are making the Exchange Offers and the Consent Solicitations in order to address the pending maturities of the 2024 Notes and to deleverage and strengthen our balance sheet. As of August 27, 2022, we had more than $284 million of debt maturing in 2024, $225 million of debt maturing in 2034 and more than $675 million of debt maturing in 2044. The transactions to address the 2024 debt maturities and to deleverage and strengthen our balance sheet are comprised of the 2024 Notes Exchange Offer, the 2034 Notes Exchange Offer and the 2044 Notes Exchange Offer.

We believe that successful completion of the Exchange Offers will significantly reduce our debt and interest expense and will place us in a stronger financial position going forward. Successful completion of the 2024 Exchange Offer also reduces the risks that the maturity of the 2024 Notes pose on our current and future business by addressing the maturity of these notes.

Q: What will happen to the Company if the Exchange Offers are not completed?

A: If we are unable to complete the Exchange Offers or if we do not receive meaningful participation in the Exchange Offers, we will need to consider other alternatives available to us to deleverage and strengthen our balance sheet, including to address our nearer-term debt maturities. These alternatives may include (subject to market conditions) capital markets transactions, repurchases, redemptions, exchanges or other refinancings of our existing debt, the potential issuance of equity securities, the potential sale of additional assets and businesses and/or other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code. These alternatives involve significant uncertainties, potential delays, significant costs and other risks, and there can be no assurance that any of these alternatives will be available on acceptable terms, or at all, in the current market environment or in the foreseeable future. Thus, unless the Exchange Offers are completed at meaningful participation levels, we may be unable to deleverage and strengthen our balance sheet, including to address our nearer-term debt maturities, including the 2024 Notes, in which case you could lose part or all of your investment in the Old Notes. For a more complete description of the risks relating to our failure to complete the Exchange Offers, see “Risk Factors—Risks Related to the Exchange Offers and the Consent Solicitations.”

Q: What will I receive if I tender my Old Notes prior to the Early Participation Time?

A: If you validly tender your Old Notes in the Exchange Offers at or prior to 5:00 p.m., New York City time on October 31, 2022, unless extended, and do not validly withdraw your Old Notes prior to the applicable Withdrawal Deadline, in addition to the applicable Exchange Consideration, you will be eligible to receive the following:

 

   

Per $1,000 principal amount of 2024 Notes tendered: $15 principal amount of New Second Lien Non-Convertible Notes or $15 principal amount of New Second Lien Convertible Notes.

 

   

Per $1,000 principal amount of 2034 Notes tendered: $7.50 principal amount of New Third Lien Secured Notes.

 

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Per $1,000 principal amount of 2044 Notes tendered: $7.50 principal amount of New Third Lien Secured Notes.

We may extend the Early Participation Time with respect to any or all of the Exchange Offers, subject to applicable law.

Q: What will I receive if I tender my Old Notes in the Exchange Offers after the Early Participation Time and prior to the Expiration Time?

A: If you validly tender (and do not validly withdraw) your Old Notes in the Exchange Offers (which will also constitute participation in the applicable Consent Solicitation) after 5:00 p.m. New York City time, on October 31, 2022 but at or prior to 11:59 p.m., New York City time on December 5, 2022, unless any Exchange Offer and Consent Solicitation is extended or earlier terminated, you will be eligible to receive the following:

 

   

Per $1,000 principal amount of 2024 Notes tendered, the option of either:

 

   

$1,000 principal amount of New Second Lien Non-Convertible Notes or

 

   

$410 principal amount of New Second Lien Convertible Notes.

 

   

Per $1,000 principal amount of 2034 Notes tendered: $217.50 principal amount of New Third Lien Secured Notes.

 

   

Per $1,000 principal amount of 2044 Notes tendered: $217.50 principal amount of New Third Lien Secured Notes.

A holder may elect to exchange a portion of its 2024 Notes for New Second Lien Non-Convertible Notes and a portion of its 2024 Notes for new Second Lien Convertible Notes, subject to the minimum denominations described herein.

Q: Why does the 2024 Notes Exchange Offer provide an option to exchange each $1,000 principal amount of 2024 Notes for either New Second Lien Non-Convertible Notes or New Second Lien Convertible Notes?

A: The Company believes that the New Second Lien Non-Convertible Notes provide holders of the 2024 Notes with the option to exchange into a security that preserves the aggregate principal amount of the outstanding 2024 Notes (subject to our right to call the New Second Lien Non-Convertible Notes on or after the first anniversary of the issue date thereof (which we expect to be December 7, 2023) at a price equal to 40% of the principal amount of New Second Lien Non-Convertible Notes to be redeemed), which certain holders may prefer, while the New Second Lien Convertible Notes provide holders of the 2024 Notes with the option to exchange into a security that is convertible into the common stock of the Company and would provide a holder with the ability to participate in the potential future growth in equity value of the Company (subject to our right to settle conversions by paying or delivering, as applicable, cash or a combination of cash and shares of common stock).

Q: In what denominations will the New Secured Notes be issued? What will happen if I am otherwise entitled to receive New Secured Notes in a principal amount less than the minimum denomination in which the New Secured Notes will be issued?

A: The New Secured Notes of each series will be issued only in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof. The Company will not accept any tender that would result in the issuance of less than $2,000 principal amount of New Secured Notes of a given series to a participating holder. The aggregate principal amount of New Secured Notes of a given series issued to each participating holder for all Old Notes validly tendered (and not validly withdrawn) and accepted by the Company will be rounded down, if necessary, to $2,000 or the nearest whole multiple of $1,000 in excess thereof. This rounded amount will be the principal amount of New Secured Notes of the relevant series you will receive, and cash will be paid in lieu of any principal amount of New Secured Notes not received as a result of such rounding down.

 

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Q: How does the interest rate on the New Secured Notes compare to the interest rate on the Old Notes?

A: The interest rate on the 2024 Notes is 3.749% per annum, the interest rate on the 2034 Notes is 4.915% per annum and the interest rate on the 2044 Notes is 5.165% per annum. For the New Secured Notes, the interest rate on the New Second Lien Non-Convertible Notes will be 3.693% per annum, the interest rate on the New Second Lien Convertible Notes will be 8.821% per annum and the interest rate on the New Third Lien Secured Notes will be 12.000% per annum. Interest will be payable on the New Secured Notes on May 30 and November 30 of each year, beginning on May 30, 2023, until the New Secured Notes mature on November 30, 2027, in the case of the New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes, and on November 30, 2029, in the case of the New Third Lien Secured Notes, unless earlier redeemed, repurchased or converted, as applicable. See the sections of this Prospectus titled “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes.”

Any 2024 Notes that are not accepted for exchange or that do not participate in the 2024 Notes Exchange Offer will continue to receive interest of 3.749% per annum until maturity on August 1, 2024. Under the terms of the New Notes Indentures, the Company may not exchange any of the 2024 Notes for new indebtedness and/or equity at more than 90% of the applicable Exchange Consideration to be received in the Exchange Offers, and the Company may only redeem or repurchase outstanding 2024 Notes in cash and/or equity on or after April 1, 2024.

Any 2034 Notes that are not accepted for exchange or that do not participate in the 2034 Notes Exchange Offer will continue to receive interest of 4.915% per annum until maturity on August 1, 2034 and any 2044 Notes that are not accepted for exchange or that do not participate in the 2044 Notes Exchange Offer will continue to receive interest of 5.165% per annum until maturity on August 1, 2044. Under the terms of the New Notes Indentures, the Company may not exchange any of the 2034 Notes or any 2044 Notes for new indebtedness and/or equity at more than 90% of the applicable Exchange Consideration to be received in the Exchange Offers, and the Company may not redeem or repurchase any outstanding 2034 Notes or 2044 Notes prior to the maturity of any of the New Secured Notes.

Q: When are the New Second Lien Convertible Notes and the New Third Lien Secured Notes convertible into shares of common stock of the Company?

A: The New Second Lien Convertible Notes and the New Third Lien Secured Notes will be convertible at the option of the holder, at any time prior to the close of business on the business day immediately preceding May 30, 2027 with respect to the New Second Lien Convertible Notes and May 30, 2029 with respect to the New Third Lien Secured Notes, only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock has been at least 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter; (2) during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of New Second Lien Convertible Notes or New Third Lien Secured Notes, as applicable, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the New Second Lien Convertible Notes or New Third Lien Secured Notes, as applicable, on such trading day; (3) if we call any or all of the New Second Lien Convertible Notes or New Third Lien Secured Notes for redemption, with respect to those New Second Lien Convertible Notes or New Third Lien Secured Notes, as applicable, called or deemed called for redemption; and (4) upon the occurrence of certain corporate events or distributions on the common stock. In addition, on or after May 30, 2027 with respect to the New Second Lien Convertible Notes and May 30, 2029 with respect to the New Third Lien Secured Notes, a holder may convert all or any portion of its New Convertible Secured Notes at any time prior the close of business on the second scheduled trading day immediately before the applicable maturity date.

 

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Q: What percentage of the ownership of the Company will holders of the Old Notes receive or be entitled to if the Exchange Offers are consummated?

A: If the Exchange Offers are consummated, we could issue approximately $91.5 million aggregate principal amount of New Second Lien Convertible Notes, assuming all holders of 2024 Notes exchange their 2024 Notes for New Second Lien Convertible Notes, and approximately $183.3 million aggregate principal amount of New Third Lien Secured Notes, assuming all holders of 2034 Notes and 2044 Notes exchange their 2034 Notes and 2044 Notes for New Third Lien Secured Notes, and, in each case, assuming that all such holders tender their Old Notes for exchange prior to the Early Participation Time, which collectively could be converted into, assuming an exercise price of $12.00 per share, 22.9 million shares of common stock of the Company, representing approximately 26% of the total shares of common stock of the Company outstanding as of the end of fiscal October 2022, which does not reflect approximately 14.5 million additional common shares issued in connection with the Private Exchange Agreements (as defined herein), and additional common shares issued or that may be issued under our ATM Program (as defined herein) subsequent to the end of fiscal October 2022. The actual number of shares of common stock of the Company that could be issued as a result of the Exchange Offers may be different than the amount indicated, however, due to, among other things, the participation levels in the Exchange Offers, the elections in the 2024 Exchange Offer and the ability of the Company to elect to deliver cash.

Q: Does the Company have the right to redeem the New Secured Notes prior to their maturity dates?

A: Yes, the Company will have certain rights to redeem the New Secured Notes prior to their maturity dates.

 

   

New Second Lien Non-Convertible Notes: On or after the first anniversary of the issue date of the notes (which is expected to be December 7, 2023), the Company may, at its option, redeem the New Second Lien Non-Convertible Notes, in whole or in part, at any time, at a price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

 

   

New Second Lien Convertible Notes: On or after the first anniversary of the issue date of the notes (which is expected to be December 7, 2023), the Company may, at its option, redeem the New Second Lien Convertible Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount of the New Second Lien Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

 

   

New Third Lien Secured Notes: On or after the first anniversary of the issue date of the notes (which is expected to be December 7, 2023), the Company may, at its option, redeem the New Third Lien Secured Notes, in whole or in part, at any time, at a price equal to 100% of the principal amount of the New Third Lien Secured Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

Q: What are the proposed amendments that are the subject of the Consent Solicitations?

A: The Proposed Amendments would eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens and (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes as further described under “Proposed Amendments.” For a detailed description of the Proposed Amendments to the Old Notes Indenture for which Consents are being sought pursuant to the Consent Solicitations, see “Proposed Amendments.”

 

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Q: What amount of Old Notes are you seeking in the Exchange Offers?

A: We are seeking to exchange all $1,029,936,500 principal amount of our outstanding Old Notes, consisting of $215,404,500 principal amount outstanding of 2024 Notes, $209,712,000 principal amount outstanding of 2034 Notes and $604,820,000 principal amount outstanding of 2044 Notes.

Q: Will you exchange all of the Old Notes validly tendered?

A: Yes. We will exchange all of the Old Notes validly tendered (and not validly withdrawn) pursuant to the terms of each Exchange Offer, if such Exchange Offer and Consent Solicitation is consummated.

Q: What is the minimum amount of Old Notes required to be tendered in the Exchange Offers?

A: There is no minimum amount of Old Notes required to be tendered in any of the Exchange Offers or in the Exchange Offers together. The Proposed Amendments will not be effective with respect to any series of Old Notes unless consented to by the holders of a majority of the outstanding principal amount of such Old Notes and all tendered Old Notes of such series are accepted for exchange in the related Exchange Offer. None of the Exchange Offers are conditioned on the receipt of Consents by holders representing a majority of the outstanding principal amount of any series of the Old Notes nor on the adoption of the Proposed Amendments with respect to such series. For a more complete description of the risks relating to the amount of Old Notes tendered in the Exchange Offers, see “Risk Factors—Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange” and “Risk Factors—Risks Related to the New Secured Notes.”

Q: Who may participate in the Exchange Offers?

A: All holders of the 2024 Notes may participate in the 2024 Notes Exchange Offer, all holders of the 2034 Notes may participate in the 2034 Notes Exchange Offer and all holders of the 2044 Notes may participate in the 2044 Notes Exchange Offer. Although we have mailed this Prospectus to all registered holders of the Old Notes as of the date of this Prospectus, including holders located outside the United States, this Prospectus is not an offer to sell or exchange and it is not a solicitation of an offer to buy any New Secured Notes in any jurisdiction in which such offer, sale or exchange is not permitted.

Countries other than the United States generally have their own legal requirements that govern securities offerings made to persons resident in those countries and often impose stringent requirements about the form and content of offers made to the general public. We have not taken any action under non-U.S. regulations to facilitate a public offer to exchange the Old Notes for the New Secured Notes outside the United States. Therefore, the ability of any holder residing outside of the United States to tender the Old Notes in the Exchange Offers will depend on whether there is an exemption available under the laws of such holder’s home country that would permit the holder to participate in the Exchange Offers without the need for us to take any action to facilitate a public offering in that country. For example, some countries exempt transactions from the rules governing public offerings if they involve persons who meet certain eligibility requirements relating to their status as sophisticated or professional investors.

Holders of the Old Notes residing outside of the United States should consult their advisors in considering whether they may participate in the Exchange Offers in accordance with the laws of their home countries and, if they do participate, whether there are any restrictions or limitations on transactions in the New Secured Notes that may apply in their home countries. Neither we nor the Dealer Manager can provide any assurance about whether such limitations may exist.

Q: Do I have to tender all of my Old Notes to participate in the Exchange Offers?

A: No. You do not have to tender all of your Old Notes of a series to participate in the applicable Exchange Offer.

 

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Q: May I tender my Old Notes in the Exchange Offers without delivering a consent in the Consent Solicitations?

A: No. By tendering your Old Notes, you will be deemed to have validly delivered your consent to the Proposed Amendments to the Old Notes Indenture as further described under “Proposed Amendments.”

Q: May I deliver a consent in the Consent Solicitations without tendering my Old Notes in the Exchange Offers?

A: No, you may not deliver a consent in the Consent Solicitations without tendering your Old Notes.

Q: Will the New Secured Notes be freely tradable?

A: Yes. The New Secured Notes are being simultaneously registered under the Securities Act on a registration statement of which this Prospectus forms a part. The consummation of the Exchange Offers is contingent on the Securities and Exchange Commission declaring this registration statement effective (which cannot be waived). For a more complete description of the risks relating to trading of the New Secured Notes, see “Risk Factors—Risks Related to the New Secured Notes.”

Q: Will the New Secured Notes be listed?

A: We have not applied and do not intend to apply for listing of the New Secured Notes on any exchange.

Q: Will the New Secured Notes be rated by credit rating agencies?

A: Yes. Upon the closing of the issuance of the New Secured Notes, we anticipate that our New Secured Notes will be assigned a non-investment grade rating, and any rating assigned to our debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. see “Risk Factors—Risks Related to the New Secured Notes—A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may adversely affect the market value of the New Secured Notes and increase our future borrowing costs and reduce our access to capital.”

Q: What risks should I consider in deciding whether to tender my Old Notes?

A: In deciding whether to participate in the Exchange Offers, you should carefully consider the discussion of risks and uncertainties described in the section “Risk Factors,” and the documents incorporated by reference into this Prospectus.

Q: Will the Company have the right to repurchase and/or commence exchange offers for any Old Notes that remain outstanding following consummation of the Exchange Offers?

The New Notes Indentures will prohibit the Company from redeeming or repurchasing Old Notes that remain outstanding following consummation of the Exchange Offers prior to the maturity of any of the New Secured Notes, except the Company may redeem or repurchase the 2024 Notes in cash and/or equity on or after April 1, 2024. In addition, the New Notes Indentures will limit the consideration to be offered in any exchange offers the Company may commence for any Old Notes that remain outstanding following consummation of the Exchange Offers. See “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes.”

Q: How do I participate in the Exchange Offers and the Consent Solicitations?

A: In order to participate in the Exchange Offers and Consent Solicitations, you must validly tender (and not validly withdraw) your Old Notes to the Exchange Agent. Any holder whose Old Notes are held through a custodian by a broker, dealer, commercial bank, trust company or other nominee should contact such custodial entity and instruct such custodial entity to tender the Old Notes on your behalf.

 

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DTC participants may electronically transmit their acceptance of the Exchange Offers through DTC’s Automated Tender Offer Program (“ATOP”), for which the transaction will be eligible. The procedures for participating in the Exchange Offers and Consent Solicitations are described in more detail in the section “Procedures for Tendering Old Notes and Delivering Consents.”

If you have questions or need help in tendering your Old Notes or delivering your consents, please contact the Information Agent and Exchange Agent at:

Global Bondholder Services Corporation

65 Broadway – Suite 404

New York, NY 10006

By Regular, Registered or Certified Mail, By Overnight Courier or By Hand

 

By Facsimile    Banks and Brokers Call:
(For Eligible Institutions only)    (212) 430-3774
(212) 430-3775    All Others Call Toll Free:
(212) 430-3779    (855) 654-2015

The tender of Old Notes pursuant to the Exchange Offers in accordance with the procedures described below and in further detail in the section “Procedures for Tendering Old Notes and Delivering Consents” will be deemed to constitute a delivery of a Consent to the Proposed Amendments with respect to the series of Old Notes tendered.

Q: May I withdraw my tender of Old Notes or delivery of my Consent?

A: Yes. You may withdraw any tendered Old Notes at any time prior to the applicable Withdrawal Deadline. A holder of Old Notes may not revoke a Consent without withdrawing the previously tendered Old Notes to which such Consent related. If you validly withdraw validly tendered Old Notes, you will be deemed to have validly revoked your Consents with respect to such series of Old Notes.

Q: How do I withdraw Old Notes previously tendered for exchange in the Exchange Offers or my delivery of my Consent?

A: For a withdrawal to be valid, the Exchange Agent must receive a computer-generated notice of withdrawal, transmitted by DTC on behalf of the holder in accordance with the standard operating procedure of DTC or a written notice of withdrawal, sent by facsimile transmission, receipt confirmed by telephone, or letter, prior to the Expiration Time. In order to revoke your Consent, you must validly withdraw your related tendered Old Notes at any time at or prior to the applicable withdrawal deadline. If you change your mind again before the expiration of the relevant Exchange Offer and Consent Solicitation, you can re-tender Old Notes by following the exchange procedures again prior to the Expiration Time. For more information regarding the procedures for withdrawing tenders of Old Notes, see the section “Withdrawal of Tenders and Revocation of Consents.”

Q: What happens if my Old Notes are not accepted in the Exchange Offers?

A: If we do not accept your Old Notes for exchange for any reason, Old Notes tendered by book entry transfer into the Exchange Agent account at DTC will be credited to your account at DTC. Any Old Notes, otherwise tendered, but not accepted for exchange, will be promptly returned to you.

Q: If I decide to tender my Old Notes and deliver Consents, will I have to pay any fees or commissions to the Company, the Dealer Manager, the Information Agent or the Exchange Agent?

A: You will not be required to pay any fees or commissions to the Company, the Dealer Manager, the Exchange Agent or the Information Agent in connection with the Exchange Offers and the Consent Solicitations. If your Old Notes are held through a broker, dealer, commercial bank, trust company or other nominee that tenders your

 

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Old Notes on your behalf, your broker or other nominee may charge you a commission for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.

Q: What do you intend to do with the Old Notes that are accepted for exchange in the Exchange Offers?

A: The Old Notes accepted for exchange by us in the Exchange Offers will be cancelled and retired.

Q: How will I be taxed on the exchange of my Old Notes?

A: Please see the section “United States Federal Income Tax Considerations.” You should consult your own tax advisor for a full understanding of the tax consequences of participating in the Exchange Offers.

Q: Has the Board of Directors adopted a position on the Exchange Offers?

A: Our Board of Directors has approved the making of the Exchange Offers and Consent Solicitations. However, our Board of Directors does not make any recommendation as to whether you should tender Old Notes pursuant to the Exchange Offers and deliver Consents in the Consent Solicitations. Accordingly, each holder must make its own decision as to whether to tender its Old Notes and deliver Consents, and, if so, the principal amount of the Old Notes as to which action is to be taken. Before making your decision, we urge you to read this Prospectus carefully in its entirety, including the information set forth in the section “Risk Factors,” and the information in the documents incorporated by reference in this Prospectus.

Q: How do I vote for the Proposed Amendments?

A: If a holder validly tenders Old Notes prior to the Expiration Time, such tender will be deemed to constitute the delivery of a consent to the Proposed Amendments, as a holder of Old Notes, with respect to the series of Old Notes tendered. See “Proposed Amendments.”

Q: What are the consequences of not participating in the Exchange Offers and Consent Solicitations at all? How will my rights be affected?

A: Holders of Old Notes that remain outstanding following the consummation of the Exchange Offers will be effectively junior to the secured indebtedness of the Company, consisting of the New Secured Notes and all existing secured indebtedness of Bed Bath & Beyond and the Subsidiary Guarantors, including obligations under the Amended Credit Agreement, in each case, to the extent of the value of the collateral securing such obligations.

The New Secured Notes will be guaranteed by the Subsidiary Guarantors and secured by second priority or third priority liens on the Collateral, as applicable (as described under “Description of New Second Lien Secured Notes—Security” and “Description of New Third Lien Secured Notes—Security”), but the Old Notes will not be guaranteed by the Subsidiary Guarantors and will remain unsecured. As a result, the Old Notes will be structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the Old Notes, including the Subsidiary Guarantors, and effectively subordinated to our secured indebtedness, including the New Secured Notes as well as obligations under the Amended Credit Agreement, in each case to the extent of the value of the collateral securing such obligations.

To the extent that any Old Notes remain outstanding after completion of the Exchange Offers, any existing trading market for the remaining Old Notes may become limited. The reduced outstanding principal amount may make the trading prices of the remaining Old Notes more volatile.

For a description of the consequences of failing to tender your Old Notes pursuant to the Exchange Offers, see “Risk Factors—Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange.”

 

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Q: What are the conditions to the Exchange Offers and the Consent Solicitations?

A: The Company’s obligations to accept Old Notes and Consents in the Exchange Offers and the Consent Solicitations are subject to the satisfaction or waiver of certain conditions described herein, including the condition that the Minimum Price be no more than $12.00. See “Conditions of the Exchange Offers and the Consent Solicitations.”

The effectiveness of the Consent Solicitations are subject to the receipt of the Old Notes Requisite Consents. None of the Exchange Offers are conditioned on the receipt of the Old Notes Requisite Consents for any series of Old Notes nor on the adoption of the Proposed Amendments with respect to such series.

The Company has the right to waive any condition to the Exchange Offers at its discretion, subject to applicable law. The Company may waive any such condition with respect to some or all of the Exchange Offers.

In addition, the Company has the right to terminate or withdraw the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes if any of the conditions described in the section “Conditions of the Exchange Offers and the Consent Solicitations” are not satisfied or waived, subject to applicable law.

Q: When will I receive the Exchange Consideration and, if applicable, the Early Participation Payment, for my Old Notes tendered and accepted for exchange pursuant to the Exchange Offers?

A: On the applicable Settlement Date, the Exchange Consideration and, if applicable the Early Participation Payment, representing the New Secured Notes deliverable in respect of Old Notes accepted for exchange pursuant to the Exchange Offers, will be delivered to the Exchange Agent (or upon its instruction to DTC), as agent for the holders whose Old Notes have been accepted for exchange.

Q: When will the Exchange Offers and the Consent Solicitations expire?

A: Each of the Exchange Offers and the Consent Solicitations will expire immediately after 11:59 p.m., New York City time, on December 5, 2022, unless extended or earlier terminated with respect to an Exchange Offer, at our discretion, subject to applicable law. If any of the Exchange Offers are extended, we will announce any extensions (including any extension of the Withdrawal Deadline) by press release or other permitted means no later than 9:00 a.m., New York City time, on the business day after the scheduled expiration of such Exchange Offer.

Q: Who can I call with questions about the Exchange Offers or Consent Solicitations, how to tender my Old Notes or to request another copy of this Prospectus?

A: You can contact the Information Agent and Exchange Agent engaged for the Exchange Offers and Consent Solicitations at:

Global Bondholder Services Corporation

65 Broadway – Suite 404

New York, NY 10006

By Regular, Registered or Certified Mail, By Overnight Courier or By Hand

 

By Facsimile    Banks and Brokers Call:
(For Eligible Institutions only)    (212) 430-3774
(212) 430-3775    All Others Call Toll Free:
(212) 430-3779    (855) 654-2015

 

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SUMMARY

This summary highlights information appearing elsewhere in this Prospectus and may not contain all of the information that may be important to you. You should read this entire Prospectus carefully, including the information set forth under the heading “Risk Factors” and the information incorporated by reference in this Prospectus before participating in the Exchange Offers and Consent Solicitations. See the section of this Prospectus titled “Where You Can Find More Information; Incorporation of Certain Information by Reference.”

Company Overview

We are an omni-channel retailer that makes it easy for our customers to feel at home. We sell a wide assortment of merchandise in the Home, Baby, Beauty & Wellness markets and operate under the names Bed Bath & Beyond, Buy Buy Baby, and Harmon, Harmon Face Values, or Face Values, or collectively, Harmon.

We offer a broad assortment of national brands and an assortment of proprietary Owned Brand merchandise in key destination categories including bedding, bath, kitchen food prep, home organization, indoor décor, baby and personal care.

We operate a robust omni-channel platform consisting of various websites and applications and physical retail stores. Our e-commerce platforms include bedbathandbeyond.com, bedbathandbeyond.ca, harmondiscount.com, facevalues.com, buybuybaby.com and buybuybaby.ca. We also operate Bed Bath & Beyond, Buy Buy Baby and Harmon retail stores.

Our principal executive office is located at 650 Liberty Avenue, Union, New Jersey 07083. Our main telephone number at that address is (908) 688-0888.

Recent Developments

On August 31, 2022, we established an at-the-market offering program (the “ATM Program”), under which we sold an aggregate of 12,000,000 shares of our common stock. On October 28, 2022, we registered additional shares of our common stock available for sale under the ATM Program with a maximum aggregate offering amount of up to $150 million, and as of November 18, 2022 we have issued 10,248,688 additional shares of our common stock for a total gross consideration of $44,394,627 under our current ATM Program.

We have recently entered into several privately negotiated exchange agreements. On November 9, 2022, we entered into a privately negotiated exchange agreement with an existing holder of our 2034 Notes and 2044 Notes. The existing holder exchanged approximately $9.5 million aggregate principal amount of 2034 Notes and $22.0 million aggregate principal amount of 2044 Notes and a cash payment of $3.5 million. Pursuant to the exchange agreement, we have issued an aggregate of approximately 2.8 million shares of common stock to the existing holder, and the exchange notes have been cancelled and are no longer outstanding.

On November 14, 2022, we entered into privately negotiated exchange agreements with existing institutional holders of our 2024 Notes, 2034 Notes and 2044 Notes. The existing holders collectively exchanged approximately $69 million aggregate principal amount of 2024 Notes (being all of the existing holders’ beneficially owned 2024 Notes), $5.8 million aggregate principal amount of 2034 Notes and $48.2 million aggregate principal amount of 2044 Notes. Pursuant to the exchange agreements, we have issued an aggregate of approximately 11.7 million shares of common stock to the existing holders, and the exchange notes have been cancelled and no longer outstanding.

We refer to these privately negotiated exchange agreements as the “Private Exchange Agreements.” Unless otherwise stated or the context otherwise requires, the outstanding principal amount of each series of Old Notes in this Prospectus gives effect to the cancellation of the Old Notes exchanged pursuant to the Private Exchange Agreements.

 

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SUMMARY RISK FACTORS

The summary below describes certain risk factors related to our indebtedness and the Exchange Offers. The “Risk Factors” section of this Prospectus contains more detailed descriptions of the risks associated with not tendering Old Notes, an investment in the New Secured Notes and participation in the Exchange Offers. The “Risk Factors” section in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 26, 2022 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended August 27, 2022 contains a discussion of the risk factors applicable to our business, financial condition and results of operations.

Risks Related to Our Indebtedness

 

   

Our business would be adversely affected if we are unable to service our debt obligations.

 

   

The terms of the Amended Credit Agreement and the New Notes Indentures may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

 

   

The Amended Credit Agreement limits our borrowing capacity to the value of certain of our assets.

 

   

Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional debt. This could further exacerbate the risks associated with our substantial leverage.

Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange:

 

   

The liquidity of the market for outstanding Old Notes will likely be reduced, and prices of remaining Old Notes may decline.

 

   

Claims regarding the Old Notes remaining outstanding will be structurally subordinated to all indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the Old Notes and subordinated to claims with respect to our secured indebtedness, to the extent of the value of the collateral securing such indebtedness.

 

   

If the Exchange Offers are not successful, we may not have sufficient funds to pay all or a portion of the amounts due at maturity on the Old Notes.

 

   

The Old Notes will have even more limited covenant protections and the New Notes Indentures will limit the Company’s ability to refinance the Old Notes.

 

   

If the Exchange Offers are not successful, we may not have sufficient funds to pay all or a portion of the amounts due at maturity on the Old Notes.

Risks Related to the Exchange Offers and the Consent Solicitations:

 

   

To the extent that holders of 2024 Notes exchange their 2024 Notes, such holders increase the amount of time before their New Secured Notes mature, which may in turn increase the risk that the Company will be unable to repay (or refinance) such New Secured Notes when they mature.

 

   

No party to the Exchange Offers has made a recommendation as to whether you should tender your Old Notes in exchange for New Secured Notes or a determination as to the fairness of the Exchange Offers.

 

   

The Exchange Offers may not occur at meaningful participation levels, or at all, or may be delayed.

 

   

Failure to consummate the Exchange Offers could adversely affect our business.

 

   

The accounting method for the New Convertible Secured Notes could adversely affect our reported financial condition and results.

 

   

Our ability to redeem, repurchase or exchange Old Notes after the consummation of the Exchange Offers will be limited.

 

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A holder may be required to recognize gain on the exchange of Old Notes for New Secured Notes for U.S. federal income tax purposes.

 

   

The exchange of the Old Notes for New Secured Notes may result in a loss of our existing tax attributes and/or increased tax liabilities and our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

 

   

Any or all of the New Secured Notes issued in the Exchange Offers might be issued with an original issue discount (“OID”) for U.S. federal income tax purposes, which amount will not be determinable prior to the consummation of the Exchange Offers, in which case holders of the New Secured Notes who are subject to U.S. federal income taxation would be required to include OID in gross income as ordinary interest income on a constant yield to maturity basis.

Risks Related to the New Secured Notes:

 

   

The New Secured Notes and the related guarantees are effectively subordinated to our and our Subsidiary Guarantors’ current senior secured indebtedness that is secured by a first-priority lien on the collateral thereunder to the extent of the value thereof and structurally subordinated to the indebtedness of our subsidiaries that do not guarantee the New Secured Notes.

 

   

There is no public market for the New Secured Notes, the liquidity of the market for New Secured Notes may be limited, and market prices for New Secured Notes may be volatile.

 

   

Federal and state law may render the New Secured Notes Guarantees and/or payments made under the New Secured Notes Guarantees avoidable in specific circumstances.

 

   

Because there are no minimum tender conditions to the Exchange Offers, the Company may fail to repay the 2024 Notes that remain outstanding following the 2024 Exchange Offer when due, which could result in an event of default under the agreements governing our indebtedness.

 

   

Redemption may adversely affect your return on the New Secured Notes.

 

   

We may redeem the New Second Lien Non-Convertible Notes, at our option, at a price less than their original principal amount which right may adversely affect the value of claims on such notes in bankruptcy.

 

   

You may not be able to resell the New Second Lien Non-Convertible Notes at par value.

 

   

If certain conditions are met, certain covenants will be terminated, and you will lose the protection of these covenants permanently in the New Notes Indentures.

Risks Related to the Collateral:

 

   

The liens on the Collateral securing the New Secured Notes and the New Notes Guarantees will be junior and subordinate to those securing the obligations under the Amended Credit Agreement.

 

   

The value of the Collateral securing the New Secured Notes may not be sufficient to ensure repayment of the New Secured Notes.

 

   

It may be difficult to realize the value of the Collateral securing the New Secured Notes and the New Notes Guarantees and the Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections that may exist with respect to the Amended Credit Agreement.

 

   

Your rights in the Collateral may be adversely affected by the failure to maintain, record and/or perfect security interests in the Collateral and to perfect liens on certain Collateral acquired in the future.

 

   

We will, in most cases, have control over the Collateral, and the sale of particular assets by us could reduce the pool of assets and certain assets will be excluded from the Collateral.

 

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The Senior Agent (as defined herein) (at the direction of the applicable secured parties) will control actions (including the exercise of remedies and distribution of proceeds) with respect to the Collateral subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements (as defined herein).

 

   

Rights of the holders of the New Secured Notes in the Collateral may be adversely affected by bankruptcy and insolvency proceedings.

Risks Related to New Convertible Secured Notes

 

   

Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the New Convertible Secured Notes.

 

   

There will not be any increase in the conversion rate for New Convertible Secured Notes converted in connection with a fundamental change or a notice of redemption.

 

   

Regulatory actions may adversely affect the trading price and liquidity of the New Convertible Secured Notes.

 

   

The conditional conversion feature of the New Convertible Secured Notes, if triggered, may adversely affect our financial condition and operating results.

 

   

If we elect to settle any future conversions of the New Convertible Secured Notes fully or partially in cash, we will be unable to do so if we do not have enough available cash.

 

   

Holders of New Convertible Secured Notes will not be entitled to any rights with respect to our common stock, but they will be subject to changes made with respect to our common stock if they convert.

 

   

The New Notes Indentures will not require us to make an offer to purchase the New Convertible Secured Notes in connection with any delisting of our common stock.

 

   

The conditional conversion feature could result in your receiving less than the value of our common stock into which the New Convertible Secured Notes would otherwise be convertible.

 

   

Upon conversion, you may receive less valuable consideration than expected because the value of our common stock may decline after you exercise your conversion right but before we settle.

 

   

The conversion rate of the New Convertible Secured Notes may not be adjusted for all dilutive events.

 

   

You may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the series of New Convertible Secured Notes that you hold even though you do not receive a corresponding cash distribution.

Risks Related to Our Common Stock:

 

   

The market prices and trading volume of our shares of common stock have recently experienced, and may continue to experience, extreme volatility.

 

   

Future issuances of securities by us may adversely affect the market price of our common stock and the value of the New Convertible Secured Notes.

 

   

Information available in public media that is published by third parties, including blogs, articles, online forums, message boards and social and other media may not be reliable or accurate.

 

   

The market price of our common stock could decline due to the large number of outstanding shares of our common stock available for future sale.

 

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SUMMARY OF THE TERMS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS

The summary below describes the principal terms of the Exchange Offers and the Consent Solicitations. Certain of the terms and conditions described below are subject to important limitations and exceptions. For a more complete understanding of the terms and conditions of the Exchange Offers and the Consent Solicitations, you should read this entire Prospectus.

 

The Exchange Offers

The Company is offering to exchange, upon the terms and subject to the conditions set forth in this Prospectus, Old Notes for the consideration listed in the table on the cover of this Prospectus.

 

  Subject to applicable law, the Exchange Offer for each series of Old Notes is being made independently of the Exchange Offers for any other series of Old Notes, and the Company reserves the right, subject to applicable law, to terminate, withdraw, amend or extend the Exchange Offer for any series of Old Notes without also terminating, withdrawing, amending or extending the Exchange Offer for any other series of Old Notes.

 

Consideration; Early Participation Payment

In exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at any time prior to the applicable Expiration Time, and accepted by the Company, participating holders of Old Notes will receive the applicable Exchange Consideration. A holder may elect to exchange a portion of its 2024 Notes for New Second Lien Non-Convertible Notes and a portion of its 2024 Notes for New Second Lien Convertible Notes, subject to the minimum denominations described herein, when they tender their 2024 Notes through DTC.

 

  If participating holders validly tender their Old Notes at any time prior to the applicable Early Participation Time and do not validly withdraw their Old Notes prior to the applicable Withdrawal Deadline, and the Company accepts such Old Notes, such participating holders will also receive the applicable Early Participation Payment.

 

  The Company will not accept any tender that would result in the issuance of less than $2,000 principal amount of any given series of New Secured Notes to a participating holder. The aggregate principal amount of New Secured Notes issued to each participating holder for all Old Notes validly tendered (and not validly withdrawn) and accepted by the Company will be rounded down, if necessary, to $2,000 or the nearest whole multiple of $1,000 in excess thereof. This rounded amount will be the principal amount of New Secured Notes you will receive, and cash will be paid in lieu of any principal amount of New Secured Notes not received as a result of such rounding down.

 

Early Participation Time

The Early Participation Time for the Exchange Offers and Consent Solicitations is 5:00 p.m., New York City time, on October 31, 2022, unless extended with respect to any Exchange Offer.

 

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Expiration Time

The Expiration Time for the Exchange Offers and Consent Solicitations is 11:59 p.m., New York City time, on December 5, 2022, unless extended with respect to any Exchange Offer.

 

Withdrawal Deadline

The Withdrawal Deadline for the Exchange Offers and Consent Solicitation is 11:59 p.m., New York City time, on December 5, 2022, unless extended with respect to any Exchange Offer. Holders may withdraw tendered Old Notes and revoke Consents at any time at or prior to the applicable Withdrawal Deadline but holders may not withdraw tendered Old Notes or revoke Consents after such deadline, except as required by applicable law. Procedures for withdrawal of tenders and revocation of Consents are described in the section “Withdrawal of Tenders and Revocation of Consents.”

 

Settlement Date

On the terms and subject to the conditions described below, the payment of the Exchange Consideration and, to the extent applicable, the Early Participation Payment, for the Exchange Offers will occur on a date promptly after the applicable Expiration Time, which is expected to be December 7, 2022, unless extended with respect to any Exchange Offer.

 

The New Secured Notes

For a description of the terms of the New Secured Notes, see “ —Summary of New Secured Notes,” “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes.”

 

Accrued and Unpaid Interest

If Old Notes are validly tendered (and not validly withdrawn) by a holder and accepted by the Company for exchange pursuant to any of the Exchange Offers, such holder will be entitled to receive accrued and unpaid interest in cash on such Old Notes up to, but not including, the Settlement Date.

 

Conditions to the Exchange Offers and the Consent Solicitations

The Company’s obligations to accept Old Notes and Consents in the Exchange Offers and the Consent Solicitations are subject to the satisfaction or waiver of certain conditions described herein, including the condition that the Minimum Price not exceed $12.00. See “Conditions of the Exchange Offers and the Consent Solicitations.”

 

  The effectiveness of the Consent Solicitations are subject to the receipt of the Old Notes Requisite Consents. None of the Exchange Offers are conditioned on the receipt of the Old Notes Requisite Consents for any series of Old Notes nor on the adoption of the Proposed Amendments with respect to such series.

 

  The Company has the right to waive any condition to the Exchange Offers at its discretion, subject to applicable law. The Company may waive any such condition with respect to some or all of the Exchange Offers.

 

  In addition, the Company has the right to terminate or withdraw any of the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes, if any of the conditions described in the section “Conditions of the Exchange Offers and the Consent Solicitations” are not satisfied or waived, subject to applicable law.

 

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The Consent Solicitations

Upon the terms and subject to the conditions described in this Prospectus, the Company is soliciting the Consents of holders of Old Notes to certain amendments with respect to any and all of the outstanding Old Notes. Holders of Old Notes may not tender their Old Notes without delivering a Consent with respect to such Old Notes tendered. See Procedures for Tendering Old Notes and Delivering Consents for more information.

 

The Proposed Amendments

With respect to each series of Old Notes, the Proposed Amendments would eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens and (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes. For a detailed description of the Proposed Amendments to the Old Notes Indenture for which Consents are being sought pursuant to the Consent Solicitations, see “Proposed Amendments.”

 

The Old Notes Requisite Consents

In order to be adopted for any series of Old Notes, the applicable Proposed Amendments must be consented to by the holders of a majority of the outstanding principal amount of such series of Old Notes (with respect to each series of Old Notes, the “Old Notes Requisite Consents”), and we must have accepted all validly tendered Old Notes of such series in such principal amount. It is expected that one or more supplemental indentures giving effect to the Proposed Amendments for each applicable series of Old Notes (the “Supplemental Indentures”) will be executed promptly following the receipt of the Old Notes Requisite Consents, but in no event prior to the applicable Withdrawal Deadline. The Proposed Amendments will become operative, with respect to any applicable series of Old Notes, immediately prior to the acceptance of such series of Old Notes pursuant to the applicable Exchange Offer.

 

Procedure for Tenders and Delivery of Consents

If a holder wishes to participate in any of the Exchange Offers and the Consent Solicitations, and such holder’s existing Old Notes are held by a custodial entity such as a bank, broker, dealer, trust company or other nominee, such holder must instruct such custodial entity (pursuant to the procedures of the custodial entity) to tender the Old Notes on such holder’s behalf. Custodial entities that are participants in DTC must tender Old Notes through DTC’s Automated Tender Offer Program, known as “ATOP.” For further information, see “Procedures for Tendering Old Notes and Delivering Consents.”

 

Withdrawal Rights

A holder may validly withdraw the tender of such holder’s Old Notes and the delivery of such holder’s Consent at any time at or prior to the applicable Withdrawal Deadline by submitting a notice of withdrawal to the Exchange Agent using ATOP procedures and/or upon compliance with the other procedures described in the section “Withdrawal of Tenders and Revocation of Consents.” Any Old Notes validly tendered and Consents validly delivered prior to the

 

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applicable Withdrawal Deadline that are not validly withdrawn at or prior to such Withdrawal Deadline may not be withdrawn after such Withdrawal Deadline, subject to limited circumstances described in the section “Withdrawal of Tenders and Revocation of Consents” and unless otherwise required by applicable law.

 

  If a holder validly withdraws its validly tendered Old Notes, such holder will be deemed to have validly revoked its Consents with respect to such series of Old Notes.

 

Consequences of Failure to Tender

Old Notes left outstanding following the consummation of the Exchange Offers will be effectively subordinated to the secured indebtedness represented by the New Secured Notes, obligations under the Amended Credit Agreement and all other existing and new secured obligations of the Company and the Subsidiary Guarantors, in each case, to the extent of the value of the collateral securing such secured obligations. Unlike the New Secured Notes, the Old Notes will not be guaranteed by the Subsidiary Guarantors. Following the consummation of the Exchange Offers, the Old Notes will therefore become structurally subordinated to the indebtedness and other liabilities of the Subsidiary Guarantors.

 

  To the extent that any Old Notes remain outstanding after completion of the Exchange Offers, any existing trading market for the remaining Old Notes may become further limited. The reduced outstanding principal amount may make the trading prices of the remaining Old Notes more volatile.

 

  If the Old Notes Requisite Consents are received with respect to a series of Old Notes and a Supplemental Indenture is executed with respect to such series of Old Notes under the Old Notes Indenture and becomes operative, holders of such series of Old Notes left outstanding following the Exchange Offers will be afforded significantly reduced protection under the Old Notes Indenture. For a description of the consequences of failing to exchange your Old Notes pursuant to the Exchange Offers, see “Risk Factors—Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange.”

 

Amendment and Termination

The Company has the right to terminate, withdraw or amend, in its discretion (subject to applicable law), the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes, at any time, if the conditions to the Exchange Offers and the Consent Solicitations are not met or waived by the Expiration Time. The Company reserves the right, subject to applicable law, (i) to waive any and all of the conditions of any of the Exchange Offers and Consent Solicitations prior to the applicable Expiration Time and (ii) to amend the terms of any of the Exchange Offers and Consent Solicitations. In the event that any of the Exchange Offers are terminated, withdrawn or otherwise not consummated prior to the applicable Expiration Time, no consideration will be paid or become payable to holders who have

 

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validly tendered (and not validly withdrawn) their Old Notes pursuant to such Exchange Offer. In any such event, the Old Notes previously tendered pursuant to such Exchange Offer will be promptly returned to the tendering holders and the Consents will be deemed voided. See “General Terms of the Exchange Offers and the Consent Solicitations—Extension, Termination or Amendment.”

 

Soliciting Broker Fee

If any Exchange Offer is consummated, we have agreed to pay a Soliciting Broker Fee equal to $2.50 for each $1,000 in principal amount of Old Notes that is validly tendered and accepted for exchange pursuant to such Exchange Offer to soliciting retail brokers for holders holding less than $1,000,000 aggregate principal amount of Old Notes that are appropriately designated by their clients to receive this fee. See “General Terms of the Exchange Offers and the Consent Solicitations—Soliciting Broker Fee.”

 

Use of Proceeds

The Company will not receive any cash proceeds as part of the Exchange Offers.

 

Taxation

For a discussion of U.S. federal income tax considerations of the Exchange Offers and Consent Solicitations, see “United States Federal Income Tax Considerations.”

 

Dealer Manager and Solicitation Agent

Lazard Frères & Co. LLC.

 

Information Agent and Exchange Agent

Global Bondholder Services Corporation.

 

Risk Factors

See “Risk Factors” and the other information included in and incorporated by reference in this Prospectus for a discussion of factors you should carefully consider before deciding to participate in the Exchange Offers.

 

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SUMMARY OF NEW SECURED NOTES

The summary below describes the principal terms of the New Secured Notes. Certain of the terms and conditions described below are subject to important limitations and exceptions. The “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes” sections of this Prospectus contain more detailed descriptions of the terms and conditions of the New Secured Notes.

New Second Lien Secured Notes

 

Issuer    Bed Bath & Beyond Inc., a New York corporation.
Notes Offered   

3.693% Senior Second Lien Secured Non-Convertible Notes due 2027 (“New Second Lien Non-Convertible Notes”).

 

8.821% Senior Second Lien Secured Convertible Notes due 2027 (“New Second Lien Convertible Notes” and together with the New Second Lien Non-Convertible Notes, the “New Second Lien Secured Notes”).

Maturity Date    The New Second Lien Secured Notes will mature on November 30, 2027.
Interest Rate   

Interest on the New Second Lien Non-Convertible Notes will be payable in cash and will accrue from the Settlement Date at a rate of 3.693% per annum.

 

Interest on the New Second Lien Convertible Notes will be payable in cash and will accrue from the Settlement Date at a rate of 8.821% per annum.

Interest Payment Dates    Interest payments with respect to the New Second Lien Secured Notes will be made on May 30 and November 30 of each year, commencing on May 30, 2023.
Optional Redemption   

Prior to the first anniversary of the issue date, we may not redeem the New Second Lien Secured Notes.

 

On or after the first anniversary of the issue date, we may redeem some or all of the New Second Lien Non-Convertible Notes at any time for cash at 40% of par, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

 

On or after the first anniversary of the issue date, we may redeem some or all of the New Second Lien Convertible Notes if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount thereof to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

Subsidiary Guarantees    On the issue date, each of our subsidiaries that is a borrower under or that has guaranteed obligations under the Amended Credit Agreement will guarantee the New Second Lien Secured

 

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Notes (the “New Second Lien Guarantees”). The New Second Lien Secured Notes may be guaranteed by additional subsidiaries in the future that become obligors under the Amended Credit Agreement under certain circumstances. See “Description of New Second Lien Secured Notes—Guarantees.

 

Our subsidiaries that are not providing New Second Lien Guarantees, are primarily (i) 100% owned subsidiaries of Bed ‘n Bath Stores Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; (ii) 100% owned subsidiaries of Harmon Stores, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; and (iii) 100% owned subsidiaries of Buy Buy Baby, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets. Our subsidiaries that are not providing New Second Lien Guarantees generated approximately less than 1.0% of the Company’s net income for the six months ended August 27, 2022, and held approximately 1.0% of the Company’s consolidated assets as of August 27, 2022 and are not material to the Company’s consolidated financial statements.

Collateral   

The New Second Lien Secured Notes and the New Second Lien Guarantees will be secured by a second-priority lien, subject to Permitted Liens, on the Collateral.

 

The Collateral securing the obligations under the New Second Lien Secured Notes will be the same as the collateral that secures the obligations under the Amended Credit Agreement and the related guarantees, other than pledges of equity interests of the Company’s subsidiaries, including the Subsidiary Guarantors, which will not be part of the Collateral securing the obligations under the New Second Lien Secured Notes, and subject to certain exceptions. The liens on the Collateral securing the obligations under the New Second Lien Secured Notes will be held by the Second Lien Collateral Agent (as defined herein) for the benefit of itself, the trustees for the New Second Lien Secured Notes and the holders of the New Second Lien Secured Notes.

 

See “Description of New Second Lien Secured Notes—Security.”

Priority   

The New Second Lien Secured Notes and the New Second Lien Guarantees will be:

 

•  secured on a second-priority basis by the Collateral (subject to certain Permitted Liens) and will be secured on a junior basis to all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a first-priority basis, including the ABL/FILO Obligations, and all other existing and future senior Secured Indebtedness of the Company and the Subsidiary Guarantors that is secured by a first-priority lien on the Collateral;

 

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•  effectively senior to all existing and future unsecured Indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the Collateral, including any Old Notes not tendered in the Exchange Offers;

 

•  senior to all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a third-priority basis, including the New Third Lien Secured Notes, to the extent of the value of the Collateral;

 

•  (i) effectively subordinated to any of the Company’s and the Subsidiary Guarantors’ existing and future Indebtedness that is secured by assets that do not constitute Collateral securing the New Secured Notes, including the equity pledges that secure the Senior Lien Obligations, to the extent of the value of such assets and (ii) structurally subordinated to all existing and future Indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries that do not guarantee the New Secured Notes;

 

•  unconditionally guaranteed by the Subsidiary Guarantors;

 

•  pari passu in right of payment with, and secured on an equal and ratable basis with, all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a second-priority basis; and

 

•  senior in right of payment to any of the Company’s and the Subsidiary Guarantors’ future subordinated Indebtedness.

 

As of August 27, 2022, on an as adjusted basis after giving effect to incremental borrowings under the ABL Facility (as defined in “Description of Other Indebtedness”) and the FILO Facility (as defined in “Description of Other Indebtedness”) as of November 11, 2022, the Private Exchange Agreements and the Exchange Offers assuming full participation in the Exchange Offers and either (1) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Non-Convertible Notes and (2) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Convertible Notes, and in each case, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, the Company and the Subsidiary Guarantors would have had:

 

•  in the case of (1), total consolidated indebtedness of approximately $1,480.8 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $218.6 million of New Second Lien Non-Convertible Notes, $0 of New

 

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Second Lien Convertible Notes and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

 

•  in the case of (2), total consolidated indebtedness of approximately $1,394.1 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $0 of New Second Lien Non-Convertible Notes, $131.9 million of New Second Lien Convertible Notes (reflecting undiscounted future cash flows, including $91.5 million of aggregate principal amount and $40.4 million of future interest payments) and $337.2 million of New Third Lien Secured Notes (reflecting the undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

  

Our borrowing capacity under the ABL Facility varies according to our inventory levels, net of certain reserves. We have the ability to continue to borrow under our ABL Facility, subject to customary conditions, no default, the accuracy of representations and warranties, and borrowing base availability, and may borrow under the ABL Facility in the future.

Conversion Rights   

Holders of the New Second Lien Non-Convertible Notes will not have any conversion rights.

 

Prior to the close of business on the business day immediately before May 30, 2027, holders of the New Second Lien Convertible Notes may convert all or a portion of their New Second Lien Convertible Notes at their option only in the following circumstances:

 

•  during any calendar quarter commencing after the calendar quarter ending on December 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

 

•  during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of New Second Lien Convertible Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the

 

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conversion rate for the New Second Lien Convertible Notes on such trading day;

 

•  if we call any or all of the New Second Lien Convertible Notes for redemption, with respect to those New Second Lien Convertible Notes called or deemed called for redemption; and

 

•  upon the occurrence of certain corporate events or distributions on the common stock.

 

On or after May 30, 2027 until the close of business on the second scheduled trading day immediately before the maturity date holders of the New Second Lien Convertible Notes may convert all or a portion of their New Second Lien Convertible Notes at their option.

 

We will settle conversions by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on the applicable conversion rate. If we elect to deliver cash or a combination of cash and shares of common stock, then the consideration due upon conversion will be based on an observation period consisting of 40 “VWAP trading days.” The initial conversion rate is 83.3333 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $12.00 per share, and is subject to adjustment if certain events occur.

 

See “Description of New Second Lien Secured Notes—Conversion Rights of New Second Lien Convertible Notes.

Second Lien Security

Agreement

   Wilmington Trust, National Association, as second lien collateral agent (the “Second Lien Collateral Agent”), will enter into a Second Lien U.S. Security Agreement and a Second Lien Canadian Security Agreement, dated as of the Settlement Date (as amended, supplemented or otherwise modified, the “Second Lien Security Agreements”), with the Company, the Subsidiary Guarantors applicable for each Second Lien Security Agreement and Wilmington Trust, National Association, as trustees for the New Second Lien Secured Notes. Pursuant to the Second Lien Security Agreements, the Second Lien Collateral Agent will be granted a lien on the Collateral to secure the second-priority lien obligations which as of the Settlement Date will only include the obligations in respect of the New Second Lien Secured Notes. The Second Lien Security Agreements will set forth therein the relative rights of the second-lien secured parties with respect to the Collateral and cover certain other matters relating to the administration of security interests. The Second Lien Security Agreements generally control substantially all matters related to the interest of the second-lien secured parties in the Collateral, including with respect to directing the Second Lien Collateral Agent, distribution of proceeds and enforcement.

 

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First Lien/Second Lien/Third

Lien Intercreditor Agreements

   In connection with the Exchange Offers and Consent Solicitations, the Second Lien Collateral Agent will enter into the First Lien/Second Lien/Third Lien Intercreditor Agreements with respect to the New Second Lien Secured Notes. The First Lien/Second Lien/Third Lien Intercreditor Agreements will restrict the actions permitted to be taken by the Second Lien Collateral Agent with respect to the Collateral on behalf of the holders of the New Second Lien Secured Notes, and the Second Lien Collateral Agent, on behalf of itself, the trustees for the New Second Lien Secured Notes and the holders of the New Second Lien Secured Notes, will agree to limit certain other rights with respect to the Collateral during any insolvency proceeding. See “Description of New Second Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements.”

Second Lien Security

Documents

   The obligations under the New Second Lien Secured Notes will be secured pursuant to new security documents (the “Second Lien Security Documents”). The Security Documents will include the Second Lien Security Agreements, control agreements (including, as applicable, a deposit account control agreement, a securities account control agreement or a commodity account control agreement) and any other filings and instruments granting, perfecting or otherwise evidencing the new second-priority lien.
Change of Control; Fundamental Change   

Upon a change of control (as defined in “Description of New Second Lien Secured Notes—Required Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes)”), we must offer to repurchase the New Second Lien Non-Convertible Notes in cash at a purchase price equal to 101% of the principal amount of notes repurchased, plus accrued and unpaid interest, if any, to but not including, the repurchase date. We are not required to make a change of control offer to the extent we exercise our right to redeem the New Second Lien Non-Convertible Notes.

 

Upon a fundamental change (as defined in “Description of New Second Lien Secured Notes—Required Repurchase upon Change of Control (in the Case of New Second Lien Nonconvertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes)”), we must offer to repurchase the New Second Lien Convertible Notes in cash at a purchase price equal to 100% of the principal amount of notes repurchased, plus accrued and unpaid interest, if any, to but not including, the repurchase date. We are not required to make a fundamental change offer to the extent we exercise our right to redeem the New Second Lien Non-Convertible Notes.

 

See “Description of New Second Lien Secured NotesRequired Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes).”

 

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Certain Covenants   

The indenture governing the New Second Lien Secured Notes (the “Second Lien Indenture”) will contain certain covenants, including limitations and restrictions on our and our restricted subsidiaries’ ability to:

 

•  incur additional indebtedness;

 

•  pay dividends on capital stock and make other restricted payments;

 

•  make investments and acquisitions;

 

•  sell assets;

 

•  merge or consolidate with other entities; and

 

•  create liens.

 

The restrictive covenants set forth in the Second Lien Indenture are subject to important exceptions and qualifications. If certain conditions are met, many of the covenants in the Second Lien Indenture will permanently terminate with respect to the applicable series of New Second Lien Secured Notes. See “Description of New Second Lien Secured Notes—Certain Covenants.”

 

Absence of an Established

Market for the Notes

   The New Second Lien Secured Notes will be new securities for which there is no established trading market. Accordingly, we cannot assure you that a liquid market for the New Second Lien Secured Notes will develop or be maintained. We do not intend to list the New Second Lien Secured Notes on any securities exchange. If an active trading market for the New Second Lien Secured Notes does not develop, the market price and liquidity of the New Second Lien Secured Notes may be adversely affected. If the New Second Lien Secured Notes are traded, they may trade at a discount, depending on prevailing interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors.
Book-Entry Form    Each series of New Second Lien Secured Notes will be issued in book-entry form only and will be in the form of one or more global certificates, which will be deposited with, or on behalf of, The Depository Trust Company, or DTC, and registered in its nominee name Cede & Co. See “Book-Entry Settlement and Clearance.”
Use of Proceeds    We will not receive any cash proceeds from the Exchange Offers and Consent Solicitations. See “Use of Proceeds.”
Denominations    The New Second Lien Secured Notes of each series will be issued in minimum denominations of $2,000 principal amount and integral multiples of $1,000 principal amount in excess thereof.
Governing Law    The New Second Lien Secured Notes and the Second Lien Indenture will be governed by, and construed in accordance with, the laws of the State of New York.

New Second Lien Secured Notes

Trustees

   Wilmington Trust, National Association.

 

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New Third Lien Secured Notes

 

Issuer    Bed Bath & Beyond Inc., a New York corporation.
Notes Offered    12.000% Senior Third Lien Secured Convertible Notes due 2029 (“New Third Lien Secured Notes”).
Maturity Date    The New Third Lien Secured Notes will mature on November 30, 2029.
Interest Rate    Interest on the New Third Lien Secured Notes will be payable in cash and will accrue from the Settlement Date at a rate of 12.000% per annum.
Interest Payment Dates    Interest payments with respect to the New Third Lien Secured Notes will be made on May 30 and November 30 of each year, commencing on May 30, 2023.
Optional Redemption   

Prior to the first anniversary of the issue date, we may not redeem the New Third Lien Secured Notes.

 

On or after the first anniversary of the issue date, we may redeem some or all of the New Third Lien Secured Notes if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption, at a redemption price equal to 100% of the principal amount thereof to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.

AHYDO Catch Up Payments   

On or before the end of the first “accrual period” of the New Third Lien Secured Notes ending after the fifth anniversary of the issue date and prior to the end of each subsequent accrual period, we will prepay a portion of the principal amount of each then outstanding New Third Lien Secured Note in an amount intended to ensure that no New Third Lien Secured Note will be an “applicable high yield discount obligation” (an “AHYDO”) within the meaning of Section 163(i)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), as further described under “Description of the New Third Lien Secured Notes—General.

Subsidiary Guarantees    On the issue date, each of our subsidiaries that is a borrower under or that has guaranteed obligations under the Amended Credit Agreement will guarantee the New Third Lien Secured Notes (the “New Third Lien Guarantees”). The New Third Lien Secured Notes may be guaranteed by additional subsidiaries in the future that become obligors under the Amended Credit Agreement under certain circumstances. See “Description of New Third Lien Secured Notes—Guarantees—Subsidiary Guarantees.

 

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Our subsidiaries that are not providing New Third Lien Guarantees, are primarily (i) 100% owned subsidiaries of Bed ‘n Bath Stores Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; (ii) 100% owned subsidiaries of Harmon Stores, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; and (iii) 100% owned subsidiaries of Buy Buy Baby, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets. Our subsidiaries that are not providing Third Lien Guarantees generated approximately less than 1.0% of the Company’s net income for the six months ended August 27, 2022, and held approximately 1.0% of the Company’s consolidated assets as of August 27, 2022 and are not material to the Company’s consolidated financial statements.

 

Collateral   

The New Third Lien Secured Notes and the New Third Lien Guarantees will be secured by a third-priority lien, subject to Permitted Liens, on the Collateral.

 

The Collateral securing the obligations under the New Third Lien Secured Notes will be the same as the collateral that secures the obligations under the Amended Credit Agreement and the related guarantees, other than pledges of equity interests of the Company’s subsidiaries, including the Subsidiary Guarantors, which will not be part of the Collateral securing the obligations under the New Third Lien Secured Notes, and subject to certain exceptions. The liens on the Collateral securing the obligations under the New Third Lien Secured Notes will be held by the Third Lien Collateral Agent (as defined herein) for the benefit of itself, the trustee for the New Third Lien Secured Notes and the holders of the New Third Lien Secured Notes.

 

See “Description of New Third Lien Secured Notes—Security.”

Priority   

The New Third Lien Secured Notes and the New Third Lien Guarantees will be:

 

•  secured on a third-priority basis by the Collateral (subject to certain Permitted Liens) and will be secured on a junior basis to (i) all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a first-priority basis, including the ABL/FILO Obligations, (ii) all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a second-priority basis, including the Second Lien Obligations and (iii) all other existing and future senior Secured Indebtedness of the Company and the Subsidiary Guarantors that is secured by a first-priority or second-priority lien on the Collateral

 

•  effectively senior to all existing and future unsecured Indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the Collateral, including any Old Notes not tendered in the Exchange Offers;

 

•  (i) effectively subordinated to any of the Company’s and the Subsidiary Guarantors’ existing and future Indebtedness that

 

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is secured by assets that do not constitute Collateral securing the New Secured Notes, including the equity pledges that secure the Senior Lien Obligations, to the extent of the value of such assets and (ii) structurally subordinated to all existing and future Indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries that do not guarantee the New Secured Notes;

 

•  unconditionally guaranteed by the Subsidiary Guarantors;

 

•  pari passu in right of payment with, and secured on an equal and ratable basis with, all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a third-priority basis; and

 

•  senior in right of payment to any of the Company’s and the Subsidiary Guarantors’ future subordinated Indebtedness.

 

As of August 27, 2022, on an as adjusted basis after giving effect to incremental borrowings under the ABL Facility and the FILO Facility as of November 11, 2022, the Private Exchange Agreements and the Exchange Offers assuming full participation in the Exchange Offers and either (1) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Non-Convertible Notes and (2) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Convertible Notes, and in each case, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, the Company and the Subsidiary Guarantors would have had:

 

•  in the case of (1), total consolidated indebtedness of approximately $1,480.8 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $218.6 million of New Second Lien Non-Convertible Notes, $0 of New Second Lien Convertible Notes and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

 

•  in the case of (2), total consolidated indebtedness of approximately $1,394.1 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $0 of New

 

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Second Lien Non-Convertible Notes, $131.9 million of New Second Lien Convertible Notes (reflecting undiscounted future cash flows, including $91.5 million of aggregate principal amount and $40.4 million of future interest payments) and $337.2 million of New Third Lien Secured Notes (reflecting the undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

Conversion Rights   

Our borrowing capacity under the ABL Facility varies according to our inventory levels, net of certain reserves. We have the ability to continue to borrow under our ABL Facility, subject to customary conditions, no default, the accuracy of representations and warranties, and borrowing base availability, and may borrow under the ABL Facility in the future.

 

Holders of the New Third Lien Secured Notes may convert all or a portion of their New Third Lien Secured Notes at their option only in the following circumstances:

 

•  during any calendar quarter commencing after the calendar quarter ending on December 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock exceeds 130% of the conversion price for each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

 

•  during the five consecutive business days immediately after any five consecutive trading day period (such five consecutive trading day period, the “measurement period”) in which the trading price per $1,000 principal amount of New Third Lien Secured Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the New Third Lien Secured Notes on such trading day;

 

•  if we call any or all of the New Third Lien Secured Notes for redemption, with respect to those New Third Lien Secured Notes called or deemed called for redemption; and

 

•  upon the occurrence of certain corporate events or distributions on the common stock.

 

On or after May 30, 2029 until the close of business on the second scheduled trading day immediately before the maturity date holders of the New Third Lien Secured Notes may convert all or a portion of their New Third Lien Secured Notes at their option.

 

We will settle conversions by paying or delivering, as applicable, cash, shares of common stock or a combination of cash and shares of common stock, at our election, based on the applicable

 

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conversion rate. If we elect to deliver cash or a combination of cash and shares of common stock, then the consideration due upon conversion will be based on an observation period consisting of 40 “VWAP trading days.” The initial conversion rate is 83.3333 shares per $1,000 principal amount of notes, which represents an initial conversion price of approximately $12.00 per share, and is subject to adjustment if certain events occur.

  

 

See “Description of New Third Lien Secured Notes—Conversion Rights of New Third Lien Secured Notes.

Third Lien Security

Agreement

  

Wilmington Trust, National Association, as third lien collateral agent (the “Third Lien Collateral Agent”), will enter into a Third Lien U.S. Security Agreement and a Third Lien Canadian Security Agreement, dated as of the Settlement Date (as amended, supplemented or otherwise modified, the “Third Lien Security Agreements”), with the Company, the Subsidiary Guarantors applicable for each Third Lien Security Agreement and Wilmington Trust, National Association, as trustee for the New Third Lien Secured Notes. Pursuant to the Third Lien Security Agreements, the Third Lien Collateral Agent will be granted a lien on the Collateral to secure the third-priority lien obligations which as of the Settlement Date will only include the obligations in respect of the New Third Lien Secured Notes. The Third Lien Security Agreements will set forth therein the relative rights of the third-lien secured parties with respect to the Collateral and cover certain other matters relating to the administration of security interests. The Third Lien Security Agreements generally control substantially all matters related to the interest of the third-lien secured parties in the Collateral, including with respect to directing the Third Lien Collateral Agent, distribution of proceeds and enforcement.

First Lien/Second Lien/Third

Lien Intercreditor Agreements

   In connection with the Exchange Offers and Consent Solicitations, the Third Lien Collateral Agent will enter into the First Lien/Second Lien/Third Lien Intercreditor Agreements with respect to the New Third Lien Secured Notes. The First Lien/Second Lien/Third Lien Intercreditor Agreements will restrict the actions permitted to be taken by the Third Lien Collateral Agent with respect to the Collateral on behalf of the holders of the New Third Lien Secured Notes, and the Third Lien Collateral Agent, on behalf of itself and the holders of the New Third Lien Secured Notes, will agree to limit certain other rights with respect to the Collateral during any insolvency proceeding. See “Description of New Third Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements.”

Third Lien Security

Documents

   The obligations under the New Third Lien Secured Notes will be secured pursuant to new security documents (the “Third Lien Security Documents”). The Security Documents will include the Third Lien Security Agreement, control agreements (including, as applicable, a deposit account control agreement, a securities

 

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   account control agreement or a commodity account control agreement) and any other filings and instruments granting, perfecting or otherwise evidencing the new third-priority lien.
Fundamental Change   

Upon a fundamental change (as defined in “Description of New Third Lien Secured Notes—Required Repurchase upon Fundamental Change”), we must offer to repurchase the New Third Lien Secured Notes at a purchase price equal to 100% of the principal amount of notes repurchased, plus accrued and unpaid interest, if any, to but not including the repurchase date. We are not required to make a change of control offer to the extent we exercise our right to redeem the New Third Secured Notes.

 

See “Description of New Third Lien Secured NotesRequired Repurchase upon Fundamental Change.”

Certain Covenants   

The indenture governing the New Third Lien Secured Notes (the “Third Lien Indenture”) will contain certain covenants, including limitations and restrictions on our and our restricted subsidiaries’ ability to:

 

•  incur additional indebtedness;

 

•  pay dividends on capital stock and make other restricted payments;

 

•  make investments and acquisitions;

 

•  sell assets;

 

•  merge or consolidate with other entities; and

 

•  create liens.

 

The restrictive covenants set forth in the Third Lien Indenture are subject to important exceptions and qualifications. If certain conditions are met, many of the covenants in the Third Lien Indenture will permanently terminate. See “Description of New Third Lien Secured Notes—Certain Covenants.”

Absence of an Established

Market for the Notes

   The New Third Lien Secured Notes will be new securities for which there is no established trading market. Accordingly, we cannot assure you that a liquid market for the New Third Lien Secured Notes will develop or be maintained. We do not intend to list the New Third Lien Secured Notes on any securities exchange. If an active trading market for the New Third Lien Secured Notes does not develop, the market price and liquidity of the New Third Lien Secured Notes may be adversely affected. If the New Third Lien Secured Notes are traded, they may trade at a discount, depending on prevailing interest rates, the market for similar securities, our operating performance and financial condition, general economic conditions and other factors.
Book-Entry Form    The New Third Lien Secured Notes will be issued in book-entry form only and will be in the form of one or more global

 

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   certificates, which will be deposited with, or on behalf of DTC, and registered in its nominee name Cede & Co. See “Book-Entry Settlement and Clearance.”
Use of Proceeds    We will not receive any cash proceeds from the Exchange Offers and Consent Solicitations. See “Use of Proceeds.”
Denominations    The New Third Lien Secured Notes will be issued in minimum denominations of $2,000 principal amount and integral multiples of $1,000 principal amount in excess thereof.
Governing Law    The New Third Lien Secured Notes and the Third Lien Indenture will be governed by, and construed in accordance with, the laws of the State of New York.

New Third Lien Secured

Notes Trustee

   Wilmington Trust, National Association.

 

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RISK FACTORS

An investment in the New Secured Notes and a decision as to whether or not to participate in the Exchange Offers involves a high degree of risk. Prior to making such decisions, and in consultation with your own financial and legal advisors, you should carefully consider the risks described below, as well as the other information contained or incorporated by reference in this Prospectus, including the information under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended February 26, 2022 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the fiscal quarter ended August 27, 2022, and the information contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” from our Annual Report on Form 10-K for the fiscal year ended February 26, 2022 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended May 28, 2022 and August 27, 2022, and other filings we may make from time to time with the SEC, together with all of the other information included or incorporated by reference in this Prospectus, including the financial statements and related notes. Additionally, a prolonged duration of COVID-19 and its resulting impacts could heighten many of the risks described in such reports. If any of the following risks actually occur, our business, financial condition or results of operations may suffer. As a result, we might be unable to repay the principal of and interest on the New Secured Notes, and you could lose all or part of your investment.

Risks Related to Our Indebtedness

Our business would be adversely affected if we are unable to service our debt obligations.

We have incurred substantial indebtedness under the Old Notes and the Amended Credit Agreement, which, assuming consummation of, and depending on the level of participation in, the Exchange Offers, may decrease but will remain substantial. Our ability to pay interest and principal when due, comply with debt covenants, repurchase the Old Notes if a change of control occurs, assuming the Proposed Amendments are not adopted, and repurchase the New Secured Notes if a change of control or fundamental change occurs, as applicable, will depend upon, among other things, sales and cash flow levels and other factors that affect our future financial and operating performance, including prevailing economic conditions and financial and business factors, many of which are beyond our control. Given the current economic environment, and ongoing challenges to our business, we may be unable to service our debt obligations, maintain compliance with the minimum fixed charge coverage ratio covenant under the Amended Credit Agreement or comply with the other terms of the Amended Credit Agreement, which would among other things, result in an event of default under the Amended Credit Agreement, as applicable.

The principal sources of our liquidity are funds generated from operating activities, available cash and cash equivalents, borrowings under the Amended Credit Agreement and supplier and vendor financing. We have incurred net losses in our most recently completed three fiscal years, including a net loss of $559.6 million for the fiscal year ended February 26, 2022. We may continue to incur net losses in future periods, which would adversely affect our business, financial condition and ability to service our debt obligations, and due to the risks inherent in our operations, our future net losses may be greater than our past net losses.

Our ability to achieve our business and cash flow plans is based on a number of assumptions which involve significant judgments and estimates of future performance, borrowing capacity and credit availability, which cannot at all times be assured. Accordingly, there is no assurance that cash flows from operations and other internal and external sources of liquidity will at all times be sufficient for our cash requirements. If necessary, we may need to consider actions and steps to improve our cash position and mitigate any potential liquidity shortfall, such as modifying our business plan, pursuing additional financing to the extent available, reducing capital expenditures, pursuing and evaluating other alternatives and opportunities to obtain additional sources of liquidity and other potential actions to reduce costs. There can be no assurance that any of these actions would be successful, sufficient or available on favorable terms. Any inability to generate or obtain sufficient levels of liquidity to meet our cash requirements at the level and times needed would have a material adverse impact on our business and financial position.

 

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If we become unable in the future to generate sufficient cash flow to meet our debt service requirements, we may be forced to take remedial actions such as restructuring or refinancing our debt, seeking additional debt or equity capital, reducing or delaying our business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code. There can be no assurance that any such measures would be successful.

Our ability to obtain any additional financing or any refinancing of our debt, if needed at any time, depends upon many factors, including our existing level of indebtedness and restrictions in the agreements governing our indebtedness, historical business performance, financial projections, the value and sufficiency of collateral, prospects and creditworthiness, external economic conditions and general liquidity in the credit and capital markets. Any additional debt, equity or equity-linked financing may require modification of our existing debt agreements, which there is no assurance would be obtainable. Any additional financing or refinancing could also be extended only at higher costs and require us to satisfy more restrictive covenants, which could further limit or restrict our business and results of operations, or be dilutive to our stockholders.

The terms of the Amended Credit Agreement and the New Notes Indentures may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

The Amended Credit Agreement governing the ABL Facility and FILO Facility contain, and the New Notes Indentures will contain, customary affirmative and negative covenants. These covenants could impose significant operating and financial limitations and restrictions on us, including restrictions on our ability to enter into particular transactions, such as asset sales and acquisitions, and to engage in other actions that we may believe are advisable or necessary for our business.

The Amended Credit Agreement includes, and the New Notes Indentures will include, covenants that, among other things, restrict our ability and certain our subsidiaries’ ability to:

 

   

incur additional indebtedness;

 

   

pay dividends on capital stock and make other restricted payments;

 

   

make investments and acquisitions;

 

   

sell assets;

 

   

merge or consolidate with other entities; and

 

   

create liens.

These restrictions could limit our ability to obtain future financings, make needed capital expenditures, including in connection with our transformation strategy, withstand future downturns in our business or the economy in general or otherwise conduct necessary corporate activities. We may also be prevented from taking advantage of business opportunities that arise because of limitations imposed by the restrictive covenants under the Amended Credit Agreement and the New Secured Notes.

In addition, under certain circumstances, the Amended Credit Agreement requires us to comply with a minimum fixed charge coverage ratio and may require us to reduce debt or take other actions in order to comply with this ratio. Moreover, the Amended Credit Agreement provides discretion to the agents acting on behalf of the lenders to impose additional availability and other reserves, which could materially impair the amount of borrowings that would otherwise be available to us. There can be no assurance that the agents will not impose such reserves or, were it to do so, that the resulting impact of this action would not materially and adversely impair our liquidity.

A breach of any of these provisions could result in a default under the Amended Credit Agreement or the New Notes Indentures. Our obligations under the ABL Facility and the FILO Facility are secured by first, and, in the case of the New Second Lien Secured Notes and the New Third Lien Secured Notes, will be secured by second and third, respectively, priority liens on the Collateral, subject to customary exceptions.

 

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In the event of a default that is not cured or waived within any applicable cure periods, the lenders’ commitment to extend further credit under the ABL Facility could be terminated, our outstanding obligations under the ABL Facility, the FILO Facility and any Old Notes that remain outstanding after and any New Secured Notes issued in the Exchange Offers could become immediately due and payable, outstanding letters of credit may be required to be cash collateralized and remedies may be exercised against any collateral securing our indebtedness, which may include the initiation of bankruptcy proceedings. If we are unable to borrow under the ABL Facility, we may not have the necessary cash resources for our operations and, if any event of default occurs, there is no assurance that we would have the cash resources available to repay such accelerated obligations, refinance such indebtedness on commercially reasonable terms, or at all, or cash collateralize our letters of credit, which would have a material adverse effect on our business, financial condition, results of operations and liquidity.

The Amended Credit Agreement limits our borrowing capacity to the value of certain of our assets.

Our borrowing capacity under the ABL Facility varies according to the Company’s inventory levels and credit card receivables, net of certain reserves, and the FILO Facility is subject to a borrowing base consisting of eligible credit card receivables, eligible inventory and eligible intellectual property. In the event of any decrease in the amount of or appraised value of these assets or upon the disposition of assets, our borrowing capacity under either the ABL Facility or the FILO Facility, would similarly decrease, which could adversely impact our business and liquidity. We have announced the closure of approximately 150 lower-producing Bed Bath & Beyond banner stores. As the closures are completed, we expect our borrowing capacity under both the ABL Facility and FILO Facility may decrease to the extent sales and cash flow levels decrease following such store closures.

Despite current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur additional indebtedness in the future, including indebtedness secured by liens ranking senior to or equally with the liens securing the New Secured Notes. Although the terms governing our indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and any indebtedness incurred in compliance with these restrictions could be substantial. This indebtedness could, subject to satisfaction of our limitation on liens covenant, constitute first or second-priority secured obligations effectively senior to the Old Notes and senior or pari passu to the New Secured Notes, as applicable, to the extent of the collateral securing it. Our ability to borrow under the ABL Facility will remain limited by the amount of the borrowing base. At November 11, 2022, we would have had the ability to borrow up to an additional $400 million under the ABL Facility. In addition, the Amended Credit Agreement allows, and the New Notes Indentures will allow, us to incur a significant amount of indebtedness in connection with acquisitions as well as purchase money debt and foreign subsidiary debt. If new debt is added to our and/or the Subsidiary Guarantors’ current debt levels, the related risks that we and they face would be increased.

Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange

The following risk factors specifically apply to the extent a holder of Old Notes elects not to participate in the Exchange Offers or whose Old Notes are tendered and not accepted for exchange. There are additional risks attendant to investing in the New Secured Notes that you should review whether or not you elect to tender your Old Notes. Such additional risks are described elsewhere in this Risk Factors section.

Upon consummation of the Exchange Offers, the liquidity of the market for outstanding Old Notes will likely be reduced, and market prices for outstanding Old Notes may decline as a result.

To the extent the Exchange Offers are consummated, the aggregate principal amount of outstanding Old Notes will be reduced. A reduction in the amount of outstanding Old Notes would likely adversely affect the liquidity

 

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of the non-tendered or not accepted Old Notes of each series. An issue of securities with a small outstanding principal amount available for trading, or float, generally commands a lower price than does a comparable issue of securities with a greater float. A reduced float may also make the trading prices of the Old Notes that are not exchanged more volatile. There can be no assurance that an active market in the Old Notes will exist, develop or be maintained, or as to the prices at which the Old Notes may trade, whether or not the Exchange Offers and Consent Solicitations are consummated.

Claims regarding the Old Notes remaining outstanding following the completion of the Exchange Offers will be structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the Old Notes, including the Subsidiary Guarantors, and effectively subordinated to claims with respect to our secured indebtedness, including the New Secured Notes, to the extent of the value of the collateral securing such indebtedness.

The unsecured nature of the claims of the Old Notes and the lack of any related guarantees could materially and adversely affect the value of Old Notes remaining outstanding following the completion of the Exchange Offers in the event of a bankruptcy, liquidation or insolvency of the Company. The New Secured Notes will be guaranteed by the Subsidiary Guarantors and secured by second priority or third priority liens on the Collateral, as applicable (as described under “Description of New Second Lien Secured Notes—Security” and “Description of New Third Lien Secured Notes—Security”), but the Old Notes will not be guaranteed by the Subsidiary Guarantors and will remain unsecured. As a result, the Old Notes will be structurally subordinated to all existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the Old Notes, including the Subsidiary Guarantors, and effectively subordinated to our secured indebtedness, including the New Secured Notes as well as indebtedness under the Amended Credit Agreement, in each case to the extent of the value of the collateral securing such indebtedness. The collateral that secures our indebtedness under the Amended Credit Agreement and the Collateral that will secure the New Secured Notes represents substantially all of the value of the assets of the Company and the Subsidiary Guarantors.

In the event of our bankruptcy, liquidation or insolvency, all obligations of our subsidiaries and all of our secured obligations will have to be satisfied before any of the assets of such subsidiaries or our pledged assets would be available for distribution to the holders of the Old Notes. If we default on our outstanding debt obligations, the proceeds from certain sales of the collateral securing our indebtedness will be applied first to satisfy claims made in respect of our secured indebtedness, including the New Secured Notes and our indebtedness under the Amended Credit Agreement. As a result, in a bankruptcy, liquidation or insolvency proceeding, there will be significantly fewer assets available to satisfy our obligations under the Old Notes remaining outstanding following the completion of the Exchange Offers. Further, it is possible (and in the short term, likely) that our assets that do not secure our indebtedness will be insufficient to satisfy the claims of the Old Notes and our other unsecured indebtedness remaining outstanding following the completion of the Exchange Offers. For additional information on the amounts of indebtedness that could be outstanding after the consummation of the Exchange Offers, see “Risks Related to the New Secured Notes.”

The Proposed Amendments to the Old Notes Indenture will afford reduced protection to remaining holders of the Old Notes and the New Notes Indentures will limit the Company’s ability to refinance the Old Notes.

The Proposed Amendments to the Old Notes Indenture, if adopted, would, among other things, eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens and (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes as further described under “Proposed Amendments.”

The Old Notes Indenture, as modified by the Proposed Amendments, will be significantly less restrictive and will afford significantly reduced protection to holders of Old Notes as compared to the restrictive covenants, events of default and other provisions currently contained in the Old Notes Indenture.

 

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If the Proposed Amendments are adopted with respect to any series of Old Notes, each holder of Old Notes who elects not to participate in such Exchange Offer will be bound by the Proposed Amendments even if that holder did not consent to the Proposed Amendments. The elimination or modification of the restrictive covenants, certain events of default and other provisions in the Old Notes Indenture contemplated by the Proposed Amendments would, among other things, permit the Company to take actions that could increase the credit risk with respect to the Old Notes, and might adversely affect the liquidity, market price and price volatility of the Old Notes that remain outstanding after completion of the Exchange Offers or otherwise be adverse to the interests of the remaining holders of the Old Notes.

In addition, the terms of the New Notes Indentures will substantially limit the Company’s ability to, and limit the terms on which the Company may, refinance the outstanding Old Notes after the consummation of the Exchange Offers. See “Description of New Second Lien Secured Notes—Certain Covenants” and “Description of New Third Lien Secured Notes—Certain Covenants.”

If we consummate the Exchange Offers, existing ratings for Old Notes that remain outstanding following completion of the Exchange Offers may not be maintained.

We cannot assure you that, as a result of the Exchange Offers, the rating agencies, including S&P Global Ratings (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”), will not downgrade or negatively comment upon the ratings for Old Notes that remain outstanding following completion of the Exchange Offers. Any downgrade or negative comment would likely adversely affect the market price of the Old Notes.

If the Exchange Offers and Consent Solicitations are not successful, we may not have sufficient funds to pay all or a portion of the amounts due at maturity on the Old Notes.

If the Exchange Offers and the Consent Solicitations are not successful, the Old Notes will remain outstanding and are scheduled to mature in 2024, 2034 and 2044, and the Proposed Amendments will not become effective. At maturity, we may not have sufficient funds and may be unable to arrange for additional financing to pay the principal amount, accrued and outstanding interest or repurchase price due on our Old Notes then outstanding, and we may not be able to reduce or refinance the Old Notes prior to such maturity on terms that are favorable to the Company or at all.

Risks Related to the Exchange Offers and the Consent Solicitations

To the extent that holders of 2024 Notes exchange 2024 Notes for New Second Lien Non-Convertible Notes and/or New Second Lien Convertible Notes with a later maturity, such holders increase the amount of time before their New Secured Notes mature, which may in turn increase the risk that the Company will be unable to repay (or refinance) such New Secured Notes when they mature.

Holders of 2024 Notes are being offered to exchange their 2024 Notes for New Second Lien Non-Convertible Notes and/or New Second Lien Convertible Notes with a later maturity than the 2024 Notes they presently hold. Holders who tender their 2024 Notes and whose tender is accepted for exchange will be exposed to the risk of nonpayment on the securities they hold for a longer period of time than non-tendering holders or those holders whose 2024 Notes were not accepted for exchange. For instance, following the maturity and payment date of the 2024 Notes (August 1, 2024), but prior to the maturity date of the New Second Lien Non-Convertible Notes and/or the New Second Lien Convertible Notes (November 30, 2027), the Company may become subject to a bankruptcy or similar proceeding. If so, holders of such 2024 Notes who opted not to participate in the Exchange Offers (or whose 2024 Notes were not accepted for exchange) may be paid in full, and there is a risk that any holders of 2024 Notes who did opt to participate in the Exchange Offers and whose 2024 Notes were accepted for exchange will not be paid in full.

 

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Neither we nor our Board, the Dealer Manager, the Old Notes Trustee, the New Notes Trustees, the Exchange Agent, the Information Agent, or any affiliate of any of them, has made a recommendation as to whether you should tender your Old Notes in exchange for New Secured Notes in the Exchange Offers and deliver Consents in the Consent Solicitations, and we have not made a determination or obtained a third-party determination that the Exchange Offers and Consent Solicitations are fair to holders of the Old Notes.

Neither we nor our Board, the Dealer Manager, the Old Notes Trustee, the New Notes Trustees, the Exchange Agent, the Information Agent or any affiliate of any of them, has made, nor will any of them make, any recommendation as to whether holders of Old Notes should tender their Old Notes in exchange for New Secured Notes pursuant to the Exchange Offers and deliver Consents pursuant to the Consent Solicitations. Furthermore, neither we nor our Board has made any determination that the consideration to be received represents a fair valuation of the Old Notes, and we also have not retained, and do not intend to retain, any unaffiliated representative to act solely on behalf of the holders of Old Notes for purposes of negotiating the terms of the Exchange Offers, or preparing a report or making any recommendation concerning the fairness of the Exchange Offers. Holders of Old Notes must make their own independent decisions regarding their participation in the Exchange Offers and Consent Solicitations.

The Exchange Offers and the Consent Solicitations may not occur at meaningful participation levels, or at all, or may be delayed.

We have the right to terminate, withdraw, amend, cancel or delay at our discretion (subject to applicable law) the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes, at any time if we fail to satisfy or do not waive any condition to the Exchange Offers.

Even if the Exchange Offers and the Consent Solicitations are consummated, they may not be consummated on the schedule described in this Prospectus. Accordingly, holders participating in the Exchange Offers may have to wait longer than expected to receive their New Secured Notes during which time such holders will not be able to effect transfers or sales of their Old Notes tendered for exchange or their New Secured Notes.

In addition, even if the Exchange Offers and Consent Solicitations are consummated, there can be no assurance that completion of the Exchange Offers will achieve our purposes. For example, if we do not receive meaningful participation in the Exchange Offers, a substantial amount of principal under the Old Notes will remain outstanding. Further, the 2024 Notes are scheduled to mature on August 1, 2024. If the 2024 Exchange Offer is not consummated at a meaningful level or at all, at maturity we may not have sufficient funds and may be unable to arrange for additional financing to pay the principal amount, accrued and outstanding interest or repurchase price due on the 2024 Notes then outstanding, and we may not be able to reduce or refinance the 2024 Notes prior to such maturity. Thus, unless the Exchange Offers are completed at meaningful participation levels, you could lose part or all of your investment in the Old Notes. Moreover, the ABL Facility matures on August 9, 2026, but is required to mature earlier on May 1, 2024 pursuant to the terms of the Amended Credit Agreement if 2024 Notes are outstanding under certain circumstances, and the FILO Facility matures on August 31, 2027, but is required to mature earlier on May 1, 2024 pursuant to the terms of the Amended Credit Agreement if 2024 Notes are outstanding under certain circumstances. In the event the maturities of the ABL Facility and the FILO Facility spring forward, the foregoing risks would be exacerbated, and we may not be able to reduce or refinance the 2024 Notes prior to such maturity.

Failure to consummate the Exchange Offers could adversely affect our business.

If we fail to consummate the Exchange Offers at meaningful participation levels, we will need to consider other alternatives available to us to deleverage and strengthen our financial condition, including to address the maturity of the 2024 Notes. These alternatives may include (subject to market conditions) capital markets transactions, repurchases, redemptions, exchanges or other refinancings of our existing debt, the potential issuance of equity securities, the potential sale of additional assets and businesses and/or other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code. These alternatives involve significant

 

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uncertainties, potential delays, significant costs and other risks, and there can be no assurance that any of these alternatives will be available on acceptable terms, or at all, in the current market environment or in the foreseeable future.

Any alternative we pursue, whether in or out of court, may take substantially longer to consummate than the Exchange Offers, could disrupt our business and would divert the attention of our management from the operation of our business and execution of our omni-channel and transformation strategy. Failure to consummate the Exchange Offers or to otherwise deleverage and address our nearer-term maturities could also have other adverse effects on us. For example, it could also adversely affect:

 

   

our ability to retain our existing, and attract new, vendors, suppliers and other business partners;

 

   

our ability to raise additional capital;

 

   

our ability to capitalize on business opportunities and react to competitive pressures;

 

   

our ability to attract and retain employees;

 

   

our liquidity;

 

   

how our business is viewed by investors, lenders, vendors, suppliers, strategic partners and customers; and

 

   

our enterprise value.

Even if we are successful with the Exchange Offers, avoidance of an in-court restructuring under the U.S. Bankruptcy Code in the future is not guaranteed.

The accounting method for the New Secured Notes could adversely affect our reported financial condition and results.

The Exchange Offers will be accounted for as a troubled debt restructuring pursuant to the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) standard 470-60. As a result of evaluating the Exchange Offers in accordance with ASC 470-60, the carrying value of the New Second Lien Convertible Notes and New Third Lien Secured Notes may need to be recorded as being equal to the sum of all future cash flows on such notes, including interest payments. If so, then accordingly, all future interest expense and debt issuance costs will be accrued upon the settlement date of the Exchange Offers as a reduction to the gain on extinguishment of the tendered Old Notes and no future interest or amortization expense associated with the such notes would be recognized.

In addition, the call option for the New Second Lien Non-Convertible Secured Notes will be considered an embedded derivative in accordance with ASC Topic 815 Derivatives and Hedging (ASC Topic 815), and thus would need to be bifurcated and would require separate accounting. The conversion and other features within the New Second Lien Convertible Notes and the New Third Lien Secured Notes may be considered to be an embedded derivatives in accordance with ASC Topic 815, and thus would need to be bifurcated and would require separate accounting. The Company will evaluate these features after the closing of the Exchange Offers.

Lastly, the shares underlying the New Convertible Secured Notes will be reflected in our diluted earnings per share using the “if-converted” method, in accordance with ASU 2020-06, Debt — Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under that method, diluted earnings per share will generally be calculated assuming that all of the New Convertible Secured Notes are converted solely into shares of common stock at the beginning of the reporting period, unless the result would be anti-dilutive. The application of the if-converted method may reduce our reported diluted earnings per share, and accounting standards may change in the future in a manner that may adversely affect our diluted earnings per share.

 

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Furthermore, if any of the conditions to the convertibility of the New Convertible Secured Notes is satisfied, then we may be required under applicable accounting standards to reclassify the carrying value of the New Convertible Secured Notes as a current, rather than a long- term, liability. This reclassification could be required even if no holders convert their New Convertible Secured Notes and could materially reduce our reported working capital.

Our ability to redeem, repurchase or exchange any Old Notes that remain outstanding after the consummation of the Exchange Offer will be limited.

After consummation of the Exchange Offers, our ability to redeem or repurchase any Old Notes that remain outstanding will be limited by the terms of the New Notes Indentures. In addition, our ability to exchange Old Notes for any other indebtedness and/or equity will be at prices less advantageous than the prices offered in this Exchange Offer.

Under the terms of the New Notes Indentures, (i) the Company may not exchange any of the 2024 Notes for new indebtedness and/or equity at more than 90% of the applicable Exchange Consideration to be received in the Exchange Offers, and the Company may only redeem or repurchase outstanding 2024 Notes in cash and/or equity on or after April 1, 2024 and (ii) the Company may not exchange any of the 2034 Notes or any 2044 Notes for new indebtedness and/or equity at more than 90% of the applicable Exchange Consideration to be received in the Exchange Offers, and, the Company may not redeem or repurchase any outstanding 2034 Notes or 2044 Notes prior to the maturity of any of the New Secured Notes.

Any failure to comply with the procedures set forth in this Prospectus could prevent you from exchanging your Old Notes and delivering your Consent.

On the terms and subject to the conditions of the Exchange Offers, the Company will issue the New Secured Notes in exchange for your Old Notes only if you validly tender (and do not validly withdraw) the Old Notes and only upon proper completion of the procedures described in this Prospectus under “Procedures for Tendering Old Notes and Delivering Consents.” Holders of Old Notes who wish to exchange them for New Secured Notes and deliver their Consents are responsible for complying with all the procedures of the applicable Exchange Offer and Consent Solicitation. Tenders made in compliance with procedures or instructions that are inconsistent with those stated in this Prospectus (or a supplement or amendment thereto provided by the Company), regardless of who provides such procedures or instructions (including DTC, Clearstream Banking, société anonyme (“Clearstream”), or Euroclear Bank SA/NV, as operator of the Euroclear System (“Euroclear”) (collectively, the “Clearing Systems”)), will not be deemed valid tenders (unless we waive such compliance in our discretion, subject to applicable law). Holders of Old Notes who wish to exchange them for New Secured Notes and deliver their Consents should allow sufficient time for timely completion of the exchange procedures. None of the Exchange Agent, the Information Agent, the Dealer Manager or the Company are under any duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange and delivery of Consents or to extend any of the applicable deadlines, subject to applicable law.

If you are the beneficial owner of Old Notes that are held through the Clearing Systems in the name of your broker, dealer, commercial bank, trust company or other nominee or custodian, and you wish to tender in the Exchange Offers and deliver Consents, you should promptly contact the person in whose name your Old Notes are held and instruct that person to tender your Old Notes and deliver a Consent on your behalf. Beneficial owners should be aware that their broker, dealer, commercial bank, trust company or other nominee or custodian may establish their own earlier deadlines for participation in the Exchange Offers and Consent Solicitations. Accordingly, beneficial owners wishing to participate in the Exchange Offers and Consent Solicitations should contact their broker, dealer, commercial bank, trust company or other nominee or custodian as soon as possible in order to determine the times by which such owner must take action in order to participate in the Exchange Offers and Consent Solicitations.

 

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A U.S. Holder that exchanges its Old Notes pursuant to the Exchange Offers may not be permitted to recognize any loss for U.S. federal income tax purposes but may be required to recognize gain.

A U.S. Holder (as defined in “United States Federal Income Tax Considerations”) that exchanges Old Notes for New Secured Notes generally will not be permitted to recognize any loss for U.S. federal income tax purposes but generally will be required to recognize any realized gain to the extent of the sum of (a) any cash received, including any portion of the total exchange consideration paid in cash for any principal amount of New Secured Notes not received as a result of rounding down (but not including any amounts received in respect of accrued and unpaid interest on the Old Notes, which will be taxed as such) and (b) the fair market value of any “excess principal amount” of New Secured Notes received, if the exchange is treated as an “exchange” and recapitalization for U.S. federal income tax purposes. Each U.S. Holder should consult its tax advisor regarding the tax consequences of participating in the Exchange Offers. See “United States Federal Income Tax Considerations.”

The exchange of the Old Notes for New Secured Notes may result in a loss of our existing tax attributes and/or increased tax liabilities.

If the Exchange Offers are completed, we would realize cancellation of indebtedness income (“COD income”) for U.S. federal income tax purposes to the extent that the aggregate amount of consideration exchanged for the Old Notes (generally, the “issue price” of the New Secured Notes and any other consideration treated as paid for the New Secured Notes for U.S. federal income tax purposes) is less than the aggregate “adjusted issue price” of the Old Notes. The exact amount of COD income (if any) that we will realize in connection with the Exchange Offers will not be determinable until after the consummation of the Exchange Offers. We would generally be required to recognize the full amount of COD income realized and we would generally be able to offset all or a portion of such COD income with our available net operating losses and tax credits carryforwards as well as our current year net operating losses.

Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.

At February 26, 2022, the Company has federal net operating loss carryforwards of $268.3 million. If we undergo an “ownership change,” our ability to utilize our pre-ownership change losses to offset post-ownership change taxable income will be subject to certain limitations. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation undergoes an “ownership change” if there is a greater than 50-percentage-point cumulative change (by value) in the equity ownership of certain stockholders over a rolling three-year period Generally, the amount of the annual limitation is determined based on a corporation’s value immediately prior to the ownership change. In addition, for state tax purposes, our ability to offset COD income with state net operating loss carryforwards will be impacted by the mix of income between states, state 382 rules and other state specific limitations.

Any or all of the New Secured Notes issued in the Exchange Offers might be issued with an original issue discount (“OID”) for U.S. federal income tax purposes, which amount will not be determinable prior to the consummation of the Exchange Offers, in which case holders of the New Secured Notes who are subject to U.S. federal income taxation would be required to include OID in gross income as ordinary interest income on a constant yield to maturity basis.

Any or all of the New Secured Notes might be issued with OID for U.S. federal income tax purposes. The issue price of the New Secured Notes for this purpose is expected to be determined as discussed below under “United States Federal Income Tax Considerations—Tax Consequences of the Ownership and Disposition of the New Secured Notes—U.S. Holders—Issue Price of the New Secured Notes.” A holder of the New Secured Notes that is subject to U.S. federal income tax on a net basis will generally be required to include such OID in gross income (as ordinary income) on a constant yield-to-maturity basis in advance of the receipt of cash payment thereof and regardless of such holder’s method of accounting for U.S. federal income tax purposes. For more information, see “United States Federal Income Tax Considerations.”

 

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We may not be able to satisfy our repurchase obligations in the event the New Third Lien Secured Notes would otherwise constitute AHYDOs because the terms of our indebtedness or lack of funds may prevent us from doing so.

If the New Third Lien Secured Notes would otherwise constitute AHYDOs, we will be required to redeem a portion of the principal amount of each then outstanding New Third Lien Secured Note in an amount intended to ensure that no New Third Lien Secured Note will be an AHYDO. Any agreement governing any of our indebtedness may restrict our ability to make “AHYDO Catch Up Payments” (as defined herein). Accordingly, it is possible that restrictions in the Amended Credit Agreement or any indebtedness that may be incurred in the future will not allow the required repurchase of the New Third Lien Secured Notes. Even if such repurchase is permitted by the terms of our then existing indebtedness, we may not have sufficient funds available to satisfy our repurchase obligations.

Risks Related to the New Secured Notes

The New Secured Notes and the related guarantees are effectively subordinated to our and our Subsidiary Guarantors’ current and future senior secured indebtedness that is secured by a first-priority lien on the Collateral or secured by any other collateral to the extent of the value of such collateral and structurally subordinated to the indebtedness of our subsidiaries that do not guarantee the New Secured Notes.

The New Secured Notes and the related guarantees are secured, in the case of the New Second Lien Secured Notes, on a second-priority basis by the Collateral and, in the case of the New Third Lien Secured Notes, on a third-priority basis by the Collateral and therefore will be effectively subordinated to our current and any future secured indebtedness that is secured by higher-priority liens on the Collateral or secured by any other collateral to the extent of the value of such collateral. Such indebtedness includes the loans and other obligations incurred under the Amended Credit Agreement, which are secured by pledges of equity interests of the Company’s subsidiaries, including the Subsidiary Guarantors, which will not be part of the Collateral securing the obligations under the New Secured Notes, and first-priority liens on the same Collateral that secures the New Secured Notes. As such, the New Secured Notes are effectively subordinated to the loans and other obligations under the Amended Credit Agreement to the extent of the value of the collateral thereunder.

As of August 27, 2022, on an as adjusted basis after giving effect to incremental borrowings under the ABL Facility and the FILO Facility as of November 11, 2022, the Private Exchange Agreements and the Exchange Offers assuming full participation in the Exchange Offers and either (1) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Non-Convertible Notes and (2) all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Convertible Notes, and in each case, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, the Company and the Subsidiary Guarantors would have had:

 

   

in the case of (1), total consolidated indebtedness of approximately $1,480.8 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $218.6 million of New Second Lien Non-Convertible Notes, $0 of New Second Lien Convertible Notes and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

 

   

in the case of (2), total consolidated indebtedness of approximately $1,349.1 million, excluding letters of credit, consisting of $550 million of secured indebtedness under the ABL Facility under the Amended Credit Agreement (with approximately $400 million of additional availability based on estimated letters of credit outstanding), $375 million of secured indebtedness under the FILO Facility under the Amended Credit Agreement, $0 of Old Notes, $0 of New Second Lien Non-Convertible Notes, $131.9 million of New Second Lien Convertible Notes (reflecting undiscounted future cash flows, including $91.5 million of aggregate principal amount and $40.4 million of future interest payments)

 

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and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

Our borrowing capacity under the ABL Facility varies according to our inventory levels, net of certain reserves. We have the ability to continue to borrow under our ABL Facility, subject to customary conditions, no default, the accuracy of representations and warranties, and borrowing base availability, and may borrow under the ABL Facility in the future.

In the event we or the Subsidiary Guarantors become the subject of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding, our assets and the assets of the Subsidiary Guarantors securing indebtedness, including on a higher-priority basis, could not be used to pay holders of the applicable series of New Secured Notes until after all such higher-priority or otherwise secured claims against us and the Subsidiary Guarantors have been fully paid.

Our subsidiaries that are not providing New Secured Notes Guarantees, are primarily (i) 100% owned subsidiaries of Bed ‘n Bath Stores Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; (ii) 100% owned subsidiaries of Harmon Stores, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets; and (iii) 100% owned subsidiaries of Buy Buy Baby, Inc. holding no assets other than a single store lease and, in some cases, fully depreciated fixed assets. These subsidiaries generated approximately less than 1.0% of the Company’s net income for the six months ended August 27, 2022, and held approximately 1.0% of the Company’s consolidated assets as of August 27, 2022 and are not material to the Company’s consolidated financial statements.

There is no public market for the New Secured Notes.

The New Secured Notes are a new issue of securities for which there is currently no trading market. We cannot be sure that an active trading market will develop for the New Secured Notes or, if developed, that it will continue. As a result, we are unable to assure you as to the presence or the liquidity of any trading market for the New Secured Notes.

Moreover, if a market were to develop, the New Secured Notes could trade at prices that may be lower than their initial offering price because of many factors, including, but not limited to:

 

   

prevailing interest rates for similar securities;

 

   

general economic conditions;

 

   

the amount of indebtedness we have outstanding;

 

   

our financial condition, performance or prospects; and

 

   

the prospects for other companies in the same industry.

In addition, the market for non-investment grade debt has historically been subject to disruptions that have caused volatility in the prices of these securities. It is possible that, if any trading market for the New Secured Notes develops, it will be subject to disruptions. Any such disruption may have a negative effect on you as a holder of the New Secured Notes, regardless of our financial condition, performance or prospects.

Depending on the amount of participation in the Exchange Offers and the amount of New Secured Notes issued in the Exchange Offers, the liquidity of the market for New Secured Notes may be limited, and market prices for New Secured Notes may be volatile.

To the extent the Exchange Offers are consummated, the amount of participation will determine the aggregate principal amount of New Secured Notes issued. However, the Exchange Offers are not conditioned on a

 

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minimum level of participation and therefore it is possible that one or all series of the New Secured Notes will have a relatively small aggregate principal amount when issued. An issue of securities with a small outstanding principal amount available for trading, or float, generally commands a lower price than does a comparable issue of securities with a greater float. As a result, the trading prices of one or all series of the New Secured Notes may be volatile and more volatile than the trading prices of the Old Notes. There can be no assurance that an active market in one or all series of the New Secured Notes will exist, develop, or be maintained at the prices at which one or all series of the New Secured Notes are issued or at all, should the Exchange Offers and Consent Solicitations be consummated.

Federal and state law may render the New Secured Notes Guarantees and/or payments made under the New Secured Notes Guarantees avoidable in specific circumstances, potentially requiring the holders to return payments received.

Fraudulent transfer and conveyance laws may apply to the issuance of the New Secured Notes and/or the incurrence of the guarantees or any security securing the New Secured Notes. If we or a Subsidiary Guarantor becomes a debtor in a case under the U.S. Bankruptcy Code or encounters other financial difficulty, under federal bankruptcy law and comparable provisions of state fraudulent transfer, fraudulent conveyance or voidable transactions laws, which may vary from state to state (and which, for simplicity, we refer to generally as “fraudulent transfer laws”), a court may avoid, subordinate or otherwise decline to enforce an obligation incurred, including a guarantee or claims in respect of a guarantee.

Specifically, the New Secured Notes Guarantees may be voided as fraudulent transfers if a court of competent jurisdiction finds that any such Subsidiary Guarantor, at the time it incurred the indebtedness evidenced by its guarantee:

 

   

incurred the obligations with the actual intent to hinder, delay or defraud creditors; or

 

   

received less than reasonably equivalent value, or did not receive fair consideration, in exchange for incurring those obligations; and

 

  1.

was insolvent or rendered insolvent by reason of that incurrence;

 

  2.

was engaged in a business or transaction for which the subsidiary’s remaining assets constituted unreasonably small capital;

 

  3.

intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature;

 

  4.

or such incurrence was made to or for the benefit of an insider not in the ordinary course of business.

A legal challenge to the obligations under any New Secured Notes Guarantee on fraudulent transfer grounds could focus on whether any benefits the applicable Subsidiary Guarantor received from the Exchange Offers, the New Secured Notes and the related transactions were reasonably equivalent in value to, or represented fair consideration for, the New Secured Notes Guarantee provided by such Subsidiary Guarantor. 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 a valid antecedent debt is satisfied. A court could find that a Subsidiary Guarantor did not receive reasonably equivalent value or fair consideration for its New Secured Notes Guarantee if, among other things, such Subsidiary Guarantor did not substantially benefit directly or indirectly from issuing the New Secured Notes Guarantee. Specifically, if the New Secured Notes Guarantees were legally challenged, any such guarantee could be subject to a claim that, since it was incurred for our benefit, and only indirectly for the benefit of the Subsidiary Guarantor, the obligations of the applicable Subsidiary Guarantor were incurred for less than reasonably equivalent value or fair consideration, and a court of competent jurisdiction could avoid the obligations under the New Secured Notes Guarantees or take other action detrimental to the holders of the New Secured Notes.

 

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We believe that each of the Subsidiary Guarantors making a New Secured Notes Guarantee is receiving reasonably equivalent value and fair consideration for incurring such guarantee, but a court may not reach the same conclusion.

The measures of insolvency for purposes of the fraudulent transfer laws vary depending on the law applied in the proceeding to determine whether a fraudulent transfer has occurred and is a fact-specific inquiry. We cannot be certain as to the standards a court would use to determine whether or not we or the Subsidiary Guarantors were insolvent at the relevant time or that a court would agree with our conclusions in this regard.

Generally, however, an entity would be considered insolvent if:

 

   

the sum of its debts, including contingent and unliquidated liabilities, was greater than all of its assets at fair valuation;

 

   

the fair saleable value of its assets within a reasonable time period was less than the amount that would be required to pay its probable liabilities on its total existing debts, including contingent liabilities, as they became absolute and mature;

 

   

it was engaged, or was about to engage, in business or a transaction, with unreasonably small capital; or

 

   

it generally was not paying its debts as they became due.

If a court of competent jurisdiction were to find that the incurrence of the New Secured Notes Guarantee was a fraudulent transfer or otherwise violated the fraudulent transfer laws, the court could avoid the payment obligations under such guarantee and direct you, as a beneficiary of such fraudulent transfer, to repay the value of any such payments received, which would be recovered for the benefit of: (i) the bankruptcy estate of the Subsidiary Guarantor, (ii) an assignee of the Subsidiary Guarantor’s assets in an Assignment for the Benefit of Creditors proceeding and/or (iii) a creditor or such other entity bringing the avoidance action. We cannot assure you that funds would be available from any other source to repay the related indebtedness.

In the event of a finding that a fraudulent transfer or conveyance occurred, you may not receive any repayment on the New Secured Notes. Further, the avoidance of the New Secured Notes or the guarantees thereof could result in an event of default with respect to our and our Subsidiaries’ other debt that could result in acceleration of that debt.

Finally, as a court of equity, the bankruptcy court may subordinate the claims in respect of the New Secured Notes or the guarantees thereof (or disallow them in their entirety) to other claims against us under the principle of equitable subordination if the court determines that (1) the holder of the New Secured Notes or the guarantees thereof engaged in some type of inequitable conduct, (2) the inequitable conduct resulted in injury to our other creditors or conferred an unfair advantage upon the holders of the New Secured Notes and (3) equitable subordination is not inconsistent with the provisions of the Bankruptcy Code. If the claims in respect of the New Secured Notes or the guarantees were subordinated, our ability to pay the New Secured Notes when due could be materially impaired. We cannot be certain as to the standards a court would use to determine whether to subordinate claims.

The New Notes Indentures limit the liability of each Subsidiary Guarantor on its New Secured Notes Guarantee to the maximum amount that such Subsidiary Guarantor can incur without risk that such guarantee will be subject to avoidance as a fraudulent transfer. We cannot assure you that this limitation will protect such New Secured Notes Guarantees from any fraudulent transfer challenges or similar challenges, as some courts have held such limitations unenforceable. Even if this limitation were enforced in accordance with its terms, the remaining amount due and collectible under the New Secured Notes Guarantees may not suffice, if necessary, to pay the New Secured Notes in full when due and could render the guarantee effectively worthless.

 

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Because there are no minimum tender conditions to the Exchange Offers, depending on the amount of 2024 Notes that remain outstanding following the completion of the 2024 Notes Exchange Offer, we may fail to repay the 2024 Notes when due, which could result in an event of default under the agreements governing our indebtedness, including the Amended Credit Agreement.

None of the Exchange Offers has a minimum tender condition. As a result, it is possible that in the 2024 Notes Exchange Offer, only a small amount of 2024 Notes may be exchanged for New Second Lien Non-Convertible Notes or New Second Lien Convertible Notes. Following completion of the Exchange Offers, under the New Notes Indentures, the Company will not be able to exchange any of the remaining 2024 Notes for new indebtedness and/or equity at more than 90% of the Exchange Consideration in the 2024 Notes Exchange Offer. In light of this restriction, if a large amount of 2024 Notes remain outstanding following the completion of the 2024 Notes Exchange Offer, the Company may not be able to repay the outstanding 2024 Notes when due. Such failure to repay the 2024 Notes could result in an event of default under the agreements governing our indebtedness, including the Amended Credit Agreement. If an event of default were to occur, the Company cannot assure you that it would have sufficient funds to repay the New Secured Notes, or any other debt, which may become immediately due and payable as a result.

We may redeem the New Secured Notes at our option, which may adversely affect your return. In particular, we may redeem the New Second Lien Non-Convertible Notes at a price less than their original principal amount. With respect to the New Second Lien Non-Convertible Notes, redemption may adversely affect the value of claims on the New Second Lien Non-Convertible Notes in bankruptcy.

We may redeem the New Secured Notes at our option on or after the dates, under the circumstances, and at the prices described in this Prospectus plus accrued and unpaid interest to, but excluding, the applicable redemption date. The New Note Indentures will not provide for any “make whole” payments in connection with a notice of redemption. In addition, we may, at our option, redeem for cash the New Second Lien Non-Convertible Notes, in whole or in part, at any time on or after the first anniversary of the issue date of the New Second Lien Non-Convertible Notes (which is expected to be December 7, 2023), at a price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. The redemption price is significantly less than the principal amount of the New Second Lien Non-Convertible Notes, which significantly reduces the exchange consideration paid for the 2024 Notes. In addition, under the New Notes Indentures, we will not be required to make an offer to repurchase the New Secured Notes in connection with a change of control, fundamental change or asset sale, as applicable, if we issue a notice of redemption. Accordingly, in connection with a change of control, the Company may have the ability to redeem the New Second Lien Non-Convertible Notes at a price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, rather than make an offer to purchase such notes at a price equal to 101% thereof, plus, accrued and unpaid interest to, but excluding, the date of purchase.

If the event of a bankruptcy or similar proceeding under the federal bankruptcy law, a bankruptcy court may determine that the New Second Lien Non-Convertible Notes represent a claim on the assets of the Company and the Subsidiary Guarantors only to the amount of the discounted redemption value. In view of the largely untested nature of the value of bonds with redemption rights at a discount and the broad equitable powers of a U.S. bankruptcy court, it is impossible to predict how the discounted redemption right would be treated in any bankruptcy or similar proceeding.

See “Description of New Second Lien Secured Notes—Optional Redemption” and “Description of New Third Lien Secured Notes—Optional Redemption” for a more detailed description of the prices and terms on which we may redeem the New Convertible Secured Notes.

You may not be able to resell the New Second Lien Non-Convertible Notes at par value.

Because we may redeem the New Second Lien Non-Convertible Notes at our option, in whole or in part, at any time on or after the first anniversary of the issue date of the New Second Lien Non-Convertible Notes (which we

 

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expect will be December 7, 2023) at a price equal to 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date, the New Second Lien Non-Convertible Notes may trade at a discount to their par value.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may adversely affect the market value of the New Secured Notes and increase our future borrowing costs and reduce our access to capital.

Upon the closing of the issuance of the New Secured Notes, we anticipate that our New Secured Notes will be assigned a non-investment grade rating, and any rating assigned to our debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the New Secured Notes. Credit ratings are not recommendations to purchase, hold or sell the New Secured Notes. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the New Secured Notes. Any downgrade by a rating agency may result in higher borrowing costs.

Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing. If any credit rating initially assigned to the New Secured Notes is subsequently lowered or withdrawn for any reason, you may not be able to resell your New Secured Notes without a substantial discount.

If certain conditions are met, certain covenants will be terminated, and you will lose the protection of these covenants permanently in the New Notes Indentures.

Many of the covenants in each of the New Notes Indentures will permanently terminate with respect to one or more series of New Secured Notes if (i) the New Second Lien Secured Notes of the applicable series, with respect to the New Second Lien Secured Notes, or either series of the New Second Lien Secured Notes, with respect to the New Third Lien Secured Notes, achieve a rating equal to or higher than at least two of the following ratings: Ba3 or the equivalent by Moody’s, BB- or the equivalent by S&P, BB- or the equivalent by Fitch, or an equivalent rating by any other rating agency, (ii) we meet a stated leverage ratio or (iii) we have no outstanding obligations secured by the Collateral on a first priority basis other than pursuant to any revolving credit facility (including the ABL Facility and the FILO Facility) and no obligations secured by the Collateral on a second priority basis other than the New Second Lien Convertible Notes and any obligations consisting of convertible notes secured equally and ratably therewith, provided that at such time no default or event of default with respect to the applicable series of New Secured Notes has occurred and is continuing. There can be no assurance that any series of the New Second Lien Secured Notes obtain the stated rating, or that if they do so, that such New Second Lien Secured Notes will maintain such rating or that the other requirements will occur. Termination of these covenants would allow us to engage in certain transactions that would not be permitted while these covenants were in force. See “Description of New Second Lien Secured Notes—Certain Covenants” and “Description of New Third Lien Secured Notes – Certain Covenants.

The asset sale covenants in the New Indentures have a number of significant exceptions and we are not required to make an offer to purchase New Secured Notes in connection with an asset sale at a purchase price equal to the par value of New Secured Notes.

If we or any of our subsidiaries engage in certain asset sales, we generally must either invest the net cash proceeds from such sales in our business within a specified period of time, reduce certain indebtedness or make an offer to purchase a principal amount of the New Secured Notes equal to the net cash proceeds, subject to certain exceptions. The asset sale covenant and the definition of asset sale in the New Notes Indentures have a number of significant exceptions pursuant to which we will be able to sell assets without being required to invest the proceeds of such sale, reduce indebtedness or make an offer to purchase a principal amount of the New Secured Notes. In addition, the purchase price of the New Secured Notes will be determined by the Company at

 

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the time we are required to make any offer to purchase. Accordingly, the purchase price may be less than the principal amount of the New Secured Notes and because holders of the New Secured Notes are not required to accept our offer, we may make asset sales without ever having to use the net proceeds to repurchase New Secured Notes.

Holders of the New Secured Notes may not be able to determine when a change of control or fundamental change giving rise to their right to have their New Secured Notes repurchased has occurred following a sale of substantially all of our assets.

One of the circumstances under which a change of control or fundamental change, as applicable, may occur is upon the sale or disposition of all or substantially all of our assets. There is no precise established definition of the phrase “substantially all” under applicable law, and the interpretation of that phrase will likely depend upon particular facts and circumstances. Accordingly, the ability of a holder to require the issuer to repurchase its New Secured Notes as a result of a sale of less than all our assets to another person may be uncertain.

Some significant restructuring transactions may not constitute a change of control or fundamental change, as applicable, in which case we would not be obligated to offer to repurchase the New Secured Notes.

Upon the occurrence of a change of control (in the case of the New Second Lien Non-Convertible Notes) or a fundamental change (in the case of the New Convertible Secured Notes), you have the right to require us to repurchase all or a portion of your New Secured Notes. However, the repurchase provisions will not afford protection to holders of New Secured Notes in the event of other transactions that could adversely affect the New Secured Notes. For example, transactions such as leveraged recapitalizations, refinancings, restructurings, or acquisitions initiated by us may not constitute a change of control or fundamental change, as applicable, requiring us to offer to repurchase the New Secured Notes. In the event of any such transaction, the holders would not have the right to require us to repurchase the New Secured Notes, even though each of these transactions could increase the amount of our indebtedness, or otherwise adversely affect our capital structure or any credit ratings, thereby adversely affecting the holders of New Secured Notes. In addition, we are not required to make a change of control offer or fundamental change offer, as applicable, on the New Secured Notes if we exercise our right to deliver a notice of redemption.

The guarantees on the New Secured Notes will be automatically and unconditionally released and discharged upon the occurrence of certain events.

A guarantee of a Subsidiary Guarantor with respect to the any of the New Second Lien Convertible Notes, New Second Lien Non-Convertible Notes and New Third Lien Secured Notes will be automatically and unconditionally released and discharged in connection with certain dispositions. See “Description of New Second Lien Secured Notes – Guarantees – Release of Guarantees” and “Description of New Third Lien Secured Notes – Guarantees – Release of Guarantees.”

Risks Related to the Collateral

The liens on the Collateral securing the New Secured Notes and the New Secured Notes Guarantees will be junior and subordinate to the liens on the Collateral securing the obligations under the Amended Credit Agreement and any other higher-priority lien debt.

The New Secured Notes and the New Secured Notes Guarantees will be secured by, in the case of the New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes, second-priority liens, and, in the case of the New Third Lien Secured Notes, third-priority liens in the Collateral granted by the Company and the Subsidiary Guarantors and any existing or future subsidiary that becomes a Subsidiary Guarantor in the future in accordance with the provisions of the New Notes Indentures, subject to certain Permitted Liens, exceptions and encumbrances described in the New Notes Indentures and the Security Documents. The obligations under the Amended Credit Agreement are secured by pledges of equity interests of the Company’s subsidiaries, including

 

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the Subsidiary Guarantors, which will not be part of the Collateral that secures the New Secured Notes, and a first-priority lien on the same property that constitutes the Collateral that will secure the New Secured Notes. The Collateral Agents will execute an ABL/Junior Intercreditor Agreement with the administrative agent for the Amended Credit Agreement (the “Senior Agent”) that will provide, among other things, that if any Collateral Agent, any New Notes Trustee or any holder of New Secured Notes receives any Collateral, including any proceeds thereof in violation of the ABL/Junior Intercreditor Agreement, at any time prior to the payment in full of the obligations under the Amended Credit Agreement and other first-priority lien debt then it will segregate and hold such Collateral and/or proceeds in trust for the benefit of the first lien secured parties and will transfer such Collateral and/or proceeds, as the case may be, to the Senior Agent, for payment of the obligations under the Amended Credit Agreement and any other first-priority lien debt. Holders of the New Secured Notes would then participate ratably in distributions from our remaining assets that constitute Collateral or the remaining assets of the Subsidiary Guarantors that constitute Collateral, as the case may be, with all holders of indebtedness that rank equally in priority with respect to such assets with the New Secured Notes based upon the respective amount owed to each such creditor. The New Notes Indentures will permit the Company and the Subsidiary Guarantors to incur additional indebtedness secured by liens on the Collateral senior in priority to the liens securing the New Secured Notes under specified circumstances. See “ —The value of the Collateral securing the New Secured Notes may not be sufficient to ensure repayment of the New Secured Notes because the holders of obligations under the Amended Credit Agreement and other current and future higher-priority lien obligations will be paid first from the proceeds of the Collateral” and “—It may be difficult to realize the value of the Collateral securing the New Secured Notes and the Subsidiary Guarantees.” Any obligations secured by such liens may further limit the recovery from the realization of the Collateral available to satisfy holders of the New Secured Notes.

In addition, if we default under the Amended Credit Agreement, the administrative agent for the Amended Credit Agreement could declare all of the funds borrowed thereunder, together with accrued and unpaid interest, immediately due and payable and could foreclose on the Collateral.

The value of the Collateral securing the New Secured Notes may not be sufficient to ensure repayment of the New Secured Notes because the holders of obligations under the Amended Credit Agreement and other current and future higher-priority lien obligations will be paid first from the proceeds of the Collateral.

Our indebtedness and other obligations under the Amended Credit Agreement is, and any other future first or second-lien indebtedness may be, secured by a first or second-priority lien, respectively, on the Collateral securing the New Secured Notes and the New Secured Notes Guarantees. The liens on such common collateral securing the New Secured Notes and the New Secured Notes Guarantees will be junior to the liens securing all such first-priority obligations, in the case of the New Second Lien Secured Notes, and junior to the liens securing all such higher-priority obligations, in the case of the New Third Lien Secured Notes, so that proceeds of such common collateral will be applied first to repay such higher-priority lien obligations before any such proceeds are applied to pay any amounts due on the New Secured Notes and any other obligations secured by a lower-priority lien on such collateral. As of November 11, 2022, $950 million of secured first-priority indebtedness is outstanding under the Amended Credit Agreement, and an aggregate amount of up to approximately $400 million in revolving commitments remains available under the ABL Facility under the Amended Credit Agreement based on estimated letters of credit outstanding. See “Description of Other Indebtedness.” Accordingly, if we default on the New Secured Notes or on the Amended Credit Agreement, we cannot assure the holders of such notes that the applicable New Notes Trustee would receive enough money from the sale of the Collateral to repay either the holders of the New Second Lien Non-Convertible Notes, the New Second Lien Convertible Notes or the New Third Lien Secured Notes. In addition, we will have specified rights to issue additional New Secured Notes and other parity lien obligations that would be secured by liens on the Collateral on an equal and ratable basis with the New Secured Notes and to incur additional indebtedness and obligations and for such obligations to be secured by liens on the Collateral that have priority over the New Secured Notes in certain circumstances. If the proceeds of any sale of the Collateral are not sufficient to repay all amounts due on the New Second Lien Non-Convertible Notes, the New Second Lien Convertible Notes, any other second-lien obligations, the New Third Lien Secured Notes and any other third-lien obligations, then your claims against our remaining assets to repay any amounts still outstanding under the New Second Lien

 

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Non-Convertible Notes, the New Second Lien Convertible Notes or the New Third Lien Secured Notes, as applicable, would be unsecured.

Pledges of equity interests of the Company’s subsidiaries, including the Subsidiary Guarantors, are not included in the Collateral securing the New Secured Notes, but are included in the collateral securing the obligations under the Amended Credit Agreement. As such, the value of any such equity interests will be available on a first-lien priority basis to the lenders under the Amended Credit Agreement, but not on a secured basis to the holders of the New Secured Notes. In addition, the Collateral securing the New Secured Notes will be subject to other liens permitted under the terms of the Amended Credit Agreement and the New Notes Indentures that may rank senior to or pari passu with the Collateral securing the New Secured Notes, whether existing now or arising at or after the date the New Secured Notes are issued. Rights of holders of the New Secured Notes with respect to the Collateral will be diluted by any indebtedness incurred in the future which is secured by a lien on the Collateral that ranks senior to or equally with the New Secured Notes. To the extent that third parties hold prior liens, such third parties may have rights and remedies with respect to the property subject to such liens that, if exercised, could adversely affect the value of the Collateral securing the New Secured Notes. The New Notes Indentures will not require that the Company maintain the current level or value of Collateral.

In the event of a foreclosure on the Collateral, the proceeds from such foreclosure may not be sufficient to satisfy the New Secured Notes because such proceeds would, under the First Lien/Second Lien/Third Lien Intercreditor Agreements, first be applied to satisfy the obligations under the Amended Credit Agreement and other higher-lien priority debt. Only after all of the obligations under the Amended Credit Agreement and other higher-lien priority debt have been satisfied and any obligations to lend under such agreements have terminated will proceeds from the Collateral be applied to satisfy the Company and the Subsidiary Guarantors’ obligations under any of the New Secured Notes.

It may be difficult to realize the value of the Collateral securing the New Secured Notes and the Subsidiary Guarantees.

No appraisal of the value of the Collateral securing the New Secured Notes and the New Secured Notes Guarantees has been made in connection with the Exchange Offers and the fair market value of the Collateral is subject to fluctuations based on factors that include, among others, the condition of our industry, market and other economic conditions, including the availability of suitable buyers, the ability to sell the Collateral in an orderly sale and other similar factors. We have announced the closure of approximately 150 lower-producing Bed Bath & Beyond banner stores. As these closures are completed, the value of the Collateral may decrease by an amount estimated to be up to $135 million. We may close more stores or dispose of business lines in the future, which could result in a further reduction of the value of the Collateral. The amount to be received upon a sale of the Collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the Collateral at such time and the timing and the manner of the sale. By its nature, some or all of the Collateral may be illiquid and may have no readily ascertainable market value. We cannot assure you that the fair market value of the Collateral as of the date of this Prospectus exceeds, or at any other point in time will exceed, the principal amount of the debt secured thereby or that the Collateral can be sold in a short period of time or in an orderly manner. The value of the Collateral and the guarantees could be impaired in the future as a result of changing economic conditions, our failure to implement our business strategy, competition, liabilities and other future events. Accordingly, there may not be sufficient Collateral to pay all or any of the amounts due on the New Secured Notes or the other debt secured by the Collateral, including the obligations under the Amended Credit Agreement. Any claim for the difference between the amount, if any, realized by holders of first-priority liens or holders of the New Secured Notes from the sale of the Collateral and the obligations of the Company and Subsidiary Guarantors under the New Secured Notes will rank equally in right of payment with all of our other unsecured unsubordinated Indebtedness and other obligations, including trade payables and the Old Notes. Additionally, in the event that a bankruptcy or insolvency proceeding is commenced by or against us, if the value of the Collateral is less than the amount of principal and accrued and unpaid interest on the applicable New Secured Notes and all other obligations secured by liens of equal or higher priority to the liens securing the

 

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New Secured Notes, interest may cease to accrue on such New Secured Notes from and after the date such proceedings are commenced or initiated. Also, any disposition of the Collateral during a bankruptcy or insolvency proceeding outside of the ordinary course of our business would require approval from the bankruptcy court (which may not be given under certain circumstances).

In the event of a foreclosure, liquidation, reorganization, bankruptcy or other insolvency proceeding, we cannot assure you that the proceeds from any sale or liquidation of the Collateral will be sufficient to pay our obligations due under the New Secured Notes. If the proceeds of any sale of the Collateral are not sufficient to repay all amounts due under the New Secured Notes, then your claims against our remaining assets to repay any such remaining amounts due under the New Secured Notes would be unsecured. In addition, in the event of any such proceeding, the ability of the holders of the New Secured Notes to realize upon any of the Collateral may be subject to bankruptcy and insolvency law limitations.

To the extent that third parties enjoy prior liens on any of the Collateral or are able to attach liens to any of the Collateral, such third parties may have rights and remedies with respect to the Collateral that, if exercised, could adversely affect the rights of the holders of the New Secured Notes. Additionally, the terms of the indentures governing the New Secured Notes allow us to incur additional secured indebtedness.

In the future, the obligation to grant additional security over assets, or a particular type or class of assets, whether as a result of the acquisition or creation of future assets or subsidiaries or otherwise, will be subject to the provisions of the applicable New Notes Indenture and security documents. Furthermore, upon enforcement against any Collateral or during a bankruptcy or insolvency proceeding, (i) the claims of the holders of New Second Lien Secured Notes and holders of any other second-priority lien indebtedness to the proceeds thereof will rank junior to any first-priority liens on such Collateral and (ii) the claims of the holders of New Third Lien Secured Notes and holders of any other third-priority lien indebtedness to the proceeds thereof will rank junior to any first-priority liens and second-priority liens on such Collateral, including, in both cases, any first-priority liens securing the obligations under the Amended Credit Agreement. Enforcement of the security interests in the Collateral is subject to practical problems generally associated with the realization of security interests in collateral. For example, the consent of a third party, including landlords or other persons in possession of material Collateral where we have not contractually agreed to the provision of any necessary consents, may be necessary to obtain or enforce a security interest in a contract and such consent may not be provided. Also, the consents of any third parties may not necessarily be given when required to facilitate a foreclosure or realization on the Collateral or to make additional filings. If we are unable to obtain these consents or make these filings, the security interests may be invalid or underlying rights constituting Collateral may be subject to termination, and the holders of the New Secured Notes may not be entitled to such Collateral or any recovery with respect thereto. Also, certain items included in the Collateral securing the New Secured Notes, such as licenses and other permits, may not be transferable or assignable (by their terms or pursuant to applicable law). Accordingly, the applicable Collateral Agent may not have the ability to foreclose or realize upon those assets and the value of the Collateral may significantly decrease.

The Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections that may exist in respect of the security interests required with respect to the Amended Credit Agreement.

The Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections that may exist in respect of the security interests. In addition, foreign security filings outside of the United States in respect of the security interests of the New Secured Notes will only be made in jurisdictions (and in the manner) where such security filings are required to be made under the Amended Credit Agreement (see “Description of New Second Lien Secured Notes—Security” and “Description of New Third Lien Secured Notes—Security”). The existence of any such exceptions, defects, encumbrances, liens and other imperfections or lack of filings could adversely affect the value of the Collateral as well as the ability of the applicable Collateral Agent to realize or foreclose on the Collateral for the benefit of the holders of the New Secured Notes, as applicable. The Dealer Manager has neither analyzed the effect of, nor participated in any negotiations relating to, such exceptions,

 

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defects, encumbrances, liens and imperfections, including the lack of any such filing in foreign jurisdictions outside of the United States, and the existence thereof could adversely affect the value of the Collateral as well as the ability of the Collateral Agents, to realize or foreclose on the Collateral for the benefit of the holders of the New Secured Notes.

Your rights in the Collateral may be adversely affected by the failure to maintain, record and/or perfect security interests in Collateral.

Your rights in the Collateral may be adversely affected by our failure to maintain the security interest in the Collateral or to perfect security interests in certain collateral in the future. Applicable law requires that a security interest in certain tangible and intangible assets can only be properly perfected and its priority retained through certain actions undertaken by the secured party. We and the Subsidiary Guarantors will not be required to take certain steps to perfect liens on certain assets. The liens on the Collateral securing the New Secured Notes may not be perfected with respect to the claims of the New Secured Notes if the Collateral Agents or New Notes Trustees, as applicable, or their designees or predecessors are not able to take, or do not take, the actions necessary to perfect any of these liens and we can make no assurance that such actions shall be taken. We may fail to file amendment UCC filings upon changes in name or other events which may adversely affect the security interest in the Collateral. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest, such as equipment subject to a certificate and certain proceeds, can be perfected only at the time at which such property and rights are acquired and identified. None of the Collateral Agents or New Notes Trustees, as applicable, will monitor, and we may not inform them of, the future acquisitions of property and rights that constitute Collateral, and necessary action may not be taken to properly perfect the security interest in such after-acquired Collateral. None of the Collateral Agents and New Notes Trustees, as applicable, or their designees or predecessors have any obligation to monitor the perfection of or take any steps to perfect or maintain the perfection of any security interest in favor of the New Secured Notes against third parties. As a result, the inability or failure of the Company or any Subsidiary Guarantor to promptly take all actions necessary to create properly perfected security interests in the Collateral may result in the loss of the priority, or a defect in the perfection, of the security interest for the benefit of the holders of the New Secured Notes to which they would have been otherwise entitled. In addition, even if the liens on Collateral acquired in the future are properly perfected, such liens may potentially be avoidable as a preference in any bankruptcy or insolvency proceeding if the Company or Subsidiary Guarantor, as applicable, was insolvent at the time of the pledge, such pledge was made within 90 days (or, in certain cases, a longer period) prior to a bankruptcy filing and such pledge would result in the holders receiving more than they would have received in a distribution under Chapter 7 of the Bankruptcy Code in a hypothetical Chapter 7 case.

The Collateral is subject to casualty risks.

Although we maintain insurance policies, in a manner appropriate and customary for our business, to insure against losses, there are certain losses that we may self insure for or that may be either uninsurable or not economically insurable, in whole or in part, or where insurance may be subject to certain limits. As a result, it is possible that the insurance proceeds will not compensate us fully for our losses in the event of a catastrophic or other loss. If there is a total or partial loss of any of the Collateral, we cannot assure you that any insurance proceeds received by us will be sufficient to satisfy all the secured obligations, including the New Secured Notes.

We will, in most cases, have control over the Collateral, and the sale of particular assets by us could reduce the pool of assets securing the New Secured Notes. In addition, certain assets, including Excluded Assets, will be excluded from the Collateral.

The terms of the Security Documents, the Amended Credit Agreement and the New Notes Indentures allow us to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from, the Collateral. For example, in accordance with the Security Documents, the Amended Credit Agreement and the New Notes Indentures, we may, among other things, without approval or consent of the

 

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New Notes Trustees or the Senior Agent conduct activities with respect to Collateral, such as selling, abandoning or otherwise disposing of Collateral and making cash payments (including repayments of indebtedness), which could decrease the value of the Collateral. The lien on any Collateral will be automatically released upon any permitted disposition thereof to a person that is not the Company or a Subsidiary Guarantor and will no longer secure the obligations under the Amended Credit Agreement or the New Notes Indentures. See “Description of New Second Lien Secured Notes” and “Description of New Third Lien Secured Notes.

In addition, certain assets, including equity interests of the Company’s subsidiaries, including the Subsidiary Guarantors, which are pledged under the Amended Credit Agreement, will be excluded from the Collateral. See “Description of New Second Lien Secured Notes—Security” and “Description of New Third Lien Secured Notes—Security.

Even though the holders of the New Secured Notes will benefit from, in the case of the New Second Lien Secured Notes, a second-priority lien on the Company’s and the Subsidiary Guarantors’ right, title and interest in the Collateral, and, in the case of the New Third Lien Secured Notes, a third-priority lien on the Company’s and the Subsidiary Guarantors’ right, title and interest in the Collateral, the Senior Agent will control actions (including the exercise of remedies and distribution of proceeds) with respect to the Collateral subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements.

The rights of the holders of the New Secured Notes in the Collateral (including the right to exercise remedies) will be governed and materially limited by the ABL/Junior Intercreditor Agreement, the 2L/3L Intercreditor Agreement and the Second Lien Security Agreements and Third Lien Security Agreements, as applicable. Under the foregoing agreements, any actions that may be taken with respect to the Collateral, including the ability to cause the commencement of enforcement proceedings against the Collateral or to control such proceedings, will be taken first by the Senior Agent, and then the Collateral Agents, subject to the terms of the First Lien/Second Lien/Third Lien Intercreditor Agreements.

The Collateral Agents may be required to release or subordinate liens pursuant to the First Lien/Second Lien/Third Lien Intercreditor Agreements, applicable law, or a final and nonappealable order or judgment of a court of competent jurisdiction, without your consent.

The lenders under the Amended Credit Agreement may cause the Senior Agent to dispose of, release, or foreclose on, or take other actions with respect to, the Collateral with which holders of the New Secured Notes may disagree or that may be contrary to the interests of holders of the New Secured Notes.

Lien searches may not reveal all existing liens on the Collateral.

We cannot guarantee that any lien searches conducted on the Collateral will reveal any or all existing liens on the Collateral. Any existing undiscovered lien could be significant, could be prior in ranking to the liens securing the New Secured Notes or the guarantees and, subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements, could have an adverse effect on the ability of the Collateral Agents or any New Notes Trustee to realize or foreclose upon the Collateral. In addition, certain statutory priority liens may also exist that are not, or that cannot be, discovered by lien searches.

Rights of the holders of the New Secured Notes in the Collateral may be adversely affected by bankruptcy and insolvency proceedings and the holders of the New Secured Notes may not be entitled to post-petition interest, fees or expenses in any bankruptcy or insolvency proceeding.

The right of the Senior Agent or, subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements, the Collateral Agents, to repossess and dispose of the Collateral may be significantly impaired, and at a minimum delayed, if U.S. bankruptcy proceedings are commenced by or against the Company prior to or possibly even after the Senior Agent or, subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements, the new

 

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Collateral Agents have repossessed and disposed of the Collateral. Pursuant to the automatic stay imposed upon a bankruptcy filing, secured creditors, such as the Senior Agent and the New Notes Trustees, are prohibited, as provided by the U.S. Bankruptcy Code, from, among other things, obtaining possession of property of the debtor’s estate or exercising control over such property, disposing of such property or creating, perfecting, or enforcing any lien on such property, without prior bankruptcy court approval (which may not be given under the circumstances). Moreover, U.S. bankruptcy law permits, subject to approval of the bankruptcy court, the debtor to continue to retain and use collateral, and the proceeds, products, rents or profits of such collateral, even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended in general to protect against the diminution of the value of the secured creditor’s interest in its collateral following the commencement of the bankruptcy case and may include cash payments or the granting of additional or replacement security, if and at such time as the court determines in its discretion, for any diminution in the value of such collateral as a result of the imposition of the automatic stay or any use of such collateral by the debtor or disposition of collateral during the pendency of the bankruptcy case. A bankruptcy court may determine that a secured creditor is not entitled to compensation for diminution in the value of its collateral if the value of such collateral exceeds the debt it secures. In view of the lack of precise contours for “adequate protection” and the broad discretionary powers of a U.S. bankruptcy court, it is impossible to predict whether or when payments under the New Secured Notes could be made following the commencement of a bankruptcy case (or the length of the delay in making any such payments), whether or when the Senior Agent or, subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements, the Collateral Agents could repossess or dispose of the Collateral, the value of the Collateral at the time of the bankruptcy petition, or whether or to what extent the holders of the New Secured Notes would be compensated for any delay in payment or loss of value of the Collateral through the requirements of “adequate protection.” With respect to the New Secured Notes, the ability of the Collateral Agents, any New Notes Trustee and the holders thereof to seek and obtain adequate protection is further limited by the terms of the First Lien/Second Lien/Third Lien Intercreditor Agreements. See “Description of New Second Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements” and “Description of New Third Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements.

Any disposition of the Collateral during a bankruptcy case outside the ordinary course of our business would also require permission from the bankruptcy court. Furthermore, in the event a U.S. bankruptcy court determines that the value of the Collateral is not sufficient to repay all amounts due with respect to the Amended Credit Agreement and any additional obligations of the Company or any Subsidiary Guarantor secured by the Collateral on a first-priority basis, second-priority basis or third-priority basis, as applicable, the holders of the New Secured Notes, as the case may be, would be considered to have “undersecured” claims as to the amount of the deficiency. Generally, U.S. bankruptcy law does not permit the payment or accrual of post-petition interest, costs, expenses and attorneys’ fees for “undersecured” claims in connection with the debtor’s bankruptcy case. Other consequences of a finding of under-collateralization could include, among other things, a lack of entitlement to receive “adequate protection” under the U.S. Bankruptcy Code with respect to any unsecured portion of the New Secured Notes. In addition, if any payments of post-petition interest had been made at the time of such a finding of under-collateralization, those payments could instead be recharacterized by a U.S. bankruptcy court as a reduction of the principal amount of the applicable New Secured Notes.

To the extent that the claims of the holders of the New Secured Notes and all other liabilities secured by the Collateral, including the obligations under the Amended Credit Agreement, exceed the value of the Collateral securing the New Secured Notes, the portion of such claims that remains unsatisfied after distribution of all of the Collateral or proceeds thereof will rank equally with the claims of the holders of our outstanding unsecured indebtedness (that is not subordinated in right of payment to the New Secured Notes). As a result, if the value of the Collateral pledged as security for the New Secured Notes and such other liabilities is less than the value of the claims of the holders of the New Secured Notes and all other liabilities, those claims may not be satisfied in full before the claims of unsecured creditors at the Company participate in distributions of unencumbered assets of the bankruptcy estate payments.

 

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The rights of the Collateral Agents with respect to the Collateral could also be impaired, delayed or otherwise affected by the insolvency laws of any other jurisdictions in which we and the Subsidiary Guarantors are incorporated, resident or organized. See “Risks Related to the New Secured Notes—Federal and state law may render the New Secured Notes Guarantees and/or payments made under the New Secured Notes Guarantees avoidable in specific circumstances, potentially requiring the holders to return payments received.”

Holders of the New Secured Notes will generally not control decisions regarding the Collateral, even during the existence of an event of default.

Under the terms of the First Lien/Second Lien/Third Lien Intercreditor Agreements, at any time that any obligations under the Amended Credit Agreement are outstanding, almost any action that may be taken in respect of the Collateral (including the rights to exercise remedies with respect to, release liens on, challenge the liens on, the Collateral), will be at the direction of the Senior Agent. Pursuant to the ABL/Junior Intercreditor Agreement, the Senior Agent will generally be entitled to receive and apply all proceeds of any Collateral to the repayment in full of the obligations under the Amended Credit Agreement and any other first-priority lien debt, before any such proceeds will be available to repay obligations under the New Secured Notes. In addition, the Senior Agent will generally have the exclusive right to exercise rights and remedies with respect to Collateral, even if an event of default under the New Secured Notes has occurred and is continuing, and none of the holders of New Secured Notes, Collateral Agents or any New Notes Trustee will be entitled to independently exercise remedies with respect to the Collateral until specified time periods have elapsed.

Furthermore, because the Senior Agent (on behalf of the first lien secured parties) will control the disposition of the Collateral, if there were an event of default under the New Secured Notes, the Senior Agent could decide, during the standstill period (which is 180 days under the New Second Lien Secured Notes and indefinite under the New Third Lien Secured Notes), not to proceed against the Collateral, regardless of whether there is a default under the first lien secured debt documents. During such standstill period, unless and until discharge of all first-priority lien obligations, including the obligations under the Amended Credit Agreement and any other first-lien indebtedness has occurred, the sole right of Collateral Agents (for the benefit of the holders of the New Secured Notes) will be to hold a lien on the Collateral.

At any time that obligations that have the benefit of the first-priority liens on the Collateral are outstanding, if the holders of such indebtedness release the Collateral in connection with an enforcement action or insolvency proceeding or otherwise in connection with a release that is not prohibited by the agreements governing the first-priority lien obligations and the New Notes Indentures, including, without limitation, in connection with any sale of assets, the junior lien on such Collateral securing the New Secured Notes will be automatically and simultaneously released without any consent or action by the holders of the New Secured Notes, subject to certain exceptions. The Collateral so released will no longer secure the Company’s and the Subsidiary Guarantors’ obligations under the New Secured Notes. See “Description of New Second Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements” and “Description of New Third Lien Secured Notes—First Lien/Second Lien/Third Lien Intercreditor Agreements.

Additionally, the ABL/Junior Intercreditor Agreement will contain certain provisions benefiting holders of indebtedness under the Amended Credit Agreement that prevent the Collateral Agents from objecting to a number of important matters regarding the Collateral in which and at such times the holders of the New Secured Notes have a junior-priority lien following the filing of a bankruptcy, such as debtor-in-possession financing or the use of any cash collateral to secure that financing. The ABL/Junior Intercreditor Agreement will also limit the ability of the Second Lien Trustee, Third Lien Trustee or a holder of the New Secured Notes from seeking certain other relief with respect to the Collateral in which and at such times the holders of the New Secured Notes have a junior-priority lien following a bankruptcy filing. After such filing, the value of the Collateral could materially deteriorate and holders of the New Secured Notes may be unable to raise an objection.

 

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Liens on the New Secured Notes will be automatically released in certain circumstances.

Liens on the Collateral securing the New Secured Notes will be automatically released under certain circumstances, including with respect to any property or other asset constituting Collateral being released in respect of the liens securing the obligations under the Amended Credit Agreement and any replacement credit facilities in respect thereof. See “Description of New Second Lien Secured Notes – Security – Release of Collateral”, “Description of New Second Lien Secured Notes – First Lien/Second Lien/Third Lien Intercreditor Agreements – ABL/Junior Intercreditor Agreement – Releases”, “Description of New Third Lien Secured Notes – Security – Release of Collateral” and “Description of New Third Lien Secured Notes – First Lien/Second Lien/Third Lien Intercreditor Agreements – ABL/Junior Intercreditor Agreement – Releases.”

Risks Related to the New Convertible Secured Notes

Volatility in the market price and trading volume of our common stock could adversely impact the trading price of the New Convertible Secured Notes.

We expect that the trading price of the New Convertible Secured Notes will be significantly affected by the market price of our common stock. The stock market in recent years has experienced significant price and volume fluctuations that have often been unrelated to the operating performance of companies. The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section, elsewhere in this Prospectus or the documents incorporated by reference in this Prospectus or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability. See “—Risks Related to Our Common Stock—The market prices and trading volume of our shares of common stock have recently experienced, and may continue to experience, extreme volatility, which could affect the price at which you could sell common stock you receive upon conversion of your New Convertible Secured Notes.” A decrease in the market price of our common stock would likely adversely impact the trading price of the New Convertible Secured Notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the New Convertible Secured Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our common stock. This trading activity could, in turn, affect the trading price of the New Convertible Secured Notes. Holders who receive common stock upon conversion of the New Convertible Secured Notes will also be subject to the risk of volatility and depressed prices of our common stock.

There will not be any increase in the conversion rate for New Convertible Secured Notes converted in connection with a fundamental change or a notice of redemption.

The New Notes Indentures for the New Convertible Secured Notes will not provide for any “make-whole” payment in connection with a fundamental change or notice of redemption. If a fundamental change occurs prior to the maturity date of the New Convertible Secured Notes or if we deliver a notice of redemption, we will not increase the conversion rate by a number of additional shares of our common stock for the New Convertible Secured Notes converted in connection with such fundamental change or notice of redemption. You will not receive compensation for any lost value of your New Convertible Secured Notes as a result of such transaction or redemption.

Regulatory actions may adversely affect the trading price and liquidity of the New Convertible Secured Notes.

We expect that many investors in, and potential purchasers of, the New Convertible Secured Notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the New Convertible Secured Notes. Investors that employ a convertible arbitrage strategy with respect to convertible debt instruments would typically implement such a strategy by selling short the common stock underlying the convertible notes and dynamically adjusting their short position while continuing to hold the convertible notes. Investors may also implement this type of strategy by entering into swaps on our common stock in lieu of or in addition to short selling the common

 

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stock. As a result, any specific rules regulating equity swaps or short selling of securities or other governmental action that interferes with the ability of market participants to effect short sales or equity swaps with respect to our common stock could adversely affect the ability of investors in, or potential purchasers of, the New Convertible Secured Notes to conduct the convertible arbitrage strategy that we believe they will employ, or seek to employ, with respect to the New Convertible Secured Notes. This could, in turn, adversely affect the trading price and liquidity of the New Convertible Secured Notes.

The SEC and other regulatory and self-regulatory authorities have implemented various rules and may adopt additional rules in the future that may impact those engaging in short selling activity involving equity securities (including our common stock). Such rules and actions include Rule 201 of SEC Regulation SHO, which generally restricts short selling when the price of a “covered security” triggers a “circuit breaker” by falling 10% or more from the security’s closing price as of the end of regular trading hours on the prior day, the adoption by the Financial Industry Regulatory Authority, Inc. and the national securities exchanges of a “Limit Up-Limit Down” mechanism, which prevents trades in individual listed equity securities from occurring outside of specific price bands during regular trading hours, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the New Convertible Secured Notes to effect short sales of our common stock, borrow our common stock or enter into swaps on our common stock could adversely affect the trading price and the liquidity of the New Convertible Secured Notes.

The conditional conversion feature of the New Convertible Secured Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the New Convertible Secured Notes is triggered, holders of New Convertible Secured Notes will be entitled to convert the New Convertible Secured Notes at any time during specified periods at their option. See “Description of New Second Lien Secured Notes—Conversion Rights of New Second Lien Convertible Notes” and “Description of New Third Lien Secured Notes—Conversion Rights of New Third Lien Secured Notes.” If we elect to settle any conversions of New Convertible Secured Notes fully or partially in cash, the related payment could adversely affect our liquidity.

In addition, even if holders do not elect to convert their New Convertible Secured Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the New Convertible Secured Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

If we elect to settle any future conversions of the New Convertible Secured Notes fully or partially in cash, we will be unable to do so if we do not have enough available cash.

We will be permitted to elect to settle any future conversions of the New Secured Notes in cash, shares of our common stock or a combination of cash and shares of our common stock. If we elect to settle any given future conversion of the New Convertible Secured Notes fully or partially in cash, we will be unable to settle such conversion if we do not have enough available cash and are unable to obtain financing at the time we are required to settle such conversion. In addition, our ability to pay cash upon conversions of the New Convertible Secured Notes may be limited by law, by regulatory authority or by agreements governing our indebtedness. If we elect to settle any future conversion of the New Convertible Secured Notes fully or partially in cash but then fail to do so, and that failure continues for three business days, it would constitute an event of default under the New Secured Notes Indentures. An event of default under the New Secured Notes Indentures could also lead to an event of default under agreements governing our other indebtedness.

 

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Holders of New Convertible Secured Notes will not be entitled to any rights with respect to our common stock, but they will be subject to all changes made with respect to our common stock to the extent our conversion obligation includes shares of our common stock.

Holders of New Convertible Secured Notes will not be entitled to any rights with respect to our common stock (including, without limitation, voting rights and rights to receive any dividends or other distributions on our common stock) prior to the conversion date relating to such New Convertible Secured Notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), but holders of New Convertible Secured Notes will be subject to all changes affecting our common stock. For example, if an amendment is proposed to our certificate of incorporation or bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date related to a holder’s conversion of its New Convertible Secured Notes (if we have elected to settle the relevant conversion by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share)) or the last trading day of the relevant observation period (if we elect to pay and deliver, as the case may be, a combination of cash and shares of our common stock in respect of the relevant conversion), such holder will not be entitled to vote on the amendment, although such holder will nevertheless be subject to any changes affecting our common stock.

The New Notes Indentures will not require us to make an offer to purchase the New Convertible Secured Notes in connection with any delisting of our common stock.

If we fail to satisfy the continued listing requirements of Nasdaq, such as the minimum closing bid price requirement, Nasdaq may take steps to delist our common stock. The delisting of our common stock would not constitute a fundamental change under the New Notes Indentures. In the event of any delisting, holders would not have the right to require us to repurchase the New Convertible Secured Notes, even though a delisting would likely impair the ability of holders to convert, or to resell any common stock they may acquire upon conversion of, their New Convertible Secured Notes, which could adversely affect the value of the New Convertible Secured Notes. Delisting of our common stock would likely have a negative effect on the price of our common stock, substantially limit the liquidity of our common stock and adversely affect our ability to raise capital.

The conditional conversion feature of the New Convertible Secured Notes could result in your receiving less than the value of our common stock into which the New Convertible Secured Notes would otherwise be convertible.

Prior to the close of business on the business day immediately preceding May 30, 2027 in the case of the New Second Lien Convertible Notes or May 30, 2029 in the case of the New Third Lien Secured Notes, you may convert your New Convertible Secured Notes only if specified conditions are met. If the specific conditions for conversion are not met, you will not be able to convert your New Convertible Secured Notes, and you may not be able to receive the value of the cash, common stock or combination of cash and common stock into which your New Convertible Secured Notes would otherwise be convertible.

Upon conversion of the New Convertible Secured Notes, you may receive less valuable consideration than expected because the value of our common stock may decline after you exercise your conversion right but before we settle our conversion obligation.

Under the New Convertible Secured Notes, a converting holder will be exposed to fluctuations in the value of our common stock during the period from the date such holder surrenders New Convertible Secured Notes for conversion until the date we settle our conversion obligation.

Upon conversion of the New Convertible Secured Notes, we have the option to pay or deliver, as the case may be, cash, shares of our common stock, or a combination of cash and shares of our common stock. If we elect to satisfy our conversion obligation in cash or a combination of cash and shares of our common stock, the amount of consideration that you will receive upon conversion of your New Convertible Secured Notes will be determined by reference to the volume-weighted average prices of our common stock for each trading day in a 40

 

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trading day observation period. As described under “Description of New Second Lien Secured Notes—Conversion Rights of New Second Lien Convertible Notes —Settlement upon Conversion” and “Description of New Third Lien Secured Notes—Conversion Rights of New Third Lien Secured Notes —Settlement upon Conversion,” this period would be: (i) subject to clause (ii), if the relevant conversion date occurs prior to May 30, 2027 in the case of the New Second Lien Convertible Notes or May 30, 2029 in the case of the New Third Lien Secured Notes, the 40 consecutive trading days beginning on, and including, the second trading day immediately succeeding such conversion date; (ii) if the relevant conversion date occurs during the period from, and including, the date of our issuance of a notice of redemption with respect to the New Convertible Secured Notes until the close of business on the second scheduled trading day immediately preceding the related redemption date, the 40 consecutive trading days beginning on, and including, the 41st scheduled trading day immediately preceding such redemption date; and (iii) subject to clause (ii), if the relevant conversion date occurs on or after May 30, 2027 in the case of the New Second Lien Convertible Notes or May 30, 2029 in the case of the New Third Lien Secured Notes, the 40 consecutive trading days beginning on, and including, the 41st scheduled trading day immediately preceding the maturity date. Accordingly, if the price of our common stock decreases during this period, the amount and/or value of consideration you receive will be adversely affected. In addition, if the market price of our common stock at the end of such period is below the average volume-weighted average price of our common stock during such period, the value of any shares of our common stock that you will receive in satisfaction of our conversion obligation will be less than the value used to determine the number of shares that you will receive.

If we elect to satisfy our conversion obligation solely in shares of our common stock upon conversion of the New Convertible Secured Notes, we will be required to deliver the shares of our common stock, together with cash for any fractional share, on the second business day following the relevant conversion date (provided that, with respect to any conversion date following the regular record date immediately preceding the maturity date where physical settlement applies to the related conversion, we will settle any such conversion on the maturity date). Accordingly, if the price of our common stock decreases during this period, the value of the shares that you receive will be adversely affected and would be less than the conversion value of the New Convertible Secured Notes on the conversion date.

The conversion rate of the New Convertible Secured Notes may not be adjusted for all dilutive events.

The conversion rate of the New Convertible Secured Notes is subject to adjustment for certain events, including, but not limited to, the issuance of certain stock dividends on our common stock, the issuance of certain rights or warrants, subdivisions, combinations, splits, distributions of capital stock, indebtedness or assets, cash dividends and certain issuer tender or exchange offers as described under “Description of New Second Lien Secured Notes —Conversion Rights of New Second Lien Convertible Notes—Conversion Rate Adjustments” and “Description of New Third Lien Secured Notes—Conversion Rights of New Third Lien Secured Notes—Conversion Rate Adjustments.” However, the conversion rate will not be adjusted for other events, such as a third-party tender or exchange offer or an issuance of common stock for cash, that may adversely affect the trading price of the New Convertible Secured Notes or our common stock. An event that adversely affects the value of the New Convertible Secured Notes may occur, and that event may not result in an adjustment to the conversion rate.

You may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the series of New Convertible Secured Notes that you hold even though you do not receive a corresponding cash distribution.

The conversion rate of each series of the New Convertible Secured Notes is subject to adjustment in certain circumstances, including if we pay any cash dividend or distribution on our common stock. If the conversion rate is adjusted as a result of a distribution that is taxable to our common stockholders, such as a cash dividend, you will be deemed to have received a dividend subject to U.S. federal income tax without the receipt of any cash. In addition, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases your proportionate interest in us could be treated as a deemed taxable dividend to you. See “United States Federal Income Tax Considerations.” If you are a non-U.S. holder (as defined under “United States Federal Income Tax Considerations”), any deemed dividend generally would be subject to U.S. federal withholding tax at a 30% rate, or such lower rate as may be specified by an applicable treaty. Withholding tax on deemed dividends may be set

 

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off against subsequent payments on the New Convertible Secured Notes, shares of common stock or cash payable upon conversion, proceeds from a sale of securities subsequently paid or credited to you, or other assets that you hold with a withholding agent. See “United States Federal Income Tax Considerations.”

Risks Related to Our Common Stock

The market prices and trading volume of our shares of common stock have recently experienced, and may continue to experience, extreme volatility, which could affect the price at which you could sell common stock you receive upon conversion of your New Convertible Secured Notes.

The market prices and trading volume of our shares of common stock have recently experienced, and may continue to experience, extreme volatility. For example, from January 3, 2022 to November 18, 2022, the market price of our common stock has had extreme fluctuations, ranging from an intra-day low of $3.33 per share on November 17, 2022 to an intra-day high of $30.06 on March 7, 2022, and the last reported sale price of our common stock on Nasdaq on November 18, 2022, was $3.38 per share. From January 3 to November 18, 2022, according to Nasdaq, daily trading volume of our common stock ranged from as low as approximately 2,121,100 to as high as approximately 395,319,900 shares. Within the last seven business days occurring in a period when we made no disclosure regarding any changes to our underlying business, the market price of our common stock fluctuated from an intra-day low of $3.33 on November 17, 2022 to an intra-day high of $4.14 on November 11, 2022. This volatility may affect the price at which you could sell the common stock, if any, you receive upon conversion of your New Convertible Secured Notes.

We believe that the recent volatility and our current market prices reflect market and trading dynamics unrelated to our underlying business, or macro or industry fundamentals, and we do not know how long these dynamics will last. Under the circumstances, we caution you against investing in our common stock through the conversion feature of the New Convertible Secured Notes, unless you are prepared to incur the risk of incurring substantial losses.

Extreme fluctuations in the market price of our common stock have been accompanied by reports of strong and atypical retail investor interest, including on social media and online forums. The market volatility and trading patterns we have experienced create several risks for investors, including the following:

 

   

the market price of our common stock has experienced and may continue to experience rapid and substantial increases or decreases unrelated to our operating performance or prospects, or macro or industry fundamentals, and substantial increases may be significantly inconsistent with the risks and uncertainties that we continue to face;

 

   

factors in the public trading market for our common stock include the sentiment of retail investors (including as may be expressed on financial trading and other social media sites and online forums), the direct access by retail investors to broadly available trading platforms, the amount and status of short interest in our securities, access to margin debt, trading in options and other derivatives on our common stock and any related hedging and other trading factors;

 

   

to the extent volatility in our common stock is caused, as has widely been reported, by a “short squeeze” in which coordinated trading activity causes a spike in the market price of our common stock as traders with a short position make market purchases to avoid or to mitigate potential losses, investors purchase at inflated prices unrelated to our financial performance or prospects, and may thereafter suffer substantial losses as prices decline once the level of short-covering purchases has abated; and

 

   

if the market price of our common stock declines, you may be unable to resell any shares you may acquire upon conversion of the New Convertible Secured Notes at or above the price at which you converted such New Convertible Secured Notes. We cannot assure you that the value of newly issued shares of our common stock will not fluctuate or decline significantly in the future, in which case you could incur substantial losses upon conversion.

We may continue to incur rapid and substantial increases or decreases in our stock price in the foreseeable future that may not coincide in timing with the disclosure of news or developments by or affecting us. Accordingly, the market price of our shares of common stock may fluctuate dramatically, and may decline rapidly, regardless of

 

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any developments in our business. Overall, there are various factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock, including:

 

   

actual or anticipated quarterly variations in operational results and reactions to earning releases or other presentations by company executives;

 

   

failure to meet the expectations of securities analysts and investors;

 

   

rating agency credit rating actions;

 

   

the contents of published research reports about us or our industry or the failure of securities analysts to cover our common stock;

 

   

any increased indebtedness we may incur in the future;

 

   

actions by institutional stockholders;

 

   

speculation or reports by the press or the investment community with respect to us or our industry in general;

 

   

short interest in our common stock and the market response to such short interest;

 

   

the dramatic increase in the number of individual holders of our common stock and their participation in social media platforms targeted at speculative investing;

 

   

increases in market interest rates that may lead purchasers of our shares to demand a higher yield;

 

   

changes in our capital structure;

 

   

announcements of dividends;

 

   

future sales of our common stock by us, members of our management or any significant stockholders;

 

   

announcements by us, our competitors or vendors of significant contracts, acquisitions, joint marketing relationships, joint ventures or capital commitments;

 

   

third-party claims or proceedings against us or adverse developments in pending proceedings;

 

   

additions or departures of key personnel;

 

   

changes in applicable laws and regulations;

 

   

negative publicity for us, our business or our industry;

 

   

changes in expectations or estimates as to our future financial performance or market valuations of competitors, customers or travel suppliers;

 

   

results of operations of our competitors;

 

   

our ability to manage supply chain-related expenses and disruptions in our supply chain;

 

   

the ongoing impacts and developments relating to the COVID-19 pandemic; and

 

   

general market, political and economic conditions, including any such conditions and local conditions in the markets in which our customers are located.

In addition, in the past, stockholders have instituted securities class action litigation following periods of market volatility, and in August 2022 we were named as a defendant in a purported securities class action lawsuit. This and any additional securities litigation, could result in substantial costs and our resources and the attention of management could be diverted from our business.

 

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Future issuances of equity or debt securities by us may adversely affect the market price of our common stock and the value of the New Convertible Secured Notes.

As of the end of fiscal September 2022, we have an aggregate of 348.4 million shares of common stock authorized but unissued, as well as 264.8 million treasury shares. We may issue, or move out of treasury, as applicable, all of these shares of common stock without any action or approval by our stockholders, subject to certain exceptions.

In the future, we may attempt to obtain financing or to increase further our capital resources, or refinance existing obligations, by issuing additional shares of our common stock, such as in one or more privately negotiated exchange transactions, or offering debt or other equity securities, such as the New Secured Notes, and including commercial paper, medium-term notes, senior or subordinated notes, debt securities convertible into equity or shares of preferred stock. We may also issue shares of our common stock or other securities from time to time upon conversion of New Convertible Secured Notes or as consideration for, or to finance, future acquisitions, investments, debt-for-equity exchanges or for other capital needs. Future acquisitions could also require substantial additional capital in excess of cash from operations. In addition, we also expect to issue additional shares in connection with exercise of our stock options under our incentive plans. We cannot predict the size of future issuances of our shares or the effect, if any, that future sales and issuances of shares would have on the market price of our common stock. If any such acquisition or investment is significant, the number of shares of common stock or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial and may result in additional dilution to our stockholders. We may also grant registration rights covering shares of our common stock or other securities that we may issue, including in connection with any such acquisitions and investments.

Issuing additional shares of our common stock or other equity securities or securities convertible into equity may dilute the economic and voting rights of our existing stockholders, reduce the market price of our common stock and/or cause the value of the New Convertible Secured Notes to decline. Upon liquidation, holders of our debt securities and preferred shares, if issued, and lenders with respect to other borrowings would receive a distribution of our available assets prior to the holders of our common stock. Debt securities convertible into equity could be, and the New Convertible Secured Notes will be, subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in the future, including in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing or nature of our future offerings. Thus, holders of our common stock and holders of our New Convertible Secured Notes bear the risk that our future issuances may, as applicable, reduce the market price of our common stock and the value of the New Convertible Secured Notes and dilute their current or potential future stockholdings in us.

A “short squeeze” due to a sudden increase in demand for shares of our common stock that largely exceeds supply and/or focused investor trading in anticipation of a potential short squeeze have led to, may be currently leading to, and could again lead to, extreme price volatility in shares of our common stock.

Investors may purchase shares of our common stock to hedge existing exposure or to speculate on the price of our common stock. Speculation on the price of our common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase on the open market, investors with short exposure may have to pay a premium to repurchase shares of our common stock for delivery to lenders of our common stock. Those repurchases may, in turn, dramatically increase the price of shares of our common stock until additional shares of our common stock are available for trading or borrowing. This is often referred to as a “short squeeze.” A large proportion of our common stock has been in the past and may be traded in the future by short sellers, which may increase the likelihood that our common stock will be the target of a short squeeze, and there is wide spread speculation that our current trading price is the

 

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result of a short squeeze. A short squeeze and/or focused investor trading in anticipation of a short squeeze have led to, may be currently leading to, and could again lead to volatile price movements in shares of our common stock that may be unrelated or disproportionate to our operating performance or prospects and, once investors purchase the shares of our common stock necessary to cover their short positions, or if investors no longer believe a short squeeze is viable, the price of our common stock may rapidly decline. Investors that acquire shares of our common stock during a short squeeze may lose a significant portion of their investment. Under the circumstances, we caution you against investing in our common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment.

Information available in public media that is published by third parties, including blogs, articles, online forums, message boards and social and other media may include statements not attributable to the Company and may not be reliable or accurate.

We have received, and may continue to receive, a high degree of media coverage that is published or otherwise disseminated by third parties, including blogs, articles, online forums, message boards and social and other media. This includes coverage that is not attributable to statements made by our directors, officers or employees. You should read carefully, evaluate and rely only on the information contained in this Prospectus, and the incorporated documents filed with the SEC, in determining whether to purchase our shares of common stock. Information provided by third parties may not be reliable or accurate and could materially impact the trading price of our common stock which could cause losses to your investments.

The market price of our common stock could decline due to the large number of outstanding shares of our common stock available for future sale.

Sales of substantial amounts of our common stock in the public market in future offerings, or the perception that these sales could occur, could cause the market price of our common stock to decline. We may make such sales from time to time. For example, on November 9, 2022 and November 14, 2022, we entered into privately negotiated exchange agreements with certain existing holders of 2024 Notes, 2034 Notes and 2044 Notes, pursuant to which we have issued 14.5 million shares of our common stock in exchange for the relevant notes. Sales of our common stock could also make it more difficult for us to sell equity or equity-related securities in the future, at a time and price that we deem appropriate. In addition, the additional sale of our common stock by our officers or directors in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline.

We may issue shares of our common stock from time to time under our ATM Program. We previously sold an aggregate of 12 million shares of our common stock under our ATM Program. On October 28, 2022, we registered additional shares of our common stock available for sale under the ATM Program with a maximum offering aggregate offering amount of up to $150 million, and, as of November 18, 2022, we have issued 10,248,688 additional shares of our common stock for a total gross consideration of $44,394,627 under our ATM Program. After the remaining authorized shares under the current ATM Program have been issued, we may implement additional ATM Programs in the future.

Certain provisions of our certificate of incorporation, our by-laws and New York law could hinder, delay or prevent a change in control of us that you might consider favorable, which could also adversely affect the price of our common stock and the value of the New Convertible Secured Notes.

Certain provisions under our certificate of incorporation, our by-laws and New York law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions include:

 

   

the sole ability of the then-current members of the board of directors to fill a vacancy created by the expansion of the board of directors;

 

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advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at our stockholder meetings;

 

   

the ability of our board of directors to issue new series of, and designate the terms of, preferred stock, without stockholder approval, which could be used to, among other things, institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors;

 

   

our opting to be governed by the provisions of Section 912 of the New York Business Corporation Law, an anti-takeover law. In general, the statute prohibits a publicly held New York corporation from engaging in a “business combination” with an “interested shareholder” for a period of five years after the date of the transaction in which the person became an interested shareholder, unless the business combination is approved in a prescribed manner; and

 

   

provisions prohibiting cumulative voting.

Anti-takeover provisions could substantially impede the ability of public stockholders to benefit from a change in control or change of our management and board of directors and, as a result, may adversely affect the market price of our common stock, the value of the New Convertible Secured Notes and the ability of existing stockholders to realize any potential change of control premium. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and to cause us to take other corporate actions they desire. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace current members of our management team. As a result, efforts by stockholders to change the direction or management of the company may be unsuccessful.

 

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SUBSIDIARY GUARANTORS

SEC Regulation S-X Rule 13-01 allows the omission of Summarized Financial Information if assets, liabilities and results of operations of the combined Company (the issuer) and Subsidiary Guarantors of the New Secured Notes are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company. On this basis, the Company concluded that the presentation of the Summarized Financial Information is not required.

USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the New Secured Notes in the Exchange Offers. The Old Notes that are surrendered in exchange for the New Secured Notes will be retired and cancelled and cannot be reissued.

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of August 27, 2022.

 

  (i)

on an actual basis and

 

  (ii)

on an as adjusted basis after giving effect to the Private Exchange Agreements as described in notes 1, 2 and 5 to this table, and the Exchange Offers, and assuming full participation in the Exchange Offers, including adjustments (a) if all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Non-Convertible Notes and (b) if all holders of 2024 Notes exchange their 2024 Notes into New Second Lien Convertible Notes, and in each case, if all holders of the 2034 Notes and 2044 Notes exchange their 2034 Notes and 2044 Notes into the New Third Lien Secured Notes, and including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment.

The cash and cash equivalents and capitalization as of August 27, 2022 is presented on an as adjusted basis is for illustrative purposes only and is based on certain assumptions about the outcome of the Exchange Offers which we are unable to predict. The table below does not give effect to all the accounting for the Exchange Offers under U.S. generally accepted accounting principles, for which the potential effects are discussed in “Risk Factors–Risks Related to the Exchange Offers and the Consent Solicitations–The accounting method for the New Secured Notes could adversely affect our reported financial condition and results” and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical financial statements and related notes in our Annual Report on Form 10-K for the fiscal year ended February 26, 2022 and our Quarterly Reports on Form 10-Q for the fiscal quarters ended May 28, 2022 and August 27, 2022, which are incorporated by reference herein.

 

     As of August 27, 2022  
     Actual      As Adjusted(1)      As Adjusted(2)  
     (in thousands, except share and per share data)  

Cash and cash equivalents(3)

   $ 135,270      $ 135,270      $ 135,270  

Long-term debt:

        

ABL Facility(4)

     550,000        550,000        550,000  

FILO Facility(4)

     —          —          —    

Notes

        

3.749 % Senior Notes due 2024(5)

     284,391        —          —    

4.915% Senior Notes due 2034(5)

     225,000        —          —    

5.165% Senior Notes due 2044(5)

     675,010        —          —    

3.693% New Senior Second Lien Non-Convertible Secured Notes due November 2027 offered hereby(6)

     —          218,636        —    

8.821% New Convertible Senior Second Lien Secured Notes due November 2027 offered hereby(6)

     —          —          131,924  

12.000% New Convertible Senior Third Lien Secured Notes due November 2029 offered hereby(6)

     —          337,216        337,216  

Total long-term debt

     1,734,401        1,105,852        1,019,140  

Shareholders’ (deficit) equity(7):

        

Preferred stock—$0.01 par value; 1,000 shares authorized; no shares issued or outstanding

     —          —          —    

Common stock—$0.01 par value; 900,000 shares authorized; 345,053 shares issued, actual and as adjusted; 80,363 shares outstanding, actual and as adjusted

     3,450        3,450        3,450  

 

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     As of August 27, 2022  
     Actual      As Adjusted(1)      As Adjusted(2)  
     (in thousands, except share and per share data)  

Additional paid-in capital

     2,253,039        2,253,039        2,253,039  

Retained earnings

     8,942,368        8,942,368        8,942,368  

Treasury stock, at cost; 264,691 shares

     (11,728,514      (11,728,514      (11,728,514

Accumulated other comprehensive loss

     (47,997      (47,997      (47,997
  

 

 

    

 

 

    

 

 

 

Total shareholders’ (deficit) equity

     (577,654      (577,654      (577,654
  

 

 

    

 

 

    

 

 

 

Total capitalization

   $ 1,292,017      $ 663,468      $ 576,756  
  

 

 

    

 

 

    

 

 

 

 

1.

The first ‘As Adjusted’ column shown in the table assumes full participation in the Exchange Offers and election of New Second Lien Non-Convertible Notes by 100% of holders of 2024 Notes and full participation in the Exchange Offers by 100% of the holders of the 2034 Notes and 2044 Notes, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, and includes the impact of the Private Exchange Agreements described in note 5 to this table (see below).

2.

The second ‘As Adjusted’ column shown in the table assumes full participation in the Exchange Offers and election of New Second Lien Convertible Notes by 100% of holders of 2024 Notes and full participation in the Exchange Offers by 100% of the holders of the 2034 Notes and 2044 Notes, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, and includes the impact of the Private Exchange Agreements described in note 5 to this table (see below).

3.

Cash and cash equivalents does not give effect to fees and expenses payable by us in connection with the Exchange Offers and Consent Solicitations and Private Exchange Agreements.

4.

As of November 11, 2022, we have approximately $925.0 million drawn under the Amended Credit Agreement, consisting of $550.0 million under our ABL Facility (with approximately $400 million of additional availability based on estimated letters of credit outstanding) and $375.0 million under our FILO Facility. Our borrowing capacity under the ABL Facility varies according to our inventory levels, net of certain reserves. We have the ability to continue to borrow under our ABL Facility, subject to customary conditions, no default, the accuracy of representations and warranties, and borrowing base availability, and may borrow under the ABL Facility in the future.

5.

Reflects aggregate principal amount of outstanding Old Notes. The Company has since entered into several Private Exchange Agreements, in which certain existing institutional holders exchanged their Old Notes for an aggregate of approximately 14.5 million shares of the Company’s common stock. These exchanges have reduced the outstanding aggregate principal amounts of Old Notes to approximately $215.4 million of 2024 Notes, $209.7 million of 2034 Notes and $604.8 million of 2044 Notes, and which effect has been included in the ‘As Adjusted’ columns (see notes 1 and 2 to this table above).

    

The table excludes the unamortized deferred financing costs, associated with the 2024 Notes, 2034 Notes and 2044 Notes, of approximately $4.4 million as of August 27, 2022, which are included in long-term debt in the Company’s consolidated financial statements.

6.

The New Secured Notes reflect assumed aggregate principal amounts based on the assumptions noted above. The exchange of Old Notes in the Exchange Offers will be accounted for in accordance with U.S. generally accepted accounting principles, and is discussed in “Risk Factors–Risks Related to the Exchange Offer–The accounting method for the New Secured Notes could adversely affect our reported financial condition and results.” For the New Convertible Secured Notes, reflects undiscounted future cash flows, including (a) $91.5 million of aggregate principal amount and $40.4 million of future interest payments for the New Second Lien Convertible Notes and (b) $183.3 million of aggregate principal amount and $153.9 million of future interest payments for the New Third Lien Secured Notes.

7.

Shareholders’ (deficit) equity excludes (i) the approximately 14.5 million shares of common stock issued in connection with the Private Exchange Agreements, (ii) the shares of common stock issued in connection with sales under the ATM Program and (iii) the shares of common stock issuable upon conversion of any New Convertible Secured Notes.

 

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GENERAL TERMS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS

General

Upon the terms and subject to the conditions set forth in this Prospectus, the Company is offering to exchange any and all outstanding Old Notes validly tendered (and not validly withdrawn) for the applicable Exchange Consideration. Holders of Old Notes who validly tender their Old Notes at any time prior to the applicable Early Participation Time and do not validly withdraw their Old Notes prior to the applicable Withdrawal Deadline will also receive the applicable Early Participation Payment.

In addition, the Company is soliciting Consents to amend the Old Notes Indenture. The purpose of the Consent Solicitations with respect to each series of Old Notes is to obtain Consents required to adopt the Proposed Amendments with respect to such series, which would eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens, (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes as further described under “Proposed Amendments”. The Proposed Amendments will be set forth in the Supplemental Indentures. It is expected that each of the Supplemental Indentures will be executed promptly following receipt of the Old Notes Requisite Consents for such series of Old Notes, but in any event not prior to the applicable Withdrawal Deadline. In order for the applicable Proposed Amendments to become operative for any series of Old Notes, (i) the Proposed Amendments must be consented to by the holders of a majority of the outstanding principal amount of such series of Old Notes (with respect to each series of Old Notes, the “Old Notes Requisite Consents”), (ii) all tendered Old Notes of such series must be accepted for exchange in the related Exchange Offer in such principal amount and (iii) all other conditions to consummation of the applicable Exchange Offer must be satisfied or waived in accordance with the terms of this Prospectus. The Proposed Amendments, with respect to any applicable series of Old Notes, will become operative immediately prior to the acceptance of such Old Notes pursuant to the applicable Exchange Offer. None of the Exchange Offers are conditioned on the receipt of the Old Notes Requisite Consents nor on the adoption of the Proposed Amendments with respect to such series.

Holders of Old Notes may not tender their Old Notes without delivering a Consent with respect to such Old Notes tendered, nor may holders of Old Notes deliver a Consent with respect to any Old Notes without tendering such Old Notes.

Tenders may be withdrawn and Consents may be revoked at any time at or prior to the applicable Withdrawal Deadline, but holders may not withdraw tendered Old Notes and revoke Consents after such deadline, except as required by applicable law. Prior to the applicable Withdrawal Deadline, if a holder withdraws its tendered Old Notes such holder will be deemed to have revoked its Consents and may not deliver subsequent Consents without re-tendering its Old Notes. The Company may also extend the Withdrawal Deadline with respect to some or all series of Old Notes.

In the event of a termination of an Exchange Offer, the Proposed Amendments with respect to the applicable series of Old Notes will not become effective, no consideration will be paid, and any Old Notes tendered pursuant to such Exchange Offer will be promptly returned to the tendering holders.

Holders may not withdraw previously tendered Old Notes without revoking their corresponding Consents and may not revoke their previously delivered Consents without withdrawing their tendered Old Notes, in each case prior to the applicable Withdrawal Deadline. In each instance, any revocation is subject to the procedures described in the section “Withdrawal of Tenders and Revocation of Consents.”

All Old Notes validly tendered in accordance with the procedures set forth under “Procedures for Tendering Old Notes and Delivering Consents” and not validly withdrawn in accordance with the procedures set forth under “Withdrawal of Tenders and Revocation of Consents” prior to the applicable Withdrawal Deadline, will, upon

 

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the terms and subject to the conditions hereof, and if the Exchange Offers are not withdrawn or terminated by us, be accepted by the Company.

If the Old Notes Requisite Consents are received for any series of Old Notes and the applicable Supplemental Indenture has become operative, the Proposed Amendments for such series of Old Notes will be binding on all holders of such series of Old Notes. Accordingly, consummation of the Exchange Offers and the adoption of the Proposed Amendments may have adverse consequences for holders who elect not to tender Old Notes affected thereby in the Exchange Offers. See “Proposed Amendments” and “Risk Factors—Risks to Holders of Old Notes That Are Not Tendered or Not Accepted for Exchange.”

From time to time after the Expiration Time, the Company or its affiliates may acquire any New Secured Notes issued in the Exchange Offers through open market purchases, tender offers, exchange offers, redemptions or otherwise, upon such terms and at such prices as permitted by the Old Notes Indenture and the New Notes Indentures. Under the terms of the New Notes Indentures, (i) on or after April 1, 2024, the Company may redeem or repurchase outstanding 2024 Notes in cash and/or equity, (ii) the Company may not redeem or repurchase any of the 2034 Notes or the 2044 Notes for cash prior to the maturity of the New Secured Notes and (iii) the Company may not exchange any of the Old Notes for new indebtedness and/or equity at more than 90% of the applicable Exchange Consideration to be received in the Exchange Offers. There can be no assurance as to which, if any, of these alternatives or combinations thereof the Company or its affiliates may choose to pursue in the future.

Consideration; Early Participation Payment

In exchange for each $1,000 principal amount of Old Notes validly tendered (and not validly withdrawn) at any time prior to the applicable Expiration Time, and accepted by the Company, participating holders of Old Notes will receive the applicable Exchange Consideration. A holder may elect to exchange a portion of its 2024 Notes for New Second Lien Non-Convertible Notes and a portion of its 2024 Notes for New Second Lien Convertible Notes, subject to the minimum denominations described herein, when they tender their 2024 Notes through DTC.

In addition, if participating holders validly tender their Old Notes at any time prior to the applicable Early Participation Time and do not validly withdraw their Old Notes prior to the applicable Withdrawal Deadline, and the Company accepts such Old Notes, such participating holders will also receive the applicable Early Participation Payment.

On the terms and subject to the conditions described herein, payment of the Exchange Consideration and, to the extent applicable, the Early Participation Payment, for each Exchange Offer and Consent Solicitation will occur on the Settlement Date as set forth herein, unless extended with respect to a series of Old Notes. Holders of Old Notes validly tendered (and not validly withdrawn) and accepted by the Company will be entitled to receive accrued and unpaid interest, if any, in cash on their exchanged Old Notes up to, but not including, the Settlement Date, in addition to the Exchange Consideration and, if applicable, Early Participation Payment, that such holder would receive in the Exchange Offers.

Holders who tender less than all of their Old Notes must continue to hold Old Notes in the minimum authorized denomination of $2,000 principal amount. The Company will not accept any tender that would result in the issuance of less than $2,000 principal amount of New Secured Notes of a given series to a participating holder. The aggregate principal amount of New Secured Notes of a given series issued to each participating holder for all Old Notes validly tendered (and not validly withdrawn) and accepted by the Company will be rounded down, if necessary, to $2,000 or the nearest whole multiple of $1,000 in excess thereof. This rounded amount will be the principal amount of New Secured Notes of the relevant series you will receive, and cash will be paid in lieu of any principal amount of New Secured Notes not received as a result of rounding down.

 

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Extension, Termination or Amendment

Subject to applicable law, the Company expressly reserves the right, in its discretion, at any time and from time to time, and regardless of whether any events preventing satisfaction of the conditions to the Exchange Offers or the Consent Solicitations shall have occurred or shall have been determined by the Company to have occurred, to extend the period during which any or all of the Exchange Offers and Consent Solicitations are open by giving oral (to be confirmed in writing) or written notice of such extension to the Exchange Agent and by making public disclosure by press release or other appropriate means of such extension to the extent required by law. During any extension of any Exchange Offers and Consent Solicitations, all Old Notes of the applicable series previously tendered and not withdrawn will remain subject to the applicable Exchange Offers and all Consents with respect to such series previously delivered and not revoked will remain subject to the applicable Consent Solicitation, and may, on the terms and subject to the conditions of the applicable Exchange Offers and the applicable Consent Solicitations, be accepted for exchange by the Company. The Company reserves the right to extend any Exchange Offer independently of the others (subject to applicable law). See also “—Announcements.”

Any waiver, amendment or modification of an Exchange Offer or Consent Solicitation will apply to all Old Notes tendered pursuant to the applicable Exchange Offer and all Consents delivered pursuant to the applicable Consent Solicitation. If the Company makes a change that the Company determines to be material in any of the terms of an Exchange Offer or Consent Solicitation, or waives a condition of an Exchange Offer or Consent Solicitation that the Company determines to be material, the Company will give oral (to be confirmed in writing) or written notice of such amendment or such waiver to the Exchange Agent and will disseminate additional Exchange Offer documents and extend the applicable Exchange Offer and Consent Solicitation and withdrawal and revocation rights with respect to such Exchange Offer and Consent Solicitation as the Company determines necessary and to the extent required by applicable law. Any such waiver, amendment, modification or change will not result in the reinstatement of any withdrawal rights if those rights had previously expired, except as specifically provided above.

Subject to applicable law, the Company may terminate or withdraw at its discretion any or all of the Exchange Offers and the Consent Solicitations if any condition is not satisfied or waived at or after the Expiration Time with respect to such Exchange Offer or Consent Solicitation.

There can be no assurance that the Company will exercise its right to extend, terminate or amend any or all of the Exchange Offers or Consent Solicitations. During any extension and irrespective of any amendment to an Exchange Offer or Consent Solicitation, all Old Notes previously tendered and not withdrawn will remain subject to such Exchange Offer, and all Consents previously delivered and not revoked will remain subject to such Consent Solicitation, and may be accepted thereafter for exchange by the Company, subject to compliance with applicable law. In addition, the Company may waive conditions without extending any or all of the Exchange Offers or Consent Solicitations in accordance with applicable law.

Announcements

Any extension, termination or amendment of any or all of the Exchange Offers and the Consent Solicitations will be followed as promptly as practicable by announcement thereof, such announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day following the previously scheduled Expiration Time for the Exchange Offers. Without limiting the manner in which the Company may choose to make such announcement, the Company will not, unless otherwise required by law, have any obligation to publish, advertise or otherwise communicate any such announcement other than by making a release to an appropriate news agency or another means of announcement that the Company deems appropriate. See also “—Extension, Termination or Amendment.”

Soliciting Broker Fee

If any Exchange Offer is consummated, we have agreed to pay a Soliciting Broker Fee equal to $2.50 for each $1,000 in principal amount of Old Notes that is validly tendered and accepted for exchange pursuant to such

 

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Exchange Offer to soliciting retail brokers for holders holding less than $1,000,000 aggregate principal amount of Old Notes that are appropriately designated by their clients to receive this fee. No Soliciting Broker Fees will be paid if such Exchange Offer is not consummated. Soliciting Broker Fees will only be paid to retail brokers upon consummation of the applicable Exchange Offer, and the Soliciting Broker Fees will be payable thereafter upon request by the soliciting retail brokers and presentation of such supporting documentation as we may reasonably request, including the soliciting broker form, a copy of which may be obtained from the Information Agent or Exchange Agent.

 

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PROPOSED AMENDMENTS

The Old Notes have been issued pursuant to the Old Notes Indenture. In general, the Proposed Amendments would eliminate the restrictive covenants in the Old Notes Indenture concerning (i) the repurchase of Old Notes in the event of a change in control of the Company, (ii) limitations on liens, (iii) limitations on sale and leaseback transactions, and would increase the percentage of outstanding notes necessary to accelerate payment upon an event of default and make other changes as described below.

The Indenture Governing the Old Notes

The Proposed Amendments, to the extent adopted with respect to the Old Notes Indenture with respect to any series of Old Notes, would eliminate the covenants and revise certain other provisions listed below.

These summaries are qualified in their entirety by reference to the full and complete provisions contained in the Old Notes Indenture and the corresponding Supplemental Indenture. Capitalized terms appearing below but not defined in this section of this Prospectus have the meanings assigned to such terms in the Old Notes Indenture or the corresponding Supplemental Indenture, as applicable. If you tender any of the Old Notes in connection with the Exchange Offer for such Old Notes you will, by the act of tendering, be providing a Consent to the Proposed Amendments to the Old Notes Indenture.

If the Old Notes Requisite Consents under the Old Notes Indenture have been received at or prior to the Expiration Time with respect to a series of Old Notes, assuming all other conditions of the Exchange Offer and Consent Solicitation with respect to such series of Old Notes are satisfied or waived, as applicable, the following modifications will be made to the Old Notes Indenture with respect to such series of Old Notes.

Amendments to Events of Default.

The Proposed Amendments with respect to the Old Notes would amend and restate the following section in the Old Notes Indenture as follows:

“Section 7.02 Acceleration; Rescission and Annulment.

(a) Except as otherwise provided as contemplated by Section 3.01 with respect to any series of Securities, if any one or more of the above-described Events of Default (other than an Event of Default specified in Section 7.01(e) or 7.01(f)) shall happen with respect to Securities of any series at the time Outstanding, then, and in each and every such case, during the continuance of any such Event of Default, the Trustee or the Holders of 95% or more in principal amount of the Securities of such series then Outstanding may declare the principal (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of that series) of and all accrued but unpaid interest on all the Securities of such series then Outstanding to be due and payable immediately by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such acceleration such principal amount (or specified amount) and interest shall become immediately due and payable. If an Event of Default specified in Section 7.01(e) or 7.01(f) occurs and is continuing, then in every such case, the principal of (or, if the Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified by the terms of that series) of and all accrued but unpaid interest on all of the Securities of that series then Outstanding shall automatically, and without any acceleration or any other action on the part of the Trustee or any Holder, become due and payable immediately. Upon payment of such amounts in the Currency in which such Securities are denominated (subject to the last paragraph of Section 7.01 and except as otherwise provided pursuant to Section 3.01), all obligations of the Company in respect of the payment of principal of and interest on the Securities of such series shall terminate.”

 

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Amendments to Restrictive Covenants and Affirmative Covenants.

The Proposed Amendments with respect to the Old Notes would remove the following sections in their entirety from the first supplemental indenture to the Old Notes Indenture and replace each one with only a section number and “Reserved”:

“Section 5.1 Offer to Purchase upon Change of Control Triggering Event.

(a) If a Change of Control Triggering Event occurs, unless the Company has exercised its right to redeem the Notes of a series, the Company will make an offer (a “Change of Control Offer”) to each Holder of the Notes of such series to repurchase all or any part (equal to $2,000 or integral multiples of $1,000 in excess thereof) of that Holder’s Notes of such series on the terms set forth in such Notes. In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of Notes repurchased, plus accrued and unpaid interest, if any, on the Notes repurchased to but not including the date of repurchase (the “Change of Control Payment”); provided that the principal amount of any Note of such series remaining outstanding after a repurchase in part shall be $2,000 or integral multiples of $1,000 in excess thereof.

(b) With respect to the Notes of each series, within 30 days following any Change of Control Triggering Event or, at the Company’s option, prior to any Change of Control, but after public announcement of the transaction that constitutes or may constitute the Change of Control, a notice will be mailed to holders of the Notes of the applicable series (or otherwise provided in accordance with DTC procedures) describing the transaction that constitutes or may constitute the Change of Control Triggering Event and offering to repurchase the Notes of such series on the date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is mailed or otherwise provided or, if the notice is mailed or otherwise provided prior to the Change of Control, no earlier than 30 days and no later than 60 days from the date on which the Change of Control Triggering Event occurs (the “Change of Control Payment Date”). The notice will, if mailed or otherwise provided prior to the date of consummation of the Change of Control, state that the offer to purchase is conditioned on the Change of Control Triggering Event occurring on or prior to the Change of Control Payment Date.

(c) On the Change of Control Payment Date, the Company shall, to the extent lawful: (i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; (ii) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes, (iii) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; and (iv) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being repurchased.

(d) Notwithstanding anything to the contrary in this 5.1, the Company shall not be required to make a Change of Control Offer upon a Change of Control Triggering Event if a third party makes such an offer in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and the third party repurchases all Notes properly tendered and not withdrawn under its offer. In addition, the Company will not repurchase any Notes if there has occurred and is continuing on the Change of Control Payment Date an Event of Default under the Indenture, other than a default in the payment of the Change of Control Payment upon a Change of Control Triggering Event.

Section 5.2 Notice. The Company shall notify the Trustee of any Rating Event occurs by delivery of an Officer’s Certificate.

Section 6.1 Limitations on Liens. The Company shall not, and shall not permit any of its Subsidiaries to, create, assume or suffer to exist any Indebtedness secured by any Lien on any Property unless the Notes are secured by such Lien equally and ratably with, or prior to, the Indebtedness secured by such Lien.

 

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Section 6.2 Exceptions. The restrictions in Section 6.1 of this Supplemental Indenture shall not apply to Indebtedness that is secured by:

(a) Liens existing on the date of the issuance of the Notes;

(b) (i) Liens on Property or shares of stock in respect of Indebtedness of a Person existing at the time such Person; becomes a Subsidiary of the Company or is merged into or consolidated with, or its assets are acquired by, the Company or any of its Subsidiaries and (ii) Liens on Property or shares of stock in respect of Indebtedness that was incurred in connection with any such transaction and was not in existence prior to any such transaction;

(c) Liens to secure Indebtedness incurred for the purpose of all or any part of a Property’s (including shares of stock) purchase price or cost of construction or additions, repairs, alterations or other improvements, including, without limitation, store construction or reconstruction, renovation, remodeling, expansion or improvement or other capital expenditures;

(d) Liens in favor of the United States or any state thereof, or any instrumentality of either, to secure certain payments pursuant to any contract or statute;

(e) Liens for taxes or assessments or other governmental charges or levies which are not overdue for a period exceeding 60 days unless such Liens are being contested in good faith and for which adequate reserves are being maintained, to the extent required by GAAP;

(f) title exceptions, easements, licenses, leases and other similar Liens that are not consensual and that do not materially impair the use of the Property subject thereto;

(g) Liens to secure obligations under worker’s compensation laws, unemployment compensation, old-age pensions and other social security benefits or similar legislation;

(h) Liens arising out of legal proceedings, including Liens arising out of judgments or awards;

(i) warehousemen’s, materialmen’s, carrier’s, landlord’s and other similar Liens or Liens otherwise arising in the ordinary course of business for sums not overdue for a period exceeding 60 days unless such Liens are being contested in good faith and for which adequate reserves are being maintained, to the extent required by GAAP;

(j) zoning restrictions, easements, rights of way, reciprocal easement agreements, operating agreements, covenants, conditions or restrictions on the use of any parcel of Property that are routinely granted in real estate transactions or do not interfere in any material respect with the ordinary conduct of the Company’s business or the value of such Property for the purpose of such business;

(k) Liens incurred to secure the performance of statutory obligations, surety or appeal bonds, performance or return-of-money bonds, insurance, self-insurance or other obligations of a like nature incurred in the ordinary course of business;

(l) Liens that are rights of set-off relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness;

(m) Liens on the assets of a special purpose subsidiary resulting from securitization transactions with respect to accounts receivable, royalties and similar assets included in such securitization transactions;

(n) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

 

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(o) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other Property relating to such letters of credit and the products and proceeds thereof;

(p) Liens on key-man life insurance policies granted to secure the Company’s Indebtedness against the cash surrender value thereof;

(q) Liens encumbering customary initial deposits and margin deposits and other Liens in the ordinary course of business, in each case securing Hedging Obligations and forward contract, option, futures contracts, futures options or similar agreements or arrangements designed to protect the Company or any of its Subsidiaries from fluctuations in interest rates, currencies or the price of commodities;

(r) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Company or any of its Subsidiaries in the ordinary course of business;

(s) Liens in the Company’s favor or the favor of any of the Company’s Subsidiaries;

(t) inchoate Liens incident to construction or maintenance of real property, or Liens incident to construction or maintenance of real property, now or hereafter filed of record for sums not yet delinquent or being contested in good faith, if reserves or other appropriate provisions, if any, as shall be required by GAAP shall have been made therefor;

(u) Liens to secure any extension, renewal, refinancing or refunding (or successive extensions, renewals, refinancings or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in clauses (a) through (t) above or Liens created in connection with any amendment, consent or waiver relating to such Indebtedness, so long as such Lien does not extend to any other Property and the Indebtedness so secured does not materially exceed the fair market value (as determined by the Company’s board of directors) of the assets subject to such Liens at the time of such extension, renewal, refinancing or refunding, or such amendment, consent or waiver, as the case may be;

(v) Liens created in substitution of or as replacements for any Liens referred to in in clauses (a) through (t) above, provided that, based on a good faith determination of one of the Company’s officers, the Property encumbered under any such substitute or replacement Lien is substantially similar in nature to the Property encumbered by the otherwise permitted Lien which is being replaced; or

(w) Liens securing other Indebtedness in outstanding amounts not to exceed, in the aggregate, together with the aggregate amount of all Attributable Debt with respect to all sale and leaseback transactions (with the exception of Attributable Debt with respect to sale and leaseback transactions which is excluded pursuant Section 7.2 of this Supplemental Indenture), the greater of $500.0 million and 20.0% of Consolidated Net Tangible Assets at any particular time.

Section 6.3 Additional Covenants. With respect to the Notes, the covenants set forth in Sections 6.1 and 6.2 of this Supplemental Indenture supplement those covenants set forth in the Base Indenture.

Section 7.1 Limitations on Sale and Leaseback Transactions. The Company shall not, and shall not permit any of its Subsidiaries to, enter into any arrangement with any person providing for the leasing by the Company or any of its Subsidiaries of any of the Company’s or its Subsidiaries’ Property (which lease is required by GAAP to be capitalized on the balance sheet of such lessee), which Property has been or is to be sold or transferred by the Company or such Subsidiary to such person (a “sale and leaseback transaction”) unless, after giving effect thereto, the aggregate amount of all Attributable Debt with respect to all such sale and leaseback transactions plus all Indebtedness secured by a Lien (with the exception of Indebtedness secured by Liens which is excluded pursuant to the Section 6.2 of this Supplemental Indenture) would not exceed the greater of $500.0 million and 20% of Consolidated Net Tangible Assets.

 

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Section 7.2 Exceptions. The restrictions in Section 7.1 of this Supplemental Indenture shall not apply to, and there will be excluded from Attributable Debt in any computation under Sections 6.2 or 7.1 of this Supplemental Indenture, Attributable Debt with respect to any sale and leaseback transaction if:

(a) the Company and its Subsidiaries are permitted to create Indebtedness secured by a Lien pursuant to Section 6.2 of this Supplemental Indenture (other than Section 6.2(w)) on the Property to be leased, in an amount equal to the Attributable Debt with respect to such sale and leaseback transaction, without equally and ratably securing the Notes;

(b) the Company or any of its Subsidiaries, within 360 days after the receipt of the proceeds of such sale or transfer by the Company or any of its Subsidiaries, shall apply such proceeds thereof to the retirement of the Company’s or any of its Subsidiaries’ Indebtedness (other than Indebtedness owned by the Company or any of its Subsidiaries); provided, however, that no retirement referred to in this Section 7.2(b) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment provision of Indebtedness;

(c) the Company or any of its Subsidiaries applies the net proceeds of the sale or transfer of the Property leased pursuant to such transaction to the purchase of assets (and the cost of construction thereof) or the expansion of the Company’s existing business within 360 days prior or subsequent to such sale or transfer;

(d) the effective date of any such arrangement or the purchaser’s commitment therefor is within 36 months prior or subsequent to the acquisition of the Property (including, without limitation, acquisition by merger or consolidation) or the completion of construction and commencement of operation thereof (which, in the case of a retail store, is the date of opening to the public), whichever is later;

(e) the lease in such sale and leaseback transaction is for a term, including renewals, of not more than three years;

(f) the sale and leaseback transaction is entered into between the Company and any of its Subsidiaries or between any of the Company’s Subsidiaries; or

(g) the lease payment therefor is created in connection with a project financed with, and such obligation constitutes, a Nonrecourse Obligation.

Section 7.3 Additional Covenants. With respect to the Notes, the covenants set forth in Sections 7.1 of this Supplemental Indenture supplement those covenants set forth in the Base Indenture.”

Conforming Changes, etc.

The Proposed Amendments with respect to each series of Old Notes would make technical, conforming and other changes to such series of Old Notes and the Old Notes Indenture, to modify or delete certain definitions and cross-references that relate to the modifications described above.

The Supplemental Indenture with respect to the applicable series of Old Notes will effect the Proposed Amendments to the Old Notes Indenture for such series of Old Notes. The applicable series of Old Notes will also be deemed to be amended to delete all provisions inconsistent with the Old Notes Indenture that are effected by the Proposed Amendments.

The Old Notes Indenture—Generally

The Proposed Amendments constitute a single proposal for each of the Consents under the Consent Solicitations, and a consenting holder must consent to the Proposed Amendments as an entirety and may not consent selectively with respect to certain of the Proposed Amendments.

 

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It is expected that a Supplemental Indenture with respect to a series of Old Notes will be executed promptly following receipt of the Old Notes Requisite Consents for such series of Old Notes, but in any event not prior to the applicable Withdrawal Deadline. The Proposed Amendments with respect to a series of Old Notes will become operative immediately prior to the acceptance of the Old Notes of such series pursuant to the applicable Exchange Offer. If we receive Old Notes Requisite Consents with respect to a series of Old Notes and the Proposed Amendments for such series of Old Notes are adopted, the Old Notes of such series that are not tendered will remain outstanding but will be subject to the terms of the Old Notes Indenture, as modified by the applicable Supplemental Indenture.

 

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ACCEPTANCE OF OLD NOTES; ACCEPTANCE OF CONSENTS; ACCRUAL OF INTEREST

Acceptance of Old Notes for Exchange; Acceptance of Consents

If the conditions to an Exchange Offer and Consent Solicitation are satisfied, or if the Company waives all of the conditions that have not been satisfied (subject to applicable law), and the Company has not withdrawn or terminated such Exchange Offer, the Company will accept for exchange on the Settlement Date, after the Company receives validly completed and duly executed Request Messages (as defined in “Procedures for Tendering Old Notes and Delivering Consents—Tender of Old Notes Through ATOP” below) with respect to any and all of the Old Notes validly tendered (and not validly withdrawn), the Old Notes to be exchanged by notifying the Exchange Agent of the Company’s acceptance, on the terms and subject to the conditions set forth in this Prospectus. The notice may be oral if the Company promptly confirms such notice in writing.

The Company expressly reserves the right, in its discretion, to delay acceptance for exchange of, or the exchange of, Old Notes tendered under any or all of the Exchange Offers (subject to Rule 14e-1(c) under the Exchange Act, which requires that the Company issue the offered consideration or return the Old Notes deposited pursuant to such Exchange Offer promptly after termination or withdrawal of the Exchange Offers), or to terminate such Exchange Offer and not accept for exchange any Old Notes not previously accepted for exchange, (1) if any of the conditions to the Exchange Offers shall not have been satisfied or validly waived by the Company or (2) in order to comply in whole or in part with any applicable law.

In all cases, the Exchange Consideration and, if applicable, the Early Participation Payment, for Old Notes exchanged pursuant to the Exchange Offers will be made only after timely receipt by the Exchange Agent of (1) certificates representing the Old Notes, or timely confirmation of a book-entry transfer (a “Book-Entry Confirmation”) of the Old Notes into the Exchange Agent’s account at DTC, and (2) a Request Message. The Exchange Offers and the Consent Solicitations are scheduled to expire at the Expiration Time for such Exchange Offers and the Consent Solicitations, unless extended with respect to a series of Old Notes by the Company at its discretion, subject to applicable law.

For purposes of an Exchange Offer, the Company will have accepted for exchange any and all Old Notes validly tendered (and not validly withdrawn) pursuant to such Exchange Offer, if, as and when the Company gives oral or written notice to the Exchange Agent of the Company’s acceptance of such Old Notes for exchange pursuant to such Exchange Offer. In all cases, exchange of Old Notes pursuant to the Exchange Offers will be made by the deposit of any Exchange Consideration and Early Participation Payment, as applicable, with the Exchange Agent, which will act as your agent for the purposes of receiving payments and New Secured Notes from the Company, and transmitting any interest cash payments and delivering New Secured Notes to you. If, for any reason whatsoever, acceptance for exchange of, or exchange of, any Old Notes tendered pursuant to the Exchange Offers are delayed (whether before or after the Company’s acceptance for exchange of the Old Notes) or the Company extends an Exchange Offer or is unable to accept for exchange the Old Notes tendered pursuant to an Exchange Offer, then, without prejudice to the Company’s rights set forth herein, the Company may instruct the Exchange Agent to retain tendered Old Notes and those Old Notes may not be withdrawn, subject to the limited circumstances described in “Withdrawal of Tenders and Revocation of Consents” below.

Tenders of Old Notes pursuant to the Exchange Offers, as well as Consents with respect to the Old Notes pursuant to the Consent Solicitations, will be accepted only in principal amounts equal to $2,000 and integral multiples of $1,000 in excess thereof. No alternative, conditional or contingent tenders will be accepted. Holders who tender less than all of their Old Notes must continue to hold Old Notes in the minimum authorized denomination of $2,000 principal amount. The Company will not accept any tender that would result in the issuance of less than $2,000 principal amount of New Secured Notes to a participating holder.

The Company will pay or cause to be paid all transfer taxes with respect to the exchange of any Old Notes.

 

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Accrued Interest

Holders of Old Notes validly tendered (and not validly withdrawn) and accepted by the Company will be entitled to receive accrued and unpaid interest, if any, in cash on their exchanged Old Notes up to, but not including, the Settlement Date, in addition to the Exchange Consideration and, if applicable, the Early Participation Payment, that such holder would receive in the Exchange Offers.

Under no circumstances will any special interest be payable because of any delay in the transmission of funds to any holder of Old Notes with respect to the New Secured Notes to be received in exchange for the Old Notes or otherwise.

Sources of Funds for the Exchange Offers

The Company intends to fund all cash payable to holders pursuant to the Exchange Offers with cash on hand.

 

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PROCEDURES FOR TENDERING OLD NOTES AND DELIVERING CONSENTS

General

In order to participate in the Exchange Offers, you must validly tender your Old Notes to the Exchange Agent, as further described below. It is your responsibility to validly tender your Old Notes. The Company has the right to waive any defects. However, the Company is not required to waive defects and is not required to notify you of defects in your tender.

The tender of Old Notes pursuant to the Exchange Offers in accordance with the procedures described below will be deemed to constitute a delivery of a Consent to the Proposed Amendments. Holders of Old Notes who tender their Old Notes pursuant to the Exchange Offers are obligated to deliver their Consents to the Proposed Amendments.

If you have any questions or need help in tendering your Old Notes and delivering your Consents, please contact the Information Agent or the Exchange Agent at the addresses and telephone numbers listed on the back cover of this Prospectus.

Valid Tender of Old Notes

Except as set forth below, for a holder to validly tender Old Notes pursuant to the Exchange Offers, a Request Message must be received by the Exchange Agent at the address or facsimile number set forth on the back cover of this Prospectus at any time at or prior to the applicable Expiration Time, and, the Old Notes must be transferred pursuant to the procedures for ATOP or book-entry transfer described below and a Book-Entry Confirmation must be received by the Exchange Agent at any time at or prior to the applicable Expiration Time.

In all cases, the exchange of Old Notes validly tendered (and not validly withdrawn) and accepted for exchange pursuant to the Exchange Offers will be made only after timely receipt by the Exchange Agent of (1) Book-Entry Confirmation with respect to such Old Notes; and (2) a Request Message.

Tender of Old Notes Held in Physical Form

We do not believe any Old Notes exist in physical form. If you believe you hold Old Notes in physical form, please contact the Information Agent or Exchange Agent regarding procedures for participating in the Exchange Offers.

Tendering Old Notes Held Through a Custodian

Any holder whose Old Notes are held by a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender Old Notes should contact such custodial entity promptly and instruct such custodial entity to tender the Old Notes on such holder’s behalf.

Book-Entry Transfer

The Exchange Agent has or will establish an account with respect to the Old Notes at DTC for purposes of the Exchange Offers, and any financial institution that is a participant in the DTC system and whose name appears on a security position listing as the record owner of the Old Notes may make book-entry delivery of Old Notes by causing DTC to transfer the Old Notes into the Exchange Agent’s account at DTC in accordance with DTC’s procedure for transfer during the normal business hours of DTC. Although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent’s account at DTC, a Request Message with respect to the Old Notes must be transmitted to and received by the Exchange Agent at one of the addresses set forth on the back cover of this Prospectus at any time at or prior to the applicable Expiration Time.

 

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Tender of Old Notes through ATOP

DTC participants may electronically transmit their acceptance of the Exchange Offers through ATOP, for which the transaction will be eligible. In accordance with ATOP procedures, DTC will then verify the acceptance of the Exchange Offers and send a Request Message to the Exchange Agent for its acceptance.

A “Request Message” is a message transmitted by DTC, received by the Exchange Agent and forming part of the Book-Entry Confirmation, which states that DTC has received an express acknowledgement from you that you have received the applicable Exchange Offer documents.

If a holder of Old Notes transmits its acceptance through ATOP, delivery of such tendered Old Notes must be made to the Exchange Agent pursuant to the book-entry delivery procedures set forth herein. Unless such holder delivers the Old Notes being tendered to the Exchange Agent, the Company may, at its option, treat such tender as defective for purposes of delivery of acceptance for exchange and the right to receive New Secured Notes. Delivery of documents to DTC does not constitute delivery to the Exchange Agent. If you desire to tender your Old Notes on the day that the Expiration Time occurs, you must allow sufficient time for completion of the ATOP procedures during the normal business hours of DTC on such date. The Company will have the right, which may be waived, to reject the defective tender of Old Notes as invalid and ineffective.

The Company has not provided guaranteed delivery procedures in conjunction with the Exchange Offers or under any of the Exchange Offers documents or other Exchange Offers materials provided therewith. Holders must timely tender their Old Notes in accordance with the procedures set forth in the applicable Exchange Offer documents.

There is no letter of transmittal for the Exchange Offers. Holders must tender Old Notes through DTC’s ATOP procedures.

Delivery of Consents in Connection with the Exchange Offers

The tender of Old Notes pursuant to the Exchange Offers in accordance with the procedures described herein will be deemed to constitute a delivery of a Consent to the Proposed Amendments. Holders of Old Notes who tender their Old Notes pursuant to the Exchange Offers are obligated to deliver their Consents to the Proposed Amendments.

Holders may not tender their Old Notes without delivering the applicable Consent with respect to the Old Notes tendered.

Effect of Tender

Any tender of Old Notes by a holder, and the Company’s subsequent acceptance of that tender, will constitute a binding agreement between that holder and the Company upon the terms and subject to the conditions of the Exchange Offers described herein. The participation in the Exchange Offers by a tendering holder of Old Notes will constitute the agreement by that holder to deliver good and marketable title to the tendered Old Notes, free and clear of any and all liens, restrictions, charges, pledges, security interests, encumbrances or rights of any kind of third parties.

Representations, Warranties and Covenants of Holders of Old Notes

Upon a valid tender of Old Notes and transmission of a Request Message to the Exchange Agent, a holder will, subject to that holder’s ability to withdraw its tender, and on the terms and subject to the conditions of the Exchange Offers, be deemed, among other things, to:

 

  1.

irrevocably sell, assign and transfer to or upon the Company’s order or the order of the Company’s nominee all right, title and interest in and to, and any and all claims in respect of or arising or having

 

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  arisen as a result of the holder’s status as a holder of, all Old Notes tendered thereby, such that thereafter the holder shall have no contractual or other rights or claims in law or equity against the Company or any fiduciary, trustee, fiscal agent or other person connected with the Old Notes arising under those Old Notes;

 

  2.

waive any and all rights with respect to the Old Notes tendered thereby, including, without limitation, any existing or past defaults and their consequences in respect of those Old Notes;

 

  3.

consent to the Proposed Amendments (and to direct the Old Notes Trustee to enter into a supplemental indenture effecting the Proposed Amendments); and

 

  4.

release and discharge the Company and the Old Notes Trustee, as applicable, from any and all claims that the holder may have, now or in the future, arising out of the Old Notes tendered thereby, including, without limitation, any claims that the holder is entitled to receive additional principal or interest payments with respect to the Old Notes tendered thereby, other than the Company’s obligations as to the Exchange Consideration and, if applicable, the Early Participation Payment, and accrued and unpaid interest as expressly provided in this Prospectus, or to participate in any redemption or defeasance of the Old Notes tendered thereby.

In addition, each holder of Old Notes validly tendered in an Exchange Offer upon transmission of a Request Message to the Exchange Agent will be deemed to represent, warrant and agree that:

 

  1.

it has received this Prospectus and has reviewed it;

 

  2.

it is the beneficial owner of, or a duly authorized representative of one or more beneficial owners of, the Old Notes tendered thereby, and it has full power and authority to tender such Old Notes and deliver the related Request Message;

 

  3.

the Old Notes being tendered thereby were owned as of the date of tender, free and clear of any liens, restrictions, charges and encumbrances of any kind, and the Company will acquire good title to those Old Notes, free and clear of all liens, restrictions, charges and encumbrances of any kind, when the Company accepts the same;

 

  4.

it will not sell, pledge, hypothecate or otherwise encumber or transfer any Old Notes tendered thereby from the date of such tender unless such Old Notes are validly withdrawn or such Exchange Offer is terminated, and any purported sale, pledge, hypothecation or other encumbrance or transfer will be void and of no effect;

 

  5.

it is not a person to whom it is unlawful to make an invitation to tender pursuant to the Exchange Offer under applicable law, and it has observed (and will observe) the laws of all relevant jurisdictions in connection with its tender;

 

  6.

it will, upon request, execute and deliver any additional documents reasonably deemed by the Exchange Agent or the Company to be necessary or desirable to complete the sale, assignment and transfer of the Old Notes tendered hereby;

 

  7.

in evaluating the applicable Exchange Offer and in making its decision whether to participate in such Exchange Offer by tendering its Old Notes and transmitting a Request Message to the Exchange Agent, it has made its own independent appraisal of the matters referred to in this Prospectus and in any related communications and it is not relying on any statement, representation or warranty, express or implied, made to it by us, the Information Agent, Exchange Agent or the Dealer Manager , other than those contained in this Prospectus, as amended or supplemented through the Expiration Time; and

 

  8.

it hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of the Company), with full powers of substitution and revocation (such power-of-attorney being deemed to be an irrevocable power coupled with an interest), to (i) present the Old Notes and all

 

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  evidences of transfer and authenticity to, or transfer ownership of, the Old Notes on the account books maintained by Euroclear, Clearstream, or DTC to, or upon the order of, the Company, (ii) present the Old Notes for transfer of ownership on the books of the relevant security register and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of the Old Notes all in accordance with the terms of and conditions to the Exchange Offers as set forth in this Prospectus.

The representations, warranties and agreements of a holder tendering Old Notes will be deemed to be repeated and reconfirmed on and as of the Expiration Time and the Settlement Date. All authority conferred or agreed to by a tender of Old Notes and transmission of a Request Message to the Exchange Agent shall not be affected by, and shall survive, the death or incapacity of the person making such tender and transmission, and every obligation of such person shall be binding upon such person’s heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives.

Determination of Validity

All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Notes and delivery of Consents pursuant to any of the procedures described above, and the form and validity (including time of receipt of notices of withdrawal) of all documents will be determined by the Company in its discretion (subject to applicable law), which determination will be final and binding. Subject to the applicable law, the Company reserves the absolute right to reject any or all tenders of any Old Notes and delivery of Consents determined by the Company not to be in proper form, or if the acceptance of or exchange of such Old Notes may, in the opinion of the Company’s counsel, be unlawful. The Company also reserves the right to waive any condition to the Exchange Offers at its discretion, subject to applicable law. The Company may waive any such condition with respect to some or all of the Exchange Offers.

Your tender and delivery of Consents will not be deemed to have been validly made until all defects or irregularities in your tender have been cured or waived. All questions as to the form and validity (including time of receipt) of any delivery or withdrawal of a tender or delivery or revocation of a Consent will be determined by the Company in its discretion (subject to applicable law), which determination shall be final and binding. None of the Company, the Dealer Manager, the Exchange Agent, the Information Agent nor any other person or entity is under any duty to give notification of any defects or irregularities in any tender or withdrawal of any Old Notes and Consents, or will incur any liability for failure to give any such notification.

PLEASE SEND ALL MATERIALS TO THE EXCHANGE AGENT ONLY. DO NOT SEND MATERIALS TO THE COMPANY, THE OLD NOTES TRUSTEE, THE NEW NOTES TRUSTEES OR THE DEALER MANAGER.

 

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WITHDRAWAL OF TENDERS AND REVOCATION OF CONSENTS

Old Notes validly tendered and not validly withdrawn at a time at or prior to the applicable Withdrawal Deadline may not be validly withdrawn at any time thereafter, unless the applicable Exchange Offer is terminated without any Old Notes of such series being accepted or unless otherwise required by applicable law. If such a termination occurs, the Old Notes of the series of Old Notes as to which the termination occurred will be returned to the tendering holder as promptly as practicable.

A holder of Old Notes may not revoke a Consent without withdrawing the previously tendered Old Notes to which such Consent relates. Tenders of Old Notes may be validly withdrawn, and Consents may be validly revoked, at any time at or prior to the applicable Withdrawal Deadline. A valid withdrawal of tendered Old Notes effected prior to the applicable Withdrawal Deadline will constitute the concurrent valid revocation of such holder’s related Consent.

In order for a holder to validly revoke a Consent, such holder must validly withdraw the related tendered Old Notes at any time at or prior to the applicable Withdrawal Deadline. Tendered Old Notes may not be validly withdrawn subsequent to the applicable Withdrawal Deadline, expect as described below or unless otherwise required by law.

If, after the applicable Withdrawal Deadline, the Company (i) reduces the principal amount of Old Notes subject to such Exchange Offer, (ii) reduces the Exchange Consideration or the Early Participation Payment or (iii) is otherwise required by law to permit withdrawals, then previously tendered Old Notes may be validly withdrawn within a reasonable period under the circumstances and to the extent required by law after the date that notice of such reduction or permitted withdrawal is first published or given or sent to holders of the Old Notes by the Company. The valid withdrawal of tendered Old Notes prior to the applicable Withdrawal Deadline will be deemed to be a concurrent revocation of the corresponding Consent to the Proposed Amendments.

A holder who validly withdraws previously tendered Old Notes at any time at or prior to the applicable Withdrawal Deadline and does not validly re-tender Old Notes prior to the applicable Expiration Time will not receive the Exchange Consideration. A holder who validly withdraws previously tendered Old Notes at any time at or prior to the applicable Withdrawal Deadline and validly re-tenders Old Notes at any time at or prior to the applicable Expiration Time will receive only the applicable Exchange Consideration (assuming such Old Notes are accepted for exchange).

Subject to applicable law, if, for any reason whatsoever, acceptance for exchange of, or exchange of, any Old Notes tendered pursuant to an Exchange Offer, or acceptance of any Consents delivered pursuant to the Consent Solicitations, is delayed (whether before or after the Company’s acceptance for exchange of Old Notes) or the Company extends an Exchange Offer or the Consent Solicitations, or is unable to accept for exchange, or exchange, the Old Notes tendered pursuant to such Exchange Offer, the Company may instruct the Exchange Agent to retain tendered Old Notes and those Old Notes may not be withdrawn, and all Consents previously delivered and not revoked will remain subject to the Consent Solicitations, except to the extent that you are entitled to the withdrawal rights set forth herein. Under no circumstances will any special interest be payable because of any delay in the transmission of funds to any holder of Old Notes with respect to the New Secured Notes to be received in exchange for the Old Notes or otherwise.

To be effective, a written or electronic transmission notice of withdrawal of a tender and a revocation of a Consent or a properly transmitted “Request Message” through DTC’s ATOP system for the withdrawal of a tender and a revocation of a Consent, must:

 

   

be received by the Exchange Agent at one of the addresses specified on the back cover of this Prospectus at any time at or prior to the applicable Withdrawal Deadline;

 

   

specify the name of the holder of the Old Notes and the corresponding Consent to be withdrawn and revoked;

 

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contain the description of the Old Notes, the corresponding Consent related to such Old Notes, in each case, to be withdrawn, the number of the account at DTC from which the Old Notes were tendered and the name and number of the account at DTC to be credited with the Old Notes withdrawn, and the aggregate principal amount represented by such Old Notes; and be signed by the DTC participant tendering such Old Notes through ATOP in the same manner as the participant’s name is listed in the applicable Request Message.

If the Old Notes to be withdrawn and the Consents to be revoked have been delivered or otherwise identified to the Exchange Agent, a signed notice of withdrawal is effective immediately upon receipt by the Exchange Agent of written or facsimile transmission of the notice of withdrawal (or receipt of a Request Message) even if physical release is not yet effected. A withdrawal of Old Notes and the revocation of Consents can only be accomplished in accordance with the foregoing procedures.

The Company will have the right, which may be waived, to reject the defective tender of Old Notes as invalid and ineffective.

If you validly withdraw Old Notes and validly revoke Consents, you will have the right to re-tender them at any time at or prior to the applicable Expiration Time in accordance with the procedures described above for tendering Old Notes and delivering the Consents. If the Company amends or modifies the terms of an Exchange Offer or Consent Solicitation, or the information concerning an Exchange Offer or Consent Solicitation in a manner determined by the Company to constitute a material change to holders of Old Notes, the Company will disseminate additional Exchange Offer materials and extend the period of any such Exchange Offer or Consent Solicitation, including any withdrawal rights, if applicable, to the extent required by law and as the Company determines necessary. An extension of the Withdrawal Deadline or the Expiration Time for an Exchange Offer will not affect a holder’s withdrawal rights unless otherwise provided herein or in any additional Exchange Offer materials or as required by applicable law.

 

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CONDITIONS OF THE EXCHANGE OFFERS AND THE CONSENT SOLICITATIONS

The Exchange Offers and the Consent Solicitations are subject to the satisfaction or waiver of the conditions described below.

Each Exchange Offer is conditioned on the lower of (i) the Nasdaq Official Closing Price of BBBY (as reflected on Nasdaq.com) immediately preceding the Expiration Time or (ii) the average Nasdaq Official Closing Price of BBBY (as reflected on Nasdaq.com) for the five trading days immediately preceding the Expiration Time not exceeding $12.00 (such price, the “Minimum Price”).

The consummation of any of the Exchange Offers and any of the corresponding Consent Solicitations is conditioned on the following (the “General Conditions”):

 

   

the registration statement of which this Prospectus forms a part shall have been declared effective by the SEC at or prior to the Expiration Time and shall remain effective on the Settlement Date;

 

   

there shall not have been instituted, threatened or be pending any action, proceeding, application, claim counterclaim or investigation (whether formal or informal, and whether oral or in writing) (and there shall not have been any material adverse development to any action, application, claim, counterclaim or proceeding currently instituted, threatened or pending) before or by any court, governmental, regulatory or administrative agency or instrumentally, domestic or foreign, or by any other person, domestic or foreign, in connection with the Exchange Offers and the Consent Solicitations that challenges the making of the Exchange Offers or the Consent Solicitations or that, in the Company’s reasonable judgment, either (a) is, or is reasonably likely to be, materially adverse to the Company’s and its subsidiaries’ business, operations, properties, condition (financial or otherwise), income, assets, liabilities or prospects, (b) would or might prohibit, prevent, restrict or materially delay consummation of the Exchange Offers or the ability for the Company to obtain the Old Notes Requisite Consents or (c) would materially impair the contemplated benefits of any offer to the Company or be material to holders in deciding whether to accept the Exchange Offers or the Consent Solicitations;

 

   

no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been proposed, enacted, entered, issued, promulgated, enforced or deemed applicable by any court or governmental, regulatory or administrative agency or instrumentality that, in the Company’s reasonable judgment, either (a) would or might prohibit, prevent, restrict or materially delay consummation of the Exchange Offers or the Consent Solicitations or (b) is, or is reasonably likely to be, materially adverse to the Company’s and its subsidiaries’ business, operations, properties, condition (financial or otherwise), income, assets, liabilities or prospects of the Company;

 

   

there shall not have occurred or be likely to occur any event or condition affecting the Company’s and its subsidiaries’ business or financial affairs and its subsidiaries that, in the Company’s reasonable judgment, either (a) is, or is reasonably likely to be, materially adverse to the Company’s and its subsidiaries’ business, operations, properties, condition (financial or otherwise), results of operations, assets, liabilities or prospects, (b) would or might prohibit, prevent, restrict or materially delay consummation of the Exchange Offers or the Consent Solicitations or (c) would or might materially impair the contemplated benefits of the Exchange Offers or the Consent Solicitations to the Company or be material to holders in deciding whether to participate in the Exchange Offers or the Consent Solicitations;

 

   

the Old Notes Trustee under the Old Notes Indenture shall not have objected in any respect to or taken any action that could or would, in the Company’s reasonable judgment, materially and adversely affect the consummation of the Exchange Offers and shall not have taken any action that challenges the validity or effectiveness of the procedures used by the Company in the making of any offer or the acceptance of, or payment for, some or all of the applicable series of Old Notes pursuant to any offer; and

 

   

there shall not exist, in the Company’s reasonable judgment, any actual or threatened legal impediment to the acceptance for exchange of, or exchange of, the Old Notes; and there shall not have occurred

 

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(a) any general suspension of, or limitation on prices for, trading in securities in the United States securities or financial markets, (b) any significant adverse change in the market price for the Old Notes, (c) a material impairment in the trading market for debt securities, (d) a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States or other major financial markets, (e) any limitation (whether or not mandatory) by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, or other event that, in the Company’s reasonable judgment, might affect the extension of credit by banks or other lending institutions, (f) a commencement of a war, armed hostilities, terrorist acts or other national or international calamity, (g) any material adverse change in the securities or financial markets in the United States generally or (h) in the case of any of the foregoing existing on the date hereof, a material acceleration, escalation or worsening thereof.

The consummation of any of the corresponding Consent Solicitations is subject to the receipt of the Old Notes Requisite Consents (as further described below). The Company may waive any condition with respect to any of the Exchange Offers or Consent Solicitations at its discretion, subject to applicable law.

Notwithstanding any other provisions of the Exchange Offers and the Consent Solicitations, subject to applicable law, the Company will not be required to accept for exchange or to exchange Old Notes validly tendered (and not validly withdrawn) pursuant to the Exchange Offers, and may, in its discretion, terminate, amend or extend the Exchange Offers and the Consent Solicitations, either as a whole, or with respect to one or more series of Old Notes, or delay or refrain from accepting for exchange or exchanging the Old Notes for any reason, including if the General Conditions shall not have been satisfied or waived.

In addition, the Company’s obligation to transfer any Exchange Consideration and, if applicable, any Early Participation Payment, is conditioned upon the Company’s acceptance of Old Notes for exchange pursuant to the Exchange Offers.

In order to amend any Old Notes Indenture, the Old Notes Requisite Consents must be received and the Supplemental Indentures must be executed. Holders delivering Old Notes Requisite Consents authorize, direct and request that the Old Notes Trustee execute and deliver the Supplemental Indenture to implement the Proposed Amendments. We intend to cause the Exchange Agent to deliver the Old Notes Requisite Consents to the Old Notes Trustee promptly after they have been obtained. Each of the Supplemental Indentures will be executed and delivered on or promptly following receipt of the Old Notes Requisite Consents, but in no event prior to the applicable Withdrawal Deadline. Only holders of the Old Notes are entitled to deliver Consents. Pursuant to the Old Notes Indenture, the transfer of the Old Notes on the register for the New Secured Notes will not have the effect of revoking any Consent previously given by the holder of those Old Notes and that Consent will remain valid by the person in whose name such Old Notes are then on the register for the New Secured Notes.

These conditions are for the Company’s benefit and may be asserted by the Company or may be waived by the Company, including any action or inaction by the Company giving rise to any condition, or may be waived by the Company, in whole or in part at any time and from time to time, in its discretion (subject to applicable law). The Company may additionally terminate any or all of the Exchange Offers and the Consent Solicitations if any condition is not satisfied at or after the applicable Expiration Time (subject to applicable law). Under each of the Exchange Offers and the Consent Solicitations, if any of these events occur, subject to the termination rights described above, the Company may (subject to applicable law) (i) return Old Notes tendered thereunder to you, (ii) extend an Exchange Offer and retain all tendered Old Notes until the expiration of the extended Exchange Offer, or (iii) amend an Exchange Offer in any respect by giving oral or written notice of such amendment to the Exchange Agent and making public disclosure of such amendment as the Company determines necessary and to the extent required by applicable law.

The Company has not made a decision as to what circumstances would lead the Company to waive any such condition, and any such waiver would depend on circumstances prevailing at the time of such waiver. The

 

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Company reserves the right to amend, at any time, the terms of any or all of the Exchange Offers and the Consent Solicitations (subject to applicable law). The Company will give holders notice of such amendments as the Company determines necessary and to the extent required by applicable law. See “General Terms of the Exchange Offers and the Consent Solicitations—Extension, Termination or Amendment” and “General Terms of the Exchange Offers and the Consent Solicitations—Announcements.”

 

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EXCHANGE AGENT; INFORMATION AGENT; DEALER MANAGER

Exchange Agent

Global Bondholder Services Corporation has been appointed the exchange agent for the Exchange Offers and the Consent Solicitations (the “Exchange Agent”). All correspondence in connection with the Exchange Offers should be sent or delivered by each holder of Old Notes, or a beneficial owner’s custodian bank, depositary, broker, trust company or other nominee, to the Exchange Agent at the address and telephone numbers set forth on the back cover of this Prospectus. The Company will pay the Exchange Agent reasonable compensation for its services and will reimburse it for certain reasonable expenses in connection therewith. In connection with the Exchange Offers and the Consent Solicitations, the Company will also pay soliciting retail brokers a Soliciting Broker Fee and will pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the holders of Old Notes and in handling or forwarding tenders of Old Notes and Consents by their customers. See “General Terms of the Exchange Offers and the Consent Solicitations—Soliciting Broker Fee.”

Information Agent

Global Bondholder Services Corporation has also been appointed as the information agent for the Exchange Offers and the Consent Solicitations (the “Information Agent”), and will receive reasonable compensation for its services. Questions concerning tender procedures and requests for additional copies of this Prospectus should be directed to the information agent at the address and telephone numbers set forth on the back cover of this Prospectus. Holders of Old Notes may also contact their custodian bank, depositary, broker, trust company or other nominee for assistance concerning the Exchange Offers.

Dealer Manager

The Company has retained Lazard Frères & Co. LLC (the “Dealer Manager”) to act as Dealer Manager in connection with the Exchange Offers and as Solicitation Agent in connection with the Consent Solicitations. The Company has agreed to pay the Dealer Manager customary fees and to reimburse the Dealer Manager for its reasonable expenses and to indemnify it against certain liabilities, including liabilities under federal securities laws, and to contribute to payments that it may be required to make in respect thereof. Except for any Soliciting Broker Fee, no fees or commissions have been or will be paid by the Company to any broker or dealer, other than the Dealer Manager, in connection with the Exchange Offers. The customary mailing and handling expenses incurred by brokers, dealers, banks, depositories, trust companies and other nominees or custodians forwarding material to their customers will be paid by the Company. The obligations of the Dealer Manager to perform such function are subject to certain conditions.

From time to time, the Dealer Manager and its affiliates have provided, are currently providing, and may in the future provide, financial advisory, investment banking, asset management and advisory services for the Company, its subsidiaries or their affiliates for customary compensation. In particular, Lazard Frères & Co. LLC is providing investment banking services to the Company in connection with the Private Exchange Agreements and the Company’s broader liability management strategy.

In the ordinary course of its business, the Dealer Manager or its affiliates may at any time hold long or short positions, and may trade for its own account or the accounts of customers, in debt or equity securities issued or guaranteed by the Company or its subsidiaries and affiliates, including the Old Notes and the New Secured Notes. To the extent that the Dealer Manager or its affiliates own Old Notes during the Exchange Offers and Consent Solicitations, they may tender such Old Notes and the related consents pursuant to the terms of the Exchange Offers and Consent Solicitations. The Dealer Manager and its affiliates may also make investment recommendations in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

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In connection with the Exchange Offers or otherwise, the Dealer Manager may purchase and sell the Old Notes and the New Secured Notes in the open market to the extent permitted by applicable law.

None of the Dealer Manager, the Exchange Agent or the Information Agent assumes any responsibility for the accuracy or completeness of the information concerning the Company contained or incorporated by reference in this Prospectus or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of such information.

 

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DESCRIPTION OF NEW SECOND LIEN SECURED NOTES

The following summary of certain provisions of the Second Lien Indenture, the New Second Lien Secured Notes, the Second Lien Security Documents and related documents does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Second Lien Indenture, the New Second Lien Secured Notes, the Second Lien Security Documents and related documents. It does not restate these agreements in their entirety. We urge you to read the Second Lien Indenture, the New Second Lien Secured Notes, the Second Lien Security Documents and related documents that will be filed at a later date because those documents, and not this description, define your rights as a Holder of a series of New Second Lien Secured Notes. A copy of these documents will be available from us at Bed Bath & Beyond Inc., 650 Liberty Avenue, Union, New Jersey 07083, Attn: Chief Financial Officer. Capitalized terms used in this “Description of New Second Lien Secured Notes” and not otherwise defined have the meanings set forth in the section “—Certain Definitions.”

General

In this description, the term “Company”, “we,” “us” and “our” refers to Bed Bath & Beyond Inc., a corporation organized under the laws of the State of New York.

Holders of the Old 2024 Notes will have the option to exchange each $1,000 principal amount of their Old 2024 Notes for (1) $1,000 principal amount of 3.693% Senior Second Lien Non-Convertible Notes due 2027 (the “New Second Lien Non-Convertible Notes”) or (2) $410 principal amount of 8.821% Senior Second Lien Convertible Notes due 2027 (the “New Second Lien Convertible Notes” and, together with the New Second Lien Non-Convertible Notes, the “New Second Lien Secured Notes”), or a combination thereof, on the terms and conditions described elsewhere in this Prospectus. The New Second Lien Non-Convertible Notes and the New Second Lien Convertible Notes will be issued under an indenture (the “Second Lien Indenture”), dated as of the Issue Date, among the Company, the Subsidiary Guarantors (as defined below) party thereto and Wilmington Trust, National Association, as trustee for the New Second Lien Convertible Notes (in such capacity, the “Convertible Second Lien Trustee”), trustee for the New Second Lien Non-Convertible Notes (in such capacity, the “Non-Convertible Second Lien Trustee” and together with the Convertible Second Lien Trustee, the “Second Lien Trustees”) and collateral agent for each series of New Second Lien Secured Notes (in such capacity, the “Collateral Agent”).

The aggregate principal amount of (i) New Second Lien Non-Convertible Notes (the “Initial New Second Lien Non-Convertible Notes”) and (ii) New Second Lien Convertible Notes (the “Initial New Second Lien Convertible Notes” and, together with the Initial New Second Lien Non-Convertible Notes, the “Initial New Second Lien Secured Notes”) that the Company issues in the Exchange Offer will depend upon the aggregate principal amount of Old 2024 Notes that are validly tendered and accepted for exchange, as well as what portion of tendering holders of Old 2024 Notes elect to receive each respective series of New Second Lien Secured Notes.

The Company may issue additional New Second Lien Non-Convertible Notes (the “Additional New Second Lien Non-Convertible Notes”) and additional New Second Lien Convertible Notes (the “Additional New Second Lien Convertible Notes” and together with the Additional New Second Lien Non-Convertible Notes, the “Additional New Second Lien Secured Notes”) under the Second Lien Indenture, from time to time after this offering without notice to or the consent of Holders of the applicable series of New Second Lien Secured Notes. Any offering of Additional New Second Lien Secured Notes would be subject to the covenant described below under the heading “—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.” Each series of the Initial New Second Lien Secured Notes and any Additional New Second Lien Secured Notes of the applicable series under the Second Lien Indenture will vote and consent together on all matters pertaining to such series as a single class. All New Second Lien Secured Notes of both series will vote as one (1) class on any matters pertaining to the exercise of remedies with respect

 

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to Collateral and any foreclosure related matters pertaining to the First Lien/Second Lien/Third Lien Intercreditor Agreements. A separate CUSIP or ISIN would be issued for any Additional New Second Lien Secured Notes, unless the applicable series of Initial New Second Lien Secured Notes and such Additional New Second Lien Secured Notes are (a) issued pursuant to a “qualified reopening” of the applicable series of New Second Lien Secured Notes offered hereby or (b) otherwise treated as part of the same “issue” of debt instruments as the applicable series of New Second Lien Secured Notes offered hereby, in each case for U.S. federal income tax purposes, or another then-recognized identifier is used.

If a Holder of New Second Lien Secured Notes has given wire transfer instructions to the paying agent, the paying agent will pay all principal of, and, if applicable, interest and premium, if any, on that Holder’s New Second Lien Secured Notes in accordance with those instructions. All other payments on the New Second Lien Secured Notes will be made at the office or agency of the paying agent unless the Company elects to make interest payments through the paying agent by check mailed to the Holders of the New Second Lien Secured Notes at their addresses set forth in the register of Holders.

The registered Holder of a New Second Lien Secured Note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the Second Lien Indenture.

The New Second Lien Secured Notes will be issued only in fully registered form, without coupons, in minimum denominations of $2,000 and any integral multiple of $1,000 in excess thereof.

Terms of the New Second Lien Secured Notes

The New Second Lien Secured Notes will mature on November 30, 2027. The New Second Lien Non-Convertible Notes will bear interest at a rate equal to 3.693% per annum and the New Second Lien Convertible Notes will bear interest at a rate equal to 8.821% per annum. Each New Second Lien Secured Note will bear interest from the Issue Date or from the most recent date to which interest has been paid or provided for. Interest on the New Second Lien Secured Notes will be payable semi-annually in arrears on May 30 and November 30 of each year, beginning on May 30, 2023 (the “Interest Payment Dates” and each an “Interest Payment Date”). Interest will be computed on the basis of a three hundred and sixty (360)-day year comprised of twelve (12) thirty (30)-day months.

Subject to satisfaction of certain conditions and during the periods described below, the New Second Lien Convertible Notes may be converted at an initial conversion rate of 83.3333 shares of our common stock per $1,000 principal amount of New Second Lien Convertible Notes (equivalent to an initial conversion price of approximately $12.00 per share of common stock). The conversion rate is subject to adjustment if certain events occur. We will settle conversions of New Second Lien Convertible Notes by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, as described under “—Conversion Rights of New Second Lien Convertible Notes—Settlement upon Conversion.” A Holder will not receive any separate cash payment for interest, if any, accrued and unpaid to the conversion date except under the limited circumstances described below.

Paying Agent and Registrar for the New Second Lien Secured Notes

The Company will maintain a paying agent for the New Second Lien Secured Notes. Each Second Lien Trustee will initially act as paying agent and registrar for its applicable series of New Second Lien Secured Notes. The Company may change the paying agent or registrar without prior notice to the Holders of the New Second Lien Secured Notes, and the Company or any of its Subsidiaries may act as paying agent or registrar. Upon written request from the Company, the registrar will provide the Company with a copy of the register to enable them to maintain a register of the New Second Lien Secured Notes at their registered offices.

 

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Ranking

The New Second Lien Secured Notes and the Guarantees will be:

 

   

secured on a second-priority basis by the Collateral (subject to certain Permitted Liens) and on a junior basis to all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a first-priority basis, including the ABL/FILO Obligations;

 

   

effectively senior to all existing and future unsecured Indebtedness of the Company and the Subsidiary Guarantors to the extent of the value of the Collateral, including any Old 2024 Notes, Old 2034 Notes and Old 2044 Notes not tendered in the Exchange Offers;

 

   

senior to all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a third-priority basis, including the New Third Lien Secured Notes, to the extent of the value of the Collateral;

 

   

(i) effectively subordinated to any of the Company’s and the Subsidiary Guarantors’ existing and future Indebtedness that is secured by assets that do not constitute Collateral securing the New Second Lien Secured Notes, including the equity pledges that secure the ABL/FILO Obligations, to the extent of the value of such assets and (ii) structurally subordinated to all existing and future Indebtedness and other liabilities, including trade payables, of the Company’s Subsidiaries that do not guarantee the New Second Lien Secured Notes;

 

   

unconditionally guaranteed by the Subsidiary Guarantors;

 

   

pari passu in right of payment with, and secured on an equal and ratable basis with, all existing and future Indebtedness of the Company and the Subsidiary Guarantors secured by the Collateral on a second-priority basis; and

 

   

senior in right of payment to any of the Company’s and the Subsidiary Guarantors’ future subordinated Indebtedness.

Guarantees

Unless a Subsidiary is a Subsidiary Guarantor, claims of creditors of such Subsidiary (including trade creditors) and claims of preferred stockholders (if any) of such Subsidiary generally will have priority with respect to the assets and earnings of such Subsidiary over the claims of creditors of the Company, including Holders of the New Second Lien Secured Notes. The New Second Lien Secured Notes, therefore, will be structurally subordinated to claims of creditors (including trade creditors) and preferred stockholders (if any) of Subsidiaries that are not Subsidiary Guarantors. Although the Second Lien Indenture will contain limitations on the amount of additional Indebtedness that the Company and its Subsidiaries may Incur, such limitations are subject to a number of significant exceptions.

Each of the Company’s Subsidiary Guarantors shall, jointly and severally, and, as a primary obligor and not merely as surety, absolutely, unconditionally and irrevocably guarantee, subject to the First Lien/Second Lien/Third Lien Intercreditor Agreements, the prompt payment when due, whether at Stated Maturity, upon acceleration or otherwise, and at all times thereafter, all Obligations of the Company under the Second Lien Indenture, the New Second Lien Secured Notes and the other Second Lien Documents and all reasonable fees and documented costs and expenses paid or incurred by the Second Lien Trustees and the Collateral Agent in endeavoring to collect all of any part of the Obligations from, or in prosecuting any action against, the Company or any Subsidiary Guarantor to the Holders, the Second Lien Trustees and the Collateral Agent (all such Obligations guaranteed by such Subsidiary Guarantors being herein called the “Guaranteed Obligations”). Each Subsidiary Guarantor will also agree that the Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal.

Notwithstanding the foregoing, if any Person becomes an obligor under the ABL/FILO Facility and any replacement Credit Facilities in respect thereof, and is not an Excluded Subsidiary, such Subsidiary shall provide a Guarantee. To the extent a Person is required to provide a Guarantee under the above provisions, such Person

 

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shall execute and deliver a supplemental indenture to the Second Lien Trustees evidencing such Guarantee within ten (10) Business Days after the requirement to provide such Guarantee arises, together with such Opinions of Counsel and Officer’s Certificates as the Second Lien Trustees reasonably require, and a pledge of all assets held by such Person (other than Excluded Assets) as After-Pledged Property with a New Second Lien as provided under “—Certain Covenants—After-Pledged Property.”

Limitations on Guarantees

The Guarantee of each Subsidiary Guarantor will also be limited as necessary to prevent that Guarantee, from constituting a fraudulent conveyance or fraudulent transfer under applicable law. See “Risk Factors—Risks Related to the New Secured Notes—Federal and state law may render the New Secured Notes Guarantees and/or payments made under the New Secured Notes Guarantees avoidable in specific circumstances, potentially requiring the holders to return payments received.”

Each Guarantee will be a continuing guarantee and, except as provided below under “—Release of Guarantees,” will:

 

  (i)

remain in full force and effect until payment in full of all the Guaranteed Obligations;

 

  (ii)

be binding upon each such Subsidiary Guarantor and its successors and assigns; and

 

  (iii)

inure to the benefit of and be enforceable by the Second Lien Trustees, the Collateral Agent, the Holders and their successors, transferees and assigns.

Release of Guarantees

A Guarantee of a Subsidiary Guarantor will be automatically and unconditionally released and discharged:

 

  (i)

in connection with any disposition of (1) Equity Interests of such Subsidiary Guarantor or (2) all or substantially all of the assets of such Subsidiary Guarantor, in each case, if (x) such disposition is permitted under the terms of the Second Lien Indenture, the applicable series of New Second Lien Secured Notes and First Lien/Second Lien/Third Lien Intercreditor Agreements and (y) such disposition is not being made for the primary purpose of causing the release of the Guarantee;

 

  (ii)

with respect to the New Second Lien Non-Convertible Notes, upon the Company’s exercise of its legal defeasance or covenant defeasance options under the Second Lien Indenture as described below under “—Satisfaction and Discharge; Defeasance—New Second Lien Non-Convertible Notes”;

 

  (iii)

if the Second Lien Obligations are discharged in accordance with the terms of the Second Lien Indenture; or

 

  (iv)

the Subsidiary Guarantor has been released from its Senior Lien Obligations .

Security

The Second Lien Obligations shall be secured by the Collateral. The “Collateral” consists of the ABL/FILO Collateral, excluding the pledges of Equity Interests of the Company’s Subsidiaries, including the Subsidiary Guarantors, that secure the ABL/FILO Obligations. The Collateral consists of substantially all the assets of the Company and the Subsidiary Guarantors, including:

 

   

accounts and credit card receivables, all inventory, all cash and cash equivalents, all deposit accounts (including all Collateral Accounts) and all cash, checks, other negotiable instruments, funds and other evidences of payments held therein or credited thereto;

 

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all Securities Accounts (including all Collateral Accounts) and all cash, cash equivalents, financial assets and securities held therein or credited thereto and securities entitlements related thereto of the Company and the Subsidiary Guarantors;

 

   

all chattel paper, all equipment, all documents, all general intangibles, all goods, all investment property (except for Equity Interests), all instruments, all letters of credit, letter-of-credit rights and supporting obligations, all Intellectual Property and all commercial tort claims, as described in the Second Lien Security Documents;

 

   

all books, records and information relating to the foregoing (including without limitation all books, records, information, databases and customer lists, credit files, computer files, programs, printouts and other computer materials and records related thereto and any general intangibles at any time evidencing or relating to any of the foregoing, whether tangible or electronic, that contain any information relating to any of the foregoing);

 

   

all accessions to, substitutions for, and replacements, Proceeds (including insurance proceeds), rents, profits, and products of any and all of the foregoing, together with all collateral security, guarantees and rights and remedies with respect to any of the foregoing; and

 

   

promissory notes and any instruments evidencing Indebtedness (i) owned by the Company or a Subsidiary Guarantor (but excluding the Excluded Note) or (ii) issued to the Company or a Subsidiary Guarantor after the First Amendment Effective Date (as defined in the Amended Credit Agreement) and having an aggregate principal amount in excess of $2,500,000, in each case, other than any Excluded Assets, in each case (i) and (ii) including all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the foregoing equity interests or Indebtedness.

The Liens on the Collateral securing the Second Lien Obligations will be held by the Collateral Agent for the benefit of itself, the Second Lien Trustees and the Holders of the New Second Lien Secured Notes.

The Collateral shall not include any Excluded Assets.

Required Collateral Lien Priority

The First Lien/Second Lien/Third Lien Intercreditor Agreements will provide that the New Second Liens and the other applicable Liens on Obligations have the Required Collateral Lien Priority. See “—First Lien/Second Lien/Third Lien Intercreditor Agreements.”

Required Collateral Lien Priority” means, with respect to any Lien on the Collateral, that such Lien on the Collateral has priority in the following order: (1) Senior Lien Obligations, (2) the Second Lien Obligations and (3) the Third Lien Obligations.

The Holders of New Second Lien Secured Notes will be permitted to take enforcement action with respect to the Collateral only to the extent permitted under and in accordance with the First Lien/Second Lien/Third Lien Intercreditor Agreements. See “—First Lien/Second Lien/Third Lien Intercreditor Agreements.”

As of August 27, 2022, on an as adjusted basis after giving effect to incremental borrowings under the ABL Facility and FILO Facility as of November 11, 2022, the Private Exchange Agreements and the Exchange Offers assuming full participation in the Exchange Offers and either (1) all holders of Old 2024 Notes exchange their Old 2024 Notes into New Second Lien Non-Convertible Notes and (2) all holders of Old 2024 Notes exchange their Old 2024 Notes into New Second Lien Convertible Notes, and in each case, including receipt of all tenders by the Early Participation Time and the inclusion of the Early Participation Payment, the Company and the Subsidiary Guarantors would have had:

 

   

in the case of (1), total consolidated indebtedness of $1,480.8 million, excluding letters of credit, consisting of $550 million of Secured Indebtedness under the ABL Facility (with $400 million of

 

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additional availability based on estimated letters of credit outstanding), $375 million of Secured Indebtedness under the FILO Facility, $0 of Unsecured Notes, $218.6 million of New Second Lien Non-Convertible Notes, $0 of New Second Lien Convertible Notes and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

 

   

in the case of (2), total consolidated indebtedness of $1,394.1 million, excluding letters of credit, consisting of $550 million of Secured Indebtedness under the ABL Facility (with $400 million of additional availability based on estimated letters of credit outstanding), $375 million of Secured Indebtedness under the FILO Facility, $0 of Unsecured Notes, $0 of New Second Lien Non-Convertible Notes, $131.9 million of New Second Lien Convertible Notes (reflecting undiscounted future cash flows, including $91.5 million of aggregate principal amount and $40.4 million of future interest payments) and $337.2 million of New Third Lien Secured Notes (reflecting undiscounted future cash flows, including $183.3 million of aggregate principal amount and $153.9 million of future interest payments).

Excluded Assets

The Collateral only consists of assets that secure the ABL/FILO Obligations (except for the pledges of Equity Interests of the Company’s Subsidiaries, including the Subsidiary Guarantors) and does not include any other assets. Therefore, the following assets, whether now owned or hereafter acquired, will not be included in the Collateral (collectively, the “Excluded Assets”):

 

   

all Excluded Equity Interests;

 

   

all Property (as defined in the Senior Notes Indenture as in effect on the First Amendment Effective Date (as defined by the Amended Credit Agreement)) unless a security interest is granted thereon by any Grantor in favor of any Person to secure Indebtedness for borrowed money;

 

   

any “intent-to-use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of the Lanham Act has been filed, to the extent that, and solely during the period for which, any assignment of an “intent-to-use” application prior to such filing would violate the Lanham Act;

 

   

any Excluded Account;

 

   

vehicles and any other assets subject to certificates of title to the extent a Lien thereon cannot be perfected by the filing of a UCC financing statement;

 

   

any Grantor’s right, title or interest in any lease, license, contract or agreement to which such Grantor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that such a grant would, under the terms of such lease, license, contract or agreement, result in a breach of the terms of, or constitute a default under, or result in the abandonment, invalidation or unenforceability of or create a right of termination in favor of or require the consent of any other party thereto (other than the Company or any Subsidiary Guarantor), such lease, license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the UCC or any other applicable law (including Title 11 of the United States Code) or principles of equity), other than the proceeds and receivables thereof the assignment of which is expressly deemed effective under applicable laws notwithstanding such prohibition;

 

   

any assets for which the Senior Agent and the Company have determined in their reasonable judgment and agree in writing that the cost of creating or perfecting such pledges or security interests therein would be excessive in view of the benefits to be obtained by the Senior Agent, on behalf of the Senior Claimholders (with respect to the corresponding requirement under the Amended Credit Agreement) therefrom;

 

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any assets and proceeds thereof subject to a Lien permitted under Section 6.02(d) of the Amended Credit Agreement to the extent that the documents providing for the Indebtedness secured by such Liens do not permit such assets and proceeds thereof to be pledged to the Senior Agent or any assets and proceeds thereof subject to a Lien permitted under Section 6.02(c) of the Amended Credit Agreement, solely to the extent any such Lien is of the type permitted under Section 6.02(c) of the Amended Credit Agreement, so long as the documents providing for such Lien do not permit such assets and Proceeds thereof to be pledged to the Senior Agent;

 

   

any asset to the extent a pledge thereof or grant of security interest therein is prohibited or restricted by any Requirement of Law (including any legally effective requirement to obtain the consent, approval, license or authorization of any Governmental Authority, except to the extent such consent has been obtained, other than to the extent that any such prohibition would be rendered ineffective pursuant to any other applicable Requirement of Law, including the Uniform Commercial Code of any applicable jurisdiction) (with no requirement to obtain the consent, approval, license or authorization of any Governmental Authority or third party);

 

   

assets for which a pledge thereof or a security interest therein to the extent the same would result in materially adverse tax consequences, as reasonably determined by an Officer of the Company in good faith;

 

   

any other assets to the extent that the Company determines in good faith that the cost, burden, difficulty or consequence of obtaining or perfecting a security interest in such assets is excessive in relation to the benefit to the Holders of the New Second Lien Secured Notes of the security to be afforded thereby or the value of such assets as Collateral; and

 

   

any other assets that do not secure the ABL/FILO Facility, including, for the avoidance of doubt, if the ABL/FILO Facility or any replacement Credit Facilities shall become an unsecured Credit Facility (including pursuant to any modification, Refinancing or replacement thereof).

Release of Collateral

Liens on the Collateral securing each series of New Second Lien Secured Notes will be released automatically under any one (1) or more of the following circumstances:

 

  (a)

any of the Collateral shall be sold, transferred or otherwise disposed of by the Company or a Subsidiary Guarantor, as the case may be, in a transaction permitted by the Second Lien Indenture, the applicable New Second Lien Secured Notes and the First Lien/Second Lien/Third Lien Intercreditor Agreements (except to the Company or another Subsidiary Guarantor), with respect to only such Collateral sold, but not on any proceeds thereof;

 

  (b)

all or substantially all of the Equity Interests of any Subsidiary Guarantor shall be sold, transferred or otherwise disposed of by the Company or any Subsidiary Guarantor in a transaction permitted by the Amended Credit Agreement (except to the Company or a Subsidiary Guarantor), with respect only to the Collateral of such Subsidiary Guarantor, as the case may be;

 

  (c)

if a Subsidiary Guarantor otherwise ceases to be a Grantor under the Second Lien U.S. Security Agreement or a Grantor under the Second Lien Canadian Security Agreement pursuant to the terms of the respective Second Lien Security Agreements, with respect to only the Collateral of such Subsidiary Guarantor, but not on any proceeds thereof;

 

  (d)

if a Subsidiary Guarantor otherwise ceases to be a Subsidiary Guarantor in accordance with the terms of the Second Lien Indenture, with respect to only the Collateral of such Subsidiary Guarantor, but not on any proceeds thereof;

 

  (e)

upon such property or other asset being released in respect of the Liens securing the Senior Lien Obligations (excluding in the case of the payment thereof);

 

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  (f)

as required by the terms of any Approved Intercreditor Agreement, including a full release of the Collateral upon the Discharge of Senior Lien Obligations; or

 

  (g)

upon such property or asset becoming an Excluded Asset.

The security interests in all Collateral securing the New Second Lien Secured Notes also will be released upon payment in full of the principal of, together with accrued and unpaid interest on, the applicable New Second Lien Secured Notes and all other Second Lien Obligations that are due and payable at or prior to the time such principal, together with accrued and unpaid interest, are paid, or, with respect to the New Second Lien Non-Convertible Notes, upon a legal defeasance or covenant defeasance under the Second Lien Indenture, each as described below under “—Satisfaction and Discharge; Defeasance”.

Security Agreements

The Collateral Agent will enter into a Second Lien U.S. Security Agreement and a Second Lien Canadian Security Agreement, dated as of the Issue Date (as amended, supplemented or otherwise modified, the “Second Lien Security Agreements”), with the Company, the Subsidiary Guarantors applicable for each Second Lien Security Agreement and the Second Lien Trustees. Pursuant to the Second Lien Security Agreements, the Collateral Agent will be granted a lien on the Collateral to secure the second (2nd)-priority lien obligations which as of the Issue Date will only include the obligations in respect of the New Second Lien Secured Notes. The Second Lien Security Agreements will set forth therein the relative rights of the second-lien secured parties with respect to the Collateral and cover certain other matters relating to the administration of security interests. The Second Lien Security Agreements generally control substantially all matters related to the interest of the second-lien secured parties in the Collateral, including with respect to directing the Collateral Agent, distribution of proceeds and enforcement.

First Lien/Second Lien/Third Lien Intercreditor Agreements

On the Issue Date, JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the ABL/FILO Facility (the “Senior Agent”), the Collateral Agent and the Third Lien Collateral Agent will enter into an intercreditor agreement (the “ABL/Junior Intercreditor Agreement”), and the Collateral Agent and the Third Lien Collateral Agent will enter into an intercreditor agreement (the “2L/3L Intercreditor Agreement” and together with the ABL/Junior Intercreditor Agreement, the “First Lien/Second Lien/Third Lien Intercreditor Agreements”). By their acceptance of the New Second Lien Secured Notes, each Holder will be deemed to accept the terms of, agree to be bound by, and authorize the Collateral Agent to enter into and perform its respective obligations under, each of the ABL/Junior Intercreditor Agreement and the 2L/3L Intercreditor Agreement, binding the Holders to the terms thereof.

ABL/Junior Intercreditor Agreement

Lien Priorities

The ABL/Junior Intercreditor Agreement will provide that any Lien with respect to the Collateral securing any Senior Lien Obligations now or hereafter held by or on behalf of, or created for the benefit of, Senior Agent or any Senior Claimholder or any agent or trustee therefore shall be senior in all respects and prior to any Lien with respect to the Collateral securing any Junior Lien Obligations.

Prohibition on Contesting Liens

The ABL/Junior Intercreditor Agreement will provide that each Junior Lien Representative (on behalf of itself and their respective Junior Lien Claimholders) and the Senior Agent, for itself and on behalf of each Senior Claimholder will not (and waives any right to), directly or indirectly, contest, or support any other person in

 

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contesting, in any proceeding (including any Insolvency Proceeding), the attachment, perfection, priority, validity, or enforceability of a Lien held by or on behalf of any Senior Claimholders or a Lien held by or on behalf of any Junior Lien Claimholders, in each case in any Collateral (including the allowability or priority of the Senior Lien Obligations or any Junior Lien Obligations, as applicable, in any Insolvency Proceeding) or the validity or enforceability of the ABL/Junior Intercreditor Agreement.

New Liens

The ABL/Junior Intercreditor Agreement will provide that so long as the Discharge of Senior Lien Obligations has not occurred (i) no Company or Subsidiary Guarantor shall grant any additional Liens on any assets or property to secure any Junior Lien Obligation unless such Company or Subsidiary Guarantor has granted a Lien on such asset or property to Senior Agent to secure the Senior Lien Obligations contemporaneously with or prior to the time of the grant of a Lien thereon in favor of the Junior Lien Representatives, such Lien being a senior Lien in favor of the Senior Agent pursuant to the terms of the ABL/Junior Intercreditor Agreement and (ii) no Company or Subsidiary Guarantor shall grant any additional Liens on any assets or property (other than Equity Interests) to secure any Senior Lien Obligation unless such Company or Subsidiary Guarantor has granted a Lien on such asset or property to the Junior Lien Representative to secure the Junior Lien Obligations contemporaneously with the grant of a Lien thereon in favor of the Senior Agent, such Lien being a Junior Lien in favor of the Junior Lien Representatives pursuant to the terms of the ABL/Junior Intercreditor Agreement; provided that this clause (i) will not be violated with respect to any Senior Lien Obligations if Senior Agent and FILO Agent expressly decline to accept a Lien on such asset or property and that this clause (ii) will not be violated with respect to the applicable Junior Lien Obligations if a Junior Lien Representative, acting in accordance with the applicable Junior Lien Documents expressly declines to accept a Lien on such asset or property; provided, further, for the avoidance of doubt, nothing in this provision shall permit or require the Company or any Subsidiary Guarantor to grant any Liens on Equity Interests to secure any Junior Lien Obligations.

Exercise of Remedies

The ABL/Junior Intercreditor Agreement will provide that until the Discharge of Senior Lien Obligations has occurred, whether or not any Insolvency Proceeding has been commenced by or against any Company or Subsidiary Guarantor, the Junior Lien Representatives (on behalf of themselves and their respective Junior Lien Claimholders):

 

   

will not exercise or seek to exercise any rights or remedies with respect to the Liens on any Collateral or institute any action or proceeding with respect to such rights or remedies (including any Exercise of Secured Creditor Remedies with respect to any Collateral); provided that the Collateral Agent (acting at the instruction of the majority of all Second Lien Claimholders, voting together, for the purposes of this section “—Exercise of Remedies), but not the Third Lien Collateral Agent, may exercise such rights and remedies after the expiry of the Standstill Period so long as any and all proceeds received as a result thereof are delivered to the Senior Agent for application pursuant to “—Application of Proceeds”.

 

   

will not directly or indirectly contest, protest, or object to or hinder or delay in any manner (whether by judicial proceeding or otherwise), or otherwise interfere with any Exercise of Secured Creditor Remedies by Senior Agent or any Senior Claimholder and has no right to direct Senior Agent to Exercise any Secured Creditor Remedies or take any other action under the Senior Loan Documents.

 

   

will not object to (and waives any and all claims with respect to) the forbearance by Senior Agent or any of the Senior Claimholders from Exercising any Secured Creditor Remedies and, except as set forth in the first bullet above or to the extent otherwise expressly set forth in the ABL/Junior Intercreditor Agreement, the Senior Agent and the Senior Claimholders shall have the exclusive right to enforce rights (including setoff), exercise remedies (including, without limitation, Exercise of

 

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Secured Creditor Remedies) and make determinations regarding the Collateral (including the release, disposition, or restrictions with respect to the Collateral) without any notice to, consultation with, or consent of, the Junior Lien Representatives or any Junior Lien Claimholder.

Notwithstanding the foregoing paragraphs, the ABL/Junior Intercreditor Agreement will provide (A) that in no event shall the Junior Lien Representatives or any Junior Lien Claimholder exercise any such rights or remedies if, notwithstanding the expiration of the Standstill Period, (x) the Senior Agent has commenced and is diligently pursuing the Exercise of Secured Creditor Remedies with respect to all or any material portion of such Collateral or (y) the Event of Default (as defined in the Junior Debt Agreement) that existed under such Junior Debt Agreement on the date of the notice referred to in the definition of “Standstill Period” has been waived, and (B) the Standstill Period shall be tolled for any period that the Senior Agent or any of the Senior Claimholders are stayed (including pursuant to any stay resulting from the commencement of any Insolvency Proceeding of any Company or Subsidiary Guarantor) or otherwise prohibited by law or court order from exercising remedies with respect to all or any material portion of the Collateral.

The ABL/Junior Intercreditor Agreement and the 2L/3L Intercreditor Agreement will provide that, other than the limited rights under the section “—Junior Permitted Actions” and certain other limited rights, the Third Lien Collateral Agent and the Third Lien Claimholders shall not be entitled to exercise any rights or remedies with respect to the Collateral either before or after the expiry of the Standstill Period.

The ABL/Junior Intercreditor Agreement will provide that except as may be permitted by the terms of the section “—Junior Permitted Actions”, each Junior Lien Representative (on behalf of itself and the its respective Junior Lien Claimholders), irrevocably, absolutely, and unconditionally waive any and all rights it or its respective Junior Lien Claimholders may have as a junior lien creditor or otherwise to object (and seek or be awarded any relief of any nature whatsoever based on any such objection) to the manner in which Senior Agent or any Senior Claimholder (A) enforces or collects (or attempts to collect) the Senior Lien Obligations or (B) realizes or seeks to realize upon or otherwise enforce the Liens in and to the Collateral securing the Senior Lien Obligations, regardless of whether any action or failure to act by or on behalf of Senior Agent or any Senior Claimholder is adverse to the interest of the Junior Lien Representatives or any Junior Lien Claimholders.

The ABL/Junior Intercreditor Agreement will provide that the Junior Lien Representatives (each on behalf of itself and its respective Junior Lien Claimholders) shall not be entitled to take or receive any Collateral or any proceeds of any Collateral in connection with the exercise of any right or remedy with respect to any Collateral (including any Exercise of Secured Creditor Remedies with respect to any Collateral) or by way of distribution in respect of any Collateral or any claim of any Junior Lien Claimholders secured thereby in an Insolvency Proceeding, unless and until the Discharge of Senior Lien Obligations has occurred. Without limiting the generality of the foregoing, unless and until the Discharge of Senior Lien Obligations has occurred, except for actions expressly permitted by the provisions under “—Junior Permitted Actions”, and, solely with respect to the Collateral Agent, the provisions under “—Exercise of Remedies” , the sole right of the Junior Lien Representatives and the Junior Lien Claimholders with respect to the Collateral is to hold a Lien on the Collateral pursuant to the Junior Lien Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after the Discharge of Senior Lien Obligations has occurred.

Exclusive Enforcement Rights

Except to the extent otherwise expressly provided in the first bullet to the first paragraph under “—Exercise of Remedies”, until the Discharge of Senior Lien Obligations has occurred, whether or not any Insolvency Proceeding has been commenced by or against Company or any Subsidiary Guarantor, Senior Agent and each Senior Claimholder shall have the exclusive right to Exercise any Secured Creditor Remedies with respect to the Collateral without any consultation with or the consent of the Junior Lien Representative or any Junior Lien Claimholder. In connection with any Exercise of Secured Creditor Remedies, Senior Agent and each Senior Claimholder may enforce the provisions of the Senior Loan Documents and exercise remedies thereunder, all in

 

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such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to Dispose of Collateral, to incur expenses in connection with such Disposition, and to exercise all the rights and remedies of a secured creditor under applicable law.

Junior Permitted Actions

Notwithstanding anything to the contrary in the ABL/Junior Intercreditor Agreement, and provided that no such action described in clauses (a) through (d) below is, or could reasonably be expected to be, prohibited by or inconsistent with the terms of the ABL/Junior Intercreditor Agreement, each Junior Lien Representative, each Junior Lien Agent and Junior Lien Claimholder may:

(a) if an Insolvency Proceeding has been commenced by or against Company or any Subsidiary Guarantor, file a claim, proof of claim or statement of interest with respect to such Company or Subsidiary Guarantor and/or the Junior Lien Obligations;

(b) take any action not adverse to the priority status of the Liens on the Collateral securing the Senior Lien Obligations, or the rights of Senior Agent or any Senior Claimholder to Exercise any Secured Creditor Remedies in order to create, perfect, file, protect or preserve (to the extent such action does not constitute the Exercise of Secured Creditor Remedies), its Lien in and to the Collateral; provided that no such action is, or could reasonably be expected to be, inconsistent with the terms of the ABL/Junior Intercreditor Agreement, including the automatic release of Liens as provided in “—Releases”;

(c) file any necessary responsive or defensive pleadings or appeal in opposition to any motion, claim, adversary proceeding, or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of Junior Lien Claimholders or any disallowance of such claims, including any claims secured by the Collateral, if any; and

(d) vote on any Plan of Reorganization, file any proof of claim, make other filings and make any arguments and motions (including in support of or opposition to, as applicable, the confirmation or approval of any Plan of Reorganization) that are, in each case, in accordance with and not otherwise prohibited by, the terms of the ABL/Junior Intercreditor Agreement, with respect to the Junior Lien Obligations and the Collateral. Without limiting the generality of the foregoing or of the other provisions of the ABL/Junior Intercreditor Agreement, any vote to accept, and any other act to support the confirmation or approval of, any Non-Conforming Plan of Reorganization shall be inconsistent with and, accordingly, a violation of the terms of the ABL/Junior Intercreditor Agreement, and Senior Agent shall be entitled (under the ABL/Junior Intercreditor Agreement, Section 510 of the Bankruptcy Code and/or other applicable law) to have any such vote to accept a Non-Conforming Plan of Reorganization changed and any such support of any Non-Conforming Plan of Reorganization withdrawn.

Unsecured Creditor Remedies

Except as set forth in the provisions under the headings “—Exercise of Remedies”, “—Releases”, “—Enforceability and Continuing Priority”, “—Insolvency Proceedings—Financing”, “—Section 363 Sales of Collateral and Releases of Liens securing Senior Lien Obligations”, “—Relief from the Automatic Stay”, “—Adequate Protection” or any other provision of the ABL/Junior Intercreditor Agreement, the Junior Lien Representatives and the Junior Lien Claimholders may exercise rights and remedies as unsecured creditors against the Company and any Subsidiary Guarantor in accordance with the terms of the Junior Lien Documents and applicable law so long as such exercise is not prohibited by or inconsistent with the terms of the ABL/Junior Intercreditor Agreement. Except as otherwise set forth in the ABL/Junior Intercreditor Agreement (and subject in any event to any Lien subordination provisions in any Junior Lien Documents), nothing in the ABL/Junior Intercreditor Agreement shall prohibit the receipt by the Junior Lien Representatives or any other Junior Lien Claimholder of payments on the Junior Lien Obligations so long as such receipt is not (i) the direct or indirect result of the exercise by the Junior Lien Representatives or any other Junior Lien Claimholder of rights or

 

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remedies with respect to any Collateral (including setoff or recoupment) or enforcement in contravention of the ABL/Junior Intercreditor Agreement of any Lien held by any of them or (ii) otherwise in contravention of the ABL/Junior Intercreditor Agreement. In the event that any Junior Lien Claimholder becomes a judgment creditor in respect of any Collateral as a result of its enforcement of its rights as an unsecured creditor with respect to any Junior Lien Obligations, such judgment Lien shall be subject to the terms of the ABL/Junior Intercreditor Agreement for all purposes as the other Liens securing such Junior Lien Obligations.

Application of Proceeds

Until the Discharge of Senior Lien Obligations has occurred, whether or not any Insolvency Proceeding has been commenced by or against Company or any Subsidiary Guarantor, any Collateral or proceeds thereof received in connection with any Exercise of Secured Creditor Remedies and any distribution made in respect of any Collateral in any Insolvency Proceeding or liquidation, including any Adequate Protection payments shall (at such time as such Collateral or proceeds has been monetized) be applied: (a) first (1st), to the payment in full in cash of all outstanding fees, of costs and expenses of Senior Agent and the FILO Agent (including, but not limited to, attorneys’ fees and expenses), (b) second (2nd), to the payment in full in cash or cash collateralization of the Senior Lien Obligations in accordance with the Senior Loan Documents, (c) third (3rd), to the payment in full in cash of costs and expenses of the Collateral Agent and the Second Lien Trustees in connection with such Exercise of Secured Creditor Remedies (to the extent such Exercise of Secured Creditor Remedies was permitted under the ABL/Junior Intercreditor Agreement and the 2L/3L Intercreditor Agreement), (d) fourth (4th), to the payment in full in cash of the Second Lien Obligations in accordance with the Second Lien Documents, (e) fifth (5th), to the payment in full in cash of costs and expenses of the Third Lien Collateral Agent and the Third Lien Trustee in connection with such Exercise of Secured Creditor Remedies (to the extent such Exercise of Secured Creditor Remedies was permitted under the First Lien/Second Lien/Third Lien Intercreditor Agreements), (f) sixth (6th), to the payment in full in cash of the Third Lien Obligations in accordance with the Third Lien Documents (or in the case of clauses (c) through (f) as may otherwise be provided in under the 2L/3L Intercreditor Agreement) and (g) seventh (7th), to the applicable Company or Loan Party (as defined in the Amended Credit Agreement), such other person as may be entitled thereto, or as a court of competent jurisdiction may otherwise direct. If any Exercise of Secured Creditor Remedies with respect to any Collateral produces non-cash proceeds, then such non-cash proceeds shall be held by the Senior Agent as additional Collateral and, at such time as such non-cash proceeds are monetized, shall be applied as set forth above.

Turnover

The ABL/Junior Intercreditor Agreement will provide that unless and until the Discharge of Senior Lien Obligations has occurred, any Collateral or proceeds thereof or any distribution in respect thereof received by any Junior Lien Representative or any Junior Lien Claimholders relating to the Collateral or that is otherwise inconsistent with the terms of the ABL/Junior Intercreditor Agreement shall be segregated and held in trust and forthwith paid over to Senior Agent for the benefit of Senior Claimholders in the same form as received, with any necessary endorsements.

Releases

The ABL/Junior Intercreditor Agreement will provide that:

(a) Until the Discharge of Senior Lien Obligations occurs, the Senior Agent shall have the exclusive right to make determinations regarding the release or Disposition of any Collateral pursuant to the terms of the Senior Loan Documents or in accordance with the provisions of the ABL/Junior Intercreditor Agreement, in each case without any consultation with, consent of or notice to the Junior Lien Representatives or any Junior Lien Claimholder.

(b) If, in connection with the Exercise of Secured Creditor Remedies by Senior Agent as provided for under the captions “—Exercise of Remedies”, “—Exclusive Enforcement Rights” and “—Junior Permitted

 

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Actions”, if Senior Agent releases any of its Liens on any part of any Collateral or releases Company or any Subsidiary Guarantor from its obligations in respect of the Senior Lien Obligations, then the Liens of the Junior Lien Representatives on such Collateral, and the obligations of such Company or Subsidiary Guarantor in respect of such Junior Lien Obligations shall be automatically, unconditionally, and simultaneously released; provided, that any proceeds of any Collateral received by the Senior Agent resulting from such Exercise of Secured Creditor Remedies shall be applied in accordance with the caption under “—Application of Proceeds”.

(c) If, in connection with the disposition of any Collateral by Company or any Subsidiary Guarantor (other than in connection with any enforcement or exercise of rights or remedies with respect to the Collateral which shall be governed by clause (b) above) permitted under the terms of the Senior Loan Documents and not prohibited under the terms of the Junior Lien Documents, Senior Agent releases any of its Liens on any part of any Collateral or releases any Company of such Subsidiary Guarantor from its obligations in respect of the Senior Lien Obligations, then the Liens of the Junior Lien Representatives on such Collateral, and the obligations of Company of such Subsidiary Guarantor, as applicable, in respect of such Junior Lien Obligations shall be automatically, unconditionally, and simultaneously released; provided, that any proceeds of any Collateral received by the Senior Agent resulting from such disposition of Collateral shall be applied in accordance with the Senior Loan Documents.

(d) In the event of any private or public Disposition of all or any material portion of any Collateral by Company or one (1) or more Subsidiary Guarantors with the consent of Senior Agent (acting in accordance with the Amended Credit Agreement) after the occurrence and during the continuance of a Senior Default (and prior to the Discharge of Senior Lien Obligations) (any such Disposition, a “Default Disposition”), then the Liens of the Junior Lien Representatives on such Collateral shall be automatically, unconditionally, and simultaneously released (and if (x) the Default Disposition includes equity interests in Company or any Subsidiary Guarantors, and (y) Senior Agent is also releasing Company or such Subsidiary Guarantors whose equity interests are Disposed of (together with their respective Subsidiaries) from all of their obligations under the Senior Loan Documents, the Junior Lien Representatives shall also release those Persons whose equity interests are Disposed of (together with their respective Subsidiaries) from all of their obligations under the Junior Lien Documents)); provided that the Senior Agent also releases its Liens on such Collateral and provided, further, that any proceeds of any Collateral received by Senior Agent or any Junior Lien Representative resulting from such Disposition shall be applied in accordance “—Application of Proceeds”.

(e) If the Liens securing the Senior Lien Obligations are released in connection with the Discharge of Senior Lien Obligations (without a contemporaneous incurrence of new or replacement Senior Lien Obligations or other than any Discharge of Senior Lien Obligations in connection with the Exercise of Secured Creditor Remedies following the occurrence and during a continuation of a Senior Default), all Liens securing the Junior Lien Obligations will also be released. Any release effected or occasioned by the terms of this caption “—Release” by any Junior Lien Representative of any Lien in favor of any Junior Lien Representative or any of the Junior Lien Claimholders shall not extend to or otherwise affect any of the rights of any Junior Lien Representative or such Junior Lien Claimholder arising under the Junior Lien Documents to any proceeds of any disposition of any Collateral occurring in connection with such release by the Senior Agent; provided that such rights to such proceeds shall be subject in all respects to the terms and conditions of the ABL/Junior Intercreditor Agreement.

(f) Notwithstanding anything contained in this caption “—Release” to the contrary, following the Discharge of Second Lien Obligations, if the Liens securing the Senior Lien Obligations are not concurrently released in connection with the Discharge of Second Lien Obligations (without a contemporaneous incurrence of new or replacement Second Lien Obligations), the junior-priority Liens on the Collateral securing the Third Lien Obligations will not be required to be released (except to the extent the Collateral or any portion thereof was disposed of or otherwise transferred or used in order to repay the Second Lien Obligations secured by the Collateral).

 

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Amendments

The ABL/Junior Intercreditor Agreement will provide that the Senior Loan Documents may be amended, supplemented, or otherwise modified in accordance with their terms and the Senior Lien Obligations may be increased or Refinanced, in each case without notice to, or the consent of, the Junior Lien Representative or Junior Lien Claimholders, all without affecting the lien subordination or other provisions of the ABL/Junior Intercreditor Agreement. The ABL/Junior Intercreditor Agreement shall not include a cap on the amount of Senior Lien Obligations, and the amount of Indebtedness in respect of such Senior Lien Obligations would only be governed by the Senior Loan Documents and the Junior Lien Documents.

The ABL/Junior Intercreditor Agreement will provide that (i) any of the Junior Lien Documents may be amended, supplemented, or otherwise modified and (ii) all or any portion of the Junior Lien Obligations may be Refinanced; provided, however, that, in the case of a Refinancing, the Holders of such Refinancing debt (or the applicable Junior Lien Representative or other representative therefor) to the extent such Refinancing debt is secured, shall bind themselves to the terms of the ABL/Junior Intercreditor Agreement. Notwithstanding the foregoing, any such amendment, supplement or modification, or the terms of any new Junior Lien Documents, shall not, without the prior written consent of Senior Agent and the FILO Agent, (A) shorten the final maturity or average life to maturity of, or require any payment to be made earlier than ninety-one (91) days prior to the Maturity Date (as defined in the Amended Credit Agreement), (B) contravene the ABL/Junior Intercreditor Agreement, (C) add any prohibition or condition on the payment of any of the Senior Lien Obligations or the amendment or other modification of the Senior Loan Documents, in each case, which is more restrictive than those contained herein or (D) relieve the Company of the obligation to comply with Section 6.01(f) of the Amended Credit Agreement.

Pledged Collateral

Unless and until the Discharge of Senior Lien Obligations, each Junior Lien Representative shall promptly notify Senior Agent of any Pledged Collateral held by it or by any Junior Lien Claimholders, and, immediately upon the written request of Senior Agent at any time prior to the Discharge of Senior Lien Obligations, each Junior Lien Representative shall deliver to Senior Agent any such Pledged Collateral held by it or by any Junior Lien Claimholders, together with any necessary endorsements (or otherwise allow Senior Agent to obtain sole possession or control of such Pledged Collateral). Until the Discharge of Senior Lien Obligations has occurred, the Senior Agent shall be entitled to deal with the Pledged Collateral in accordance with the terms of the Senior Loan Documents as if the Liens of the Junior Lien Representatives under the Second Lien Security Documents and the Third Lien Security Documents did not exist. The Senior Agent shall not have any obligation whatsoever to the Junior Lien Representatives or any Junior Lien Claimholder to ensure that the Pledged Collateral is genuine or owned by Company or any Subsidiary Guarantor to preserve rights or benefits of any person other than as expressly set forth in this caption “—Pledged Collateral”. Upon the Discharge of Senior Lien Obligations, Senior Agent shall deliver the remaining Pledged Collateral (if any) together with any necessary endorsements (but without recourse, representation or warranty or recourse of any kind), to the applicable Company or Subsidiary Guarantors, to the extent no Senior Lien Obligations remain outstanding, so as to allow such person to obtain possession or control of such Pledged Collateral; provided, however, that solely in the event that the Discharge of Senior Lien Obligations occurs in connection with any Exercise of Secured Creditor Remedies following the occurrence and during a continuation of a Senior Default, Senior Agent shall deliver the remaining Pledged Collateral (if any) together with any necessary endorsements (but without recourse, representation or warranty or recourse of any kind) first (1st), to the Collateral Agent (to the extent the Discharge of the Second Lien Obligations has not occurred), so as to allow the Collateral Agent to obtain possession or control of such Pledged Collateral, second (2nd), following the Discharge of the Second Lien Obligations, to the Third Lien Collateral Agent (to the extent the Discharge of the Third Lien Obligations has not occurred), so as to allow the Third Lien Collateral Agent to obtain possession or control of such Pledged Collateral and third (3rd), following the Discharge of the Second Lien Obligations and the Discharge of the Third Lien Obligations, to the applicable Company or Subsidiary Guarantors, so as to allow such person to obtain possession or control of such Pledged Collateral.

 

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Discharge Deemed Not to Have Occurred

If any Refinancing of the Senior Lien Obligations, the Second Lien Obligations or the Third Lien Obligations occurs, then a discharge of such Obligations shall be deemed not to have occurred for all purposes of the ABL/Junior Intercreditor Agreement, and the obligations under such Refinancing of such Obligations shall be treated as Senior Lien Obligations, Second Lien Obligations or Third Lien Obligations, as applicable, for all purposes of the ABL/Junior Intercreditor Agreement, including for purposes of the Lien priorities and rights in respect of Collateral set forth therein.

Enforceability and Continuing Priority

The ABL/Junior Intercreditor Agreement shall be applicable both before and after the commencement of any Insolvency Proceeding and all converted or succeeding cases in respect thereof. The relative rights of Claimholders in or to any distributions from or in respect of any Collateral or proceeds of Collateral, shall continue after the commencement of any Insolvency Proceeding.

Insolvency Proceedings—Financing

The ABL/Junior Intercreditor Agreement will provide that, if Company or any Subsidiary Guarantor shall be subject to any Insolvency Proceeding and Senior Agent (acting in accordance with the Amended Credit Agreement) consents to the use of Cash Collateral on which Senior Agent has a Lien or to permit the Company or any Subsidiary Guarantor to obtain DIP Financing, then subject to the terms and conditions set forth in the second (2nd) paragraph under “—Adequate Protection”, each Junior Lien Representative will consent to such Cash Collateral use and will not be entitled to raise (and will not raise or support any Person in raising), but instead shall be deemed to have irrevocably and absolutely waived, any objection, and shall not otherwise in any manner be entitled to oppose or support any Person in opposing, such Cash Collateral use or such DIP Financing (including, except as provided below (including, without limitation, terms and conditions set forth in the second (2nd) paragraph under “—Adequate Protection), any claim that the Junior Lien Claimholders are entitled to Adequate Protection on account of their interests in any Collateral as a condition thereto) and, to the extent the Liens securing the Senior Lien Obligations are discharged, subordinated to, or pari passu with such DIP Financing, each Junior Lien Representative will subordinate its Liens in the Collateral to the Liens securing such DIP Financing (and all obligations related thereto) and all Liens granted as adequate protection to the Senior Claimholders. If, in connection with any Cash Collateral use or DIP Financing, any Liens on the Collateral held by Senior Claimholders are subject to a surcharge or are subordinated to an administrative priority claim, a professional fee “carve out,” or fees owed to the United States trustee, then the Liens on the Collateral of Junior Lien Claimholders shall also be subordinated to such interest or claim and shall remain subordinated to the Liens on the Collateral of Senior Claimholders consistent with the ABL/Junior Intercreditor Agreement. The Company or any Subsidiary Guarantor shall not require any consent from the Senior Agent, FILO Agent or Senior Claimholders in connection with obtaining any debtor-in-possession financing from any Junior Lien Claimholder unless such debtor-in-possession financing will be pari passu or senior in priority to the Senior Lien Obligations.

Section 363 Sales of Collateral and Releases of Liens securing Senior Lien Obligations

Except as otherwise set forth under this heading “—Section 363 Sales of Collateral and Releases of Liens securing Senior Lien Obligations”, until the Discharge of Senior Lien Obligations has occurred, the ABL/Junior Intercreditor Agreement will provide that each Junior Lien Representative will be deemed to have irrevocably, absolutely and unconditionally consented, and will not object or oppose a motion to Dispose of any Collateral free and clear of the Liens or other claims in favor of the Junior Lien Representatives under Section 363 of the Bankruptcy Code, or pursuant to the terms of any other applicable Bankruptcy Law or court order in any Insolvency Proceeding, if Senior Agent (acting in accordance with the Amended Credit Agreement) has consented to such Disposition of such assets free and clear of their Liens, and such motion does not impair, subject to the priorities set forth in the ABL/Junior Intercreditor Agreement, the rights of Junior Lien

 

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Claimholders under Section 363(k) of the Bankruptcy Code, or pursuant to the terms of any other applicable Bankruptcy Law or court order in any Insolvency Proceeding (so long as the right of the Junior Lien Claimholders to offset their claim against the purchase price is only after the Discharge of Senior Lien Obligations has occurred) so long as the interests of the Junior Lien Claimholders in the Junior Lien Collateral (and any post-petition assets subject to adequate protection liens, if any, in favor of the Junior Lien Representatives) attach to the proceeds thereof on the same basis and priority as the other Liens securing the Junior Lien Obligations under the ABL/Junior Intercreditor Agreement (i.e., subordinate to the Liens securing the Senior Lien Obligations).

Relief from the Automatic Stay

The ABL/Junior Intercreditor Agreement will provide that until the Discharge of Senior Lien Obligations has occurred, each Junior Lien Representative will not (a) seek (or support any other person seeking) relief from any automatic stay or any other applicable stay in any Insolvency Proceeding in respect of the Collateral, without the prior written consent of Senior Agent and the FILO Agent, or (b) oppose any request by Senior Agent or any Senior Claimholder to seek relief from any automatic stay or any other applicable stay in any Insolvency Proceeding in respect of the Collateral.

Adequate Protection

The ABL/Junior Intercreditor Agreement will provide that in any Insolvency Proceeding involving Company or a Subsidiary Guarantor, until the Discharge of Senior Lien Obligations has occurred, no Junior Lien Representative or Junior Lien Claimholder shall contest or support any other person contesting: (i) any request by Senior Agent or any other Senior Claimholder for Adequate Protection, (ii) any objection by Senior Agent or any other Senior Claimholders to any motion, relief, action, or proceeding based on Senior Agent or such Senior Claimholders claiming a lack of Adequate Protection or (iii) the payment of interest, fees, expenses or other amounts to the Senior Agent or any other Senior Claimholders (or the Person or Persons acting in a similar capacity under any agreement replacing or Refinancing the ABL/FILO Facility as permitted hereunder) under Section 506(b) or 506(c) of the Bankruptcy Code or otherwise.

The ABL/Junior Intercreditor Agreement will provide that in any Insolvency Proceeding involving Company or Subsidiary Guarantor:

 

   

if any one (1) or more Senior Claimholders are granted Adequate Protection in the form of an additional Lien or a replacement Lien (on existing or future assets of Grantors) in connection with any DIP Financing or use of Cash Collateral, the Junior Lien Representatives shall also be entitled to seek, without objection from Senior Claimholders, Adequate Protection in the form of an additional Lien or a replacement Lien (on such existing or future assets of Grantors), which additional or replacement Lien of the Junior Lien Representative, if obtained, shall be subordinate to the Liens securing and providing adequate protection for the Senior Lien Obligations (including those under a DIP Financing) on the same basis as the other Liens securing such Junior Lien Obligations are subordinate to the Senior Lien Obligations under the ABL/Junior Intercreditor Agreement;

 

   

if any one (1) or more Junior Lien Claimholders request Adequate Protection in the form of an additional Lien or a replacement Lien (on existing or future assets of the Company or Subsidiary Guarantor ), neither the Junior Lien Representative nor any Junior Lien Claimholder shall accept such Adequate Protection unless Senior Agent shall also be granted or offered an Adequate Protection Lien on existing or future assets of Grantors as security and adequate protection for the Senior Lien Obligations and that any Adequate Protection Lien on such existing or future assets securing or providing adequate protection for all or any portion of the Junior Lien Obligations shall be subordinated to the Lien on such assets securing or providing adequate protection for the Senior Lien Obligations on the same basis as the other Liens securing such Junior Lien Obligations are subordinated to the Senior Lien Obligations under the ABL/Junior Intercreditor Agreement;

 

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if any one (1) or more Senior Claimholders request and are granted Adequate Protection in the form of a super-priority claim in connection with any DIP Financing or use of Cash Collateral, then Senior Agent agrees that the Junior Lien Representative shall also be entitled to seek, without objection from Senior Claimholders, Adequate Protection in the form of a super-priority claim, which super-priority claim of the Junior Lien Representative, if obtained, shall be subordinate to the super-priority claims of the Senior Agent on the same basis as the other claims of the Junior Lien Claimholders are subordinate to the claims of the Senior Claimholders under the ABL/Junior Intercreditor Agreement and the Junior Lien Claimholders waive their rights under Section 1129(a)(9) of the Bankruptcy Code and consent and agree that such Section 507(b) claims may be paid under a plan of reorganization in any form having a value on the effective date of such plan equal to the allowed amount of such claims; provided, however, the Junior Lien Representative (on behalf of itself and the Junior Lien Claimholders), agree that they shall not accept such Adequate Protection unless Senior Agent shall also be granted or offered Adequate Protection in the form of a super-priority claim, which super-priority claim, if obtained, shall be subordinate to the super-priority claim of the Senior Claimholders;

 

   

if any one (1) or more Senior Claimholders have filed an objection in the Insolvency Proceeding to the use of Cash Collateral, then the Junior Lien Representatives shall be entitled to file an objection to the use of Cash Collateral and seek Adequate Protection, without objection from the Senior Claimholders; provided that to the extent any Junior Lien Claimholders are granted Adequate Protection pursuant to such objection, the Senior Claimholders shall also be granted such Adequate Protection in the same form granted to the Junior Lien Claimholders and that any such Adequate Protection granted to the Senior Claimholders shall be senior to that granted to the Junior Lien Claimholders;

 

   

if any one (1) or more Junior Lien Claimholders are granted Adequate Protection in the form of a super-priority claim, then Senior Agent shall also be granted or offered Adequate Protection in the form of a super-priority claim, which super-priority claim shall be senior to the super- priority claim of the Junior Lien Claimholders;

 

   

consistent with the foregoing provisions under the caption “—Adequate Protection”, in any Insolvency Proceeding, no Junior Lien Claimholder shall be entitled (and each Junior Lien Claimholder shall be deemed to have irrevocably, absolutely, and unconditionally waived any right) to seek or otherwise be granted any type of Adequate Protection with respect to its interests in the Collateral (except as expressly set forth under the caption “—Adequate Protection”, or as may otherwise be consented to in writing by Senior Agent and FILO Agent) with respect to such Collateral or as may otherwise be granted to the Senior Agent; provided, that any such other type of Adequate Protection granted to the Junior Lien Representative shall be subordinated to that granted to the Senior Agent;

 

   

nothing in the ABL/Junior Intercreditor Agreement shall limit the rights of Senior Agent or any Senior Claimholder to seek Adequate Protection with respect to their rights in the ABL/FILO Collateral in any Insolvency Proceeding (including Adequate Protection in the form of a cash payment, periodic cash payments or otherwise) so long as such request is not otherwise inconsistent with the ABL/Junior Intercreditor Agreement;

 

   

no Junior Lien Representative or Junior Lien Claimholder shall seek, receive or retain any Adequate Protection with respect to their rights in the Collateral in any Insolvency Proceeding in the form of a cash payment or periodic cash payments without the prior written consent of the Senior Agent and the FILO Agent;

 

   

no Junior Lien Representative or Junior Lien Claimholder shall object to, oppose, or challenge any claim by Senior Agent or any Senior Claimholder for allowance in any Insolvency Proceeding of Senior Lien Obligations consisting of post-petition interest, fees, or expenses.

Avoidance Issues

If any Senior Claimholder is required in any Insolvency Proceeding or otherwise to turn over, disgorge or otherwise pay to the estate of Company and any Subsidiary Guarantor any amount paid in respect of Senior Lien

 

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Obligations (a “Recovery”), then such Senior Claimholders shall be entitled to a reinstatement of Senior Lien Obligations with respect to all such recovered amounts, and all rights, interests, priorities and privileges recognized in the ABL/Junior Intercreditor Agreement shall apply with respect to any such Recovery. If the ABL/Junior Intercreditor Agreement shall have been terminated prior to such Recovery, the ABL/Junior Intercreditor Agreement shall be reinstated in full force and effect with respect to such Recovery, and such prior termination shall not diminish, release, discharge, impair, or otherwise affect the obligations of the parties hereto from such date of reinstatement with respect thereto.

The ABL/Junior Intercreditor Agreement will provide that no Junior Lien Representative (on behalf of itself and its Junior Lien Claimholders) shall be entitled to benefit in any manner from any Lien with respect to any avoidance action affecting or otherwise relating to any distribution or allocation of Collateral or the proceeds of Collateral made in accordance with the ABL/Junior Intercreditor Agreement, whether by preference or otherwise, to the extent such Lien is prior to the Lien of Junior Lien Representative therein, it being understood and agreed that the benefit of such avoidance action otherwise allocable to them shall instead be allocated and turned over for application in accordance with the priorities set forth in the ABL/Junior Intercreditor Agreement.

The ABL/Junior Intercreditor Agreement will provide that to the extent that any Senior Lien Obligations are reinstated after the Discharge of Senior Lien Obligations, then (i) the previously released senior-priority Lien of the Senior Lien Obligations in the Collateral shall be reinstated and the previously released junior-priority Lien of the Junior Lien Obligations in the Collateral shall be reinstated and (ii) the ABL/Junior Intercreditor Agreement shall be reinstated.

Plan of Reorganization

The ABL/Junior Intercreditor Agreement will provide that in any Insolvency Proceeding involving the Company or any Subsidiary Guarantor, debt obligations of the reorganized debtor secured by Liens upon any property of the reorganized debtor are distributed pursuant to a Plan of Reorganization or similar dispositive restructuring plan, both on account of Senior Lien Obligations and on account of Junior Lien Obligations, then, to the extent the debt obligations distributed on account of the Senior Lien Obligations and on account of the Junior Lien Obligations are secured by Liens upon the same property, the provisions of the ABL/Junior Intercreditor Agreement will survive the distribution of such debt obligations pursuant to such plan and will apply with like effect to the Liens securing such debt obligations.

The ABL/Junior Intercreditor Agreement will provide that Junior Lien Claimholders (whether in the capacity of a secured creditor or an unsecured creditor) shall not propose, vote in favor of or support any Plan of Reorganization that is inconsistent with the priorities or other provisions of the ABL/Junior Intercreditor Agreement, other than with the consent of the Senior Agent and the FILO Agent or to the extent any such plan is proposed or supported by the number of Senior Claimholders required under Section 1126(c) of the Bankruptcy Code. Without limiting the generality of the foregoing, other than with the prior written consent of the Senior Agent and the FILO Agent, no Junior Lien Claimholder (whether in the capacity of a secured creditor or an unsecured creditor) shall vote in favor of any plan unless such plan (i) satisfies the Senior Lien Obligations in full in cash, (ii) is proposed or supported by the number of Senior Claimholders required under Section 1126(c) of the Bankruptcy Code or (iii) otherwise provides Senior Claimholders with the value of the Collateral in cash or otherwise, prior to any payment or distribution on account of the Junior Lien Obligations.

Conflicts with 2L/3L Intercreditor Agreement

The ABL/Junior Intercreditor Agreement will provide that in the event of a conflict between the terms of the ABL/Junior Intercreditor Agreement and the 2L/3L Intercreditor Agreement with respect to (i) any matter that concerns solely the Second Lien Obligations and the Third Lien Obligations, then the provisions of the 2L/3L Intercreditor Agreement shall prevail and (ii) any matter that concerns solely the Senior Lien Obligations and the Junior Lien Obligations, then the provisions of the ABL/Junior Intercreditor Agreement shall prevail.

 

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Conflicts with Security Agreements

The ABL/Junior Intercreditor Agreement will provide that in the event of a conflict between the terms of the ABL/Junior Intercreditor Agreement, on the one hand, and any of the Senior Security Documents, Second Lien Security Documents or Third Lien Security Documents on the other hand, the provisions of the ABL/Junior Intercreditor Agreement shall prevail.

2L/3L Intercreditor Agreement

The 2L/3L Intercreditor Agreement is substantially similar to the ABL/Junior Intercreditor Agreement, subject to certain conforming changes, provided that:

 

   

the Collateral Agent would have the role of the “Senior Agent” and the Second Lien Claimholders would have the role of “Senior Claimholders”;

 

   

the Third Lien Collateral Agent would have the role of the “Junior Lien Representative” and the Third Lien Claimholders would have the role of the “Junior Lien Claimholders”;

 

   

while the ABL/Junior Intercreditor Agreement remains in effect, any rights and remedies provided in the 2L/3L Intercreditor Agreement shall be expressly subject to the ABL/Junior Intercreditor Agreement; and

 

   

the 2L/3L Intercreditor Agreement will provide that the Third Lien Collateral Agent or Third Lien Claimholders shall not have any rights to exercise remedies, and there shall be no expiration of any standstill period, notwithstanding any Standstill Period rights provided to the Collateral Agent and Second Lien Claimholders in the caption “—ABL/Junior Intercreditor Agreement—Exercise of Remedies”, “—Junior Permitted Actions” and “—Unsecured Creditor Remedies”, until the Discharge of Second Lien Obligations.

Conversion Rights of New Second Lien Convertible Notes

The New Second Lien Convertible Notes will have conversion rights as described below. The New Second Lien Non-Convertible Notes will not have any conversion rights.

General

Prior to the Close of Business on the business day immediately preceding May 30, 2027, the New Second Lien Convertible Notes will be convertible only upon satisfaction of one (1) or more of the conditions described under the headings “—Conversion upon Satisfaction of Sale Price Condition,” “—Conversion upon Satisfaction of Trading Price Condition,” “—Conversion upon Specified Corporate Events” and “—Conversion upon Notice of Redemption.” On or after May 30, 2027 and prior to the Close of Business on the second (2nd) Scheduled Trading Day immediately preceding the maturity date, Holders may convert all or any portion of their New Second Lien Convertible Notes at the conversion rate at any time irrespective of the foregoing conditions. Neither the Convertible Second Lien Trustee nor the conversion agent (if other than the Convertible Second Lien Trustee) shall have any duty to determine or verify our determination of whether any of the conditions to conversion have been satisfied.

The conversion rate for the New Second Lien Convertible Notes will initially be 83.3333 shares of common stock per $1,000 principal amount of New Second Lien Convertible Notes (equivalent to an initial conversion price of approximately $12.00 per share of common stock). Upon conversion of a New Second Lien Convertible Note, we will satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, all as set forth below under “—Settlement upon Conversion.” If we satisfy our conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount

 

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of cash and shares of common stock, if any, due upon conversion will be based on a daily conversion value (as defined below) calculated on a proportionate basis for each trading day in a forty (40) trading day observation period (as defined below under “—Settlement upon Conversion”). The Convertible Second Lien Trustee will initially act as the conversion agent.

If a Holder has submitted New Second Lien Convertible Notes for repurchase upon a Fundamental Change or in an Asset Sale Offer (as defined below), the Holder may convert those New Second Lien Convertible Notes only if that Holder first withdraws its repurchase notice.

A Holder may convert fewer than all of such Holder’s New Second Lien Convertible Notes so long as the New Second Lien Convertible Notes converted are in denominations of the minimum denomination of $2,000 or integral multiples of $1,000 in excess thereof. If we call any New Second Lien Convertible Notes for redemption, a Holder of New Second Lien Convertible Notes may convert all or any portion of its New Second Lien Convertible Notes called for redemption only until the Close of Business on the second (2nd) Scheduled Trading Day immediately preceding the redemption date unless we fail to pay the redemption price (in which case a Holder of New Second Lien Convertible Notes may convert such New Second Lien Convertible Notes until the redemption price has been paid or duly provided for).

Upon conversion, a Holder will not receive any separate cash payment for accrued and unpaid interest, if any, except as described below. We will not issue fractional shares of our common stock upon conversion of New Second Lien Convertible Notes. Instead, we will pay cash in lieu of delivering any fractional share as described under “—Settlement upon Conversion.” Our payment and delivery, as the case may be, to a Holder of the cash, shares of our common stock or a combination thereof, as the case may be, into which a New Second Lien Convertible Note is convertible will be deemed to satisfy in full our obligation to pay:

 

   

the principal amount of the New Second Lien Convertible Note; and

 

   

accrued and unpaid interest, if any, to, but not including, the relevant conversion date.

As a result, accrued and unpaid interest, if any, to, but not including, the relevant conversion date will be deemed to be paid in full rather than cancelled, extinguished or forfeited. Upon a conversion of New Second Lien Convertible Notes into a combination of cash and shares of our common stock, accrued and unpaid interest will be deemed to be paid first out of the cash paid upon such conversion.

Notwithstanding the immediately preceding paragraph, if New Second Lien Convertible Notes are converted after 5:00 p.m., New York City time, on a regular record date for the payment of interest and prior to 9:00 a.m., New York City time on the corresponding Interest Payment Date, Holders of such New Second Lien Convertible Notes at 5:00 p.m., New York City time, on such regular record date will receive the full amount of interest payable on such New Second Lien Convertible Notes on the corresponding Interest Payment Date notwithstanding the conversion. New Second Lien Convertible Notes surrendered for conversion during the period from 5:00 p.m., New York City time, on any regular record date to 9:00 a.m., New York City time, on the immediately following Interest Payment Date must be accompanied by funds equal to the amount of interest payable on the New Second Lien Convertible Notes so converted; provided that no such payment need be made:

 

   

for conversions following the regular record date immediately preceding the maturity date;

 

   

if we have specified a redemption date that is after a regular record date and on or prior to the second (2nd) business day immediately following the corresponding Interest Payment Date;

 

   

if we have specified a Fundamental Change repurchase date that is after a regular record date and on or prior to the business day immediately following the corresponding Interest Payment Date; or

 

   

to the extent of any overdue interest, if any overdue interest exists at the time of conversion with respect to such New Second Lien Convertible Note.

 

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Therefore, for the avoidance of doubt, all record Holders of New Second Lien Convertible Notes on the regular record date immediately preceding the maturity date or any redemption date or any Fundamental Change repurchase date described in the bullets in the preceding paragraph will receive the full interest payment due on the maturity date or other applicable Interest Payment Date regardless of whether their New Second Lien Convertible Notes have been converted following such regular record date.

Holders may surrender their New Second Lien Convertible Notes for conversion only under the following circumstances:

Conversion upon Satisfaction of Sale Price Condition

Prior to the Close of Business on the business day immediately preceding May 30, 2027, a Holder may surrender all or any portion of its New Second Lien Convertible Notes for conversion at any time during any calendar quarter commencing after the calendar quarter ending on December 31, 2022 (and only during such calendar quarter), if the last reported sale price of our common stock for at least twenty (20) trading days (whether or not consecutive) during the period of thirty (30) consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter has been at least 130% of the conversion price for the New Second Lien Convertible Notes on each applicable trading day.

The “last reported sale price” of our common stock (or other security for which a closing sale price must be determined) on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one (1) in either case, the average of the average bid and the average ask prices) on that date as reported in composite transactions for the principal U.S. national or regional securities exchange on which our common stock (or such other security) is traded. If our common stock (or such other security) is not listed for trading on a U.S. national or regional securities exchange on the relevant date, the “last reported sale price” will be the last quoted bid price for our common stock (or such other security) in the over-the-counter market on the relevant date as reported by OTC Markets Group Inc. or a similar organization. If our common stock (or such other security) is not so quoted, the “last reported sale price” will be the average of the mid-point of the last bid and ask prices for our common stock (or such other security) on the relevant date from each of at least three (3) nationally recognized independent investment banking firms selected by us for this purpose. The “last reported sale price” will be determined without regard to after hours trading or any other trading outside of regular trading session hours. Neither the Second Lien Trustees nor the conversion agent will have any duty to monitor such sale price.

Except for purposes of determining amounts due upon conversion, “trading day” means a day on which (i) trading in our common stock (or other security for which a closing sale price must be determined) generally occurs on the Nasdaq Global Select Market or, if our common stock (or such other security) is not then listed on the Nasdaq Global Select Market, on the principal other U.S. national or regional securities exchange on which our common stock (or such other security) is then listed or, if our common stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which our common stock (or such other security) is then traded, (ii) there is no “market disruption event” and (iii) a last reported sale price for our common stock (or closing sale price for such other security) is available on such securities exchange or market. If our common stock (or such other security) is not so listed or traded, “trading day” means a “business day.”

For purposes of determining amounts due upon conversion, “trading day” means a day on which (i) trading in our common stock (or other security for which a closing sale price must be determined) generally occurs on the

 

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Nasdaq Global Select Market or, if our common stock (or such other security) is not then listed on the Nasdaq Global Select Market, on the principal other U.S. national or regional securities exchange on which our common stock (or such other security) is then listed or, if our common stock (or such other security) is not then listed on a U.S. national or regional securities exchange, on the principal other market on which our common stock (or such other security) is then traded and (ii) there is no “market disruption event”. If our common stock (or such other security) is not so listed or traded, “trading day” means a “business day.”

Except for purposes of determining amounts due upon conversion, “market disruption event” means (i) a failure by the primary U.S. national or regional securities exchange or market on which our common stock is listed or admitted for trading to open for trading during its regular trading session or (ii) the occurrence or existence during the one (1) half-hour period ending on the scheduled close of trading on any trading day of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant stock exchange or otherwise) in our common stock or in any options contracts or futures contracts relating to our common stock.

For purposes of determining amounts due upon conversion, “market disruption event” means (i) a failure by the primary U.S. national or regional securities exchange or market on which our common stock is listed or admitted for trading to open for trading during its regular trading session or (ii) the occurrence or existence for more than one (1) half-hour period in the aggregate during regular trading hours on any trading day of any material suspension or limitation imposed on trading (by reason of movements in price exceeding limits permitted by the relevant stock exchange or otherwise) in our common stock or in any options contracts or futures contracts relating to our common stock.

Conversion upon Satisfaction of Trading Price Condition

Prior to the Close of Business on the business day immediately preceding May 30, 2027, a Holder of New Second Lien Convertible Notes may surrender all or any portion of its New Second Lien Convertible Notes for conversion at any time during the five (5) consecutive business day period immediately following any five (5) consecutive trading day period (the “measurement period”) in which the “trading price” per $1,000 principal amount of New Second Lien Convertible Notes, as determined following a request by a Holder of New Second Lien Convertible Notes in accordance with the procedures described below, for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate for the New Second Lien Convertible Notes on each such trading day.

The “trading price” per $1,000 principal amount of New Second Lien Convertible Notes on any date of determination means the average of the secondary market bid quotations obtained by the Bid Solicitation Agent for $2,000,000 principal amount of New Second Lien Convertible Notes at approximately 3:30 p.m., New York City time, on such determination date from three (3) independent nationally recognized securities dealers we select for this purpose; provided that if three (3) such bids cannot reasonably be obtained by the Bid Solicitation Agent but two (2) such bids are obtained, then the average of the two (2) bids shall be used, and if only one (1) such bid can reasonably be obtained by the Bid Solicitation Agent, that one (1) bid shall be used. If the Bid Solicitation Agent cannot reasonably obtain at least one (1) bid for $2,000,000 principal amount of New Second Lien Convertible Notes from a nationally recognized securities dealer, then the trading price per $1,000 principal amount of New Second Lien Convertible Notes will be deemed to be less than 98% of the product of the last reported sale price of our common stock and the conversion rate.

The Bid Solicitation Agent (if other than the Company) shall have no obligation to determine the trading price per $1,000 principal amount of New Second Lien Convertible Notes unless we have requested such determination; and we will have no obligation to make such request (or, if we are acting as Bid Solicitation Agent, we shall have no obligation to determine the trading price) unless a Holder of at least $1,000,000 aggregate principal amount of New Second Lien Convertible Notes provides us with reasonable evidence that the trading price per $1,000 principal amount of New Second Lien Convertible Notes would be less than 98% of the

 

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product of the last reported sale price of our common stock and the conversion rate. At such time, we will instruct the Bid Solicitation Agent to determine, or if we are acting as Bid Solicitation Agent, we shall determine, the trading price per $1,000 principal amount of New Second Lien Convertible Notes beginning on the next trading day and on each successive trading day until the trading price per $1,000 principal amount of New Second Lien Convertible Notes is greater than or equal to 98% of the product of the last reported sale price of our common stock and the conversion rate. If the trading price condition has been met, we will promptly so notify the Holders, the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee). If, at any time after the trading price condition has been met, the trading price per $1,000 principal amount of New Second Lien Convertible Notes is greater than or equal to 98% of the product of the last reported sale price of our common stock and the conversion rate for such date, we will promptly so notify the Holders, the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee).

If (x) we are not acting as Bid Solicitation Agent, and we do not, when we are required to, instruct the Bid Solicitation Agent to obtain bids, or if we give such instruction to the Bid Solicitation Agent, and the Bid Solicitation Agent fails to make such determination, or (y) we are acting as Bid Solicitation Agent and we fail to make such determination, then, in either case, the trading price per $1,000 principal amount of New Second Lien Convertible Notes on any date will be deemed to be less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each trading day of such failure.

At such time as we direct the Bid Solicitation Agent (if other than the Company) in writing to solicit bid quotations, we will provide the Bid Solicitation Agent with the names and contact details of the three (3) independent nationally-recognized securities dealers we select, and we will direct those security dealers to provide bids to the Bid Solicitation Agent.

The Company will initially act as the Bid Solicitation Agent. The Company may, however, appoint another person as the Bid Solicitation Agent (including one (1) of the Company’s Affiliates) without prior notice to the Holders of the New Second Lien Convertible Notes.

Conversion upon Notice of Redemption

If we call any or all of the New Second Lien Convertible Notes for redemption prior to the Close of Business on the business day immediately preceding May 30, 2027, Holders may convert all or any portion of their New Second Lien Convertible Notes called (or deemed called) for redemption at any time prior to the Close of Business on the second (2nd) Scheduled Trading Day prior to the redemption date, even if the New Second Lien Convertible Notes are not otherwise convertible at such time. After that time, the right to convert such New Second Lien Convertible Notes on account of our delivery of the notice of redemption will expire, unless we default in the payment of the redemption price, in which case a Holder of New Second Lien Convertible Notes may convert all or any portion of its New Second Lien Convertible Notes until the redemption price has been paid or duly provided for. The Company may only call the New Second Lien Convertible Notes for redemption if the New Second Lien Convertible Note Call Date has occurred and if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any thirty (30) consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

If we elect to redeem less than all of the outstanding New Second Lien Convertible Notes as described under “—Optional Redemption,” and the Holder of any New Second Lien Convertible Note (or any owner of a beneficial interest in any global New Second Lien Convertible Note) is reasonably not able to determine, before the Close of Business on the forty fourth (44th) Scheduled Trading Day immediately before the relevant redemption date, whether such New Second Lien Convertible Note or beneficial interest, as applicable, is to be redeemed pursuant to such redemption, then such Holder or owner, as applicable, will be entitled to convert such New Second Lien Convertible Note or beneficial interest, as applicable, at any time before the Close of Business

 

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on the second (2nd) Scheduled Trading Day preceding such redemption date, unless we default in the payment of the redemption price, in which case such Holder or owner, as applicable, will be entitled to convert such New Second Lien Convertible Note or beneficial interest, as applicable, until the redemption price has been paid or duly provided for.

Conversion upon Specified Corporate Events

Certain Distributions

If, prior to the Close of Business on the business day immediately preceding May 30, 2027, we elect to:

 

   

issue to all or substantially all Holders of our common stock any rights, options or warrants (other than in connection with a stockholder rights plan) entitling them, for a period of not more than forty-five (45) calendar days after the announcement of such issuance, to subscribe for or purchase shares of our common stock at a price per share that is less than the average of the last reported sale prices of our common stock for the ten (10) consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement for such issuance; or

 

   

distribute to all or substantially all Holders of our common stock our assets, securities or rights to purchase our securities, which distribution has a per share value, as reasonably determined in good faith by us, exceeding 10% of the last reported sale price of our common stock on the trading day immediately preceding the date of announcement for such distribution,

then, in either case, we must notify the Holders of the New Second Lien Convertible Notes (with a copy to the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee) at least forty-five (45) Scheduled Trading Days prior to the ex-dividend date for such issuance or distribution. Once we have given such notice, Holders may surrender all or any portion of their New Second Lien Convertible Notes for conversion at any time until the earlier of 5:00 p.m., New York City time, on the business day immediately preceding the ex-dividend date for such issuance or distribution and our announcement that such issuance or distribution will not take place, even if the New Second Lien Convertible Notes are not otherwise convertible at such time.

Certain Corporate Events

If (i) a transaction or event that constitutes a “Fundamental Change” (as defined under “—Required Repurchase upon Change of Control (in the case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the case of New Second Lien Convertible Notes)”) occurs prior to the Close of Business on the business day immediately preceding May 30, 2027, regardless of whether a Holder has the right to require us to repurchase the New Second Lien Convertible Notes as described under “—Required Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes),” or (ii) we are a party to a consolidation, merger, binding share exchange, or transfer or lease of all or substantially all of our consolidated assets prior to the Close of Business on the business day immediately preceding May 30, 2027, pursuant to which our common stock would be converted into cash, securities or other assets, then, in each case, all or any portion of a Holder’s New Second Lien Convertible Notes may be surrendered for conversion at any time from or after effective date of the transaction (or, if later, the business day after we give notice of such transaction) until thirty-five (35) trading days after the effective date of such transaction or event or, if such transaction or event also constitutes a Fundamental Change, until the related Fundamental Change repurchase date. We will notify Holders of the New Second Lien Convertible Notes, the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee) as promptly as practicable following the date we publicly announce such transaction and in no event later than the actual effective date of such transaction.

 

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Conversions on or after May 30, 2027

On or after May 30, 2027, a Holder may convert all or any portion of its New Second Lien Convertible Notes at any time prior to the Close of Business on the second (2nd) Scheduled Trading Day immediately preceding the maturity date regardless of the foregoing conditions.

Conversion Procedures

In order to convert a beneficial interest in a global New Second Lien Convertible Note, the Holder of the New Second Lien Convertible Note must comply with the Depository’s procedures for converting a beneficial interest in a global New Second Lien Convertible Note and, if required, pay funds equal to interest payable on the next Interest Payment Date to which the Holder is not entitled. As such, the beneficial owner of the New Second Lien Convertible Notes must allow for sufficient time to comply with the Depository’s procedures in order to exercise their conversion rights.

In order to convert a certificated New Second Lien Convertible Note, the Holder of the New Second Lien Convertible Note must:

 

   

complete and manually sign the conversion notice on the back of the New Second Lien Convertible Note, or a facsimile of the conversion notice;

 

   

deliver the conversion notice, which is irrevocable, and the New Second Lien Convertible Note to the conversion agent;

 

   

if required, furnish appropriate endorsements and transfer documents; and

 

   

if required, pay funds equal to interest payable on the next Interest Payment Date to which the Holder is not entitled.

We will pay any documentary, stamp or similar issue or transfer tax on the issuance of any shares of our common stock upon conversion of the New Second Lien Convertible Notes, unless the tax is due because the Holder requests such shares to be issued in a name other than the Holder’s name, in which case the Holder will pay the tax.

We refer to the date the Holder complies with the relevant procedures for conversion described above as the “conversion date.”

If a Holder has already delivered a repurchase notice as described under “—Required Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes)” with respect to a New Second Lien Convertible Note, the Holder may not surrender that New Second Lien Convertible Note for conversion until the Holder has withdrawn the repurchase notice in accordance with the relevant provisions of the Second Lien Indenture. If a Holder submits its New Second Lien Convertible Notes for required repurchase, the Holder’s right to withdraw the Fundamental Change repurchase notice and convert the New Second Lien Convertible Notes that are subject to repurchase will terminate at the Close of Business on the second (2nd) business day immediately preceding the relevant Fundamental Change repurchase date.

Settlement upon Conversion

Upon conversion, we may choose to pay or deliver, as the case may be, either cash (“cash settlement”), shares of our common stock (“physical settlement”) or a combination of cash and shares of our common stock (“combination settlement”), as described below. We refer to each of these settlement methods as a “settlement method.”

All conversions for which the relevant conversion date occurs after our issuance of a notice of redemption with respect to the New Second Lien Convertible Notes and prior to the related redemption date will be settled using

 

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the same settlement method, and all conversions for which the relevant conversion date occurs on or after May 30, 2027 will be settled using the same settlement method. Except for any conversions for which the relevant conversion date occurs after our issuance of a notice of redemption but prior to the related redemption date, and any conversions for which the relevant conversion date occurs on or after May 30, 2027, we will use the same settlement method for all conversions with the same conversion date, but we will not have any obligation to use the same settlement method with respect to conversions with different conversion dates. For example, we may choose for New Second Lien Convertible Notes converted on one (1) conversion date to settle conversions in physical settlement, and choose for New Second Lien Convertible Notes converted on another conversion date cash settlement or combination settlement.

If we elect a settlement method, we will inform Holders so converting with a copy to the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee) of the settlement method we have selected no later than the Close of Business on the Scheduled Trading Day immediately following the related conversion date (or in the case of any conversions for which the relevant conversion date occurs (i) during a redemption period as described under “—Optional Redemption”, in such notice of redemption or (ii) on or after May 30, 2027, no later than the Close of Business on the Scheduled Trading Day immediately preceding May 30, 2027). If we do not timely elect a settlement method, we will no longer have the right to elect cash settlement or combination settlement with respect to such conversion or during such period and we will be deemed to have elected physical settlement in respect of our conversion obligation, as described below. If we timely elect combination settlement, but we do not timely notify converting Holders of the specified dollar amount per $1,000 principal amount of New Second Lien Convertible Notes, such specified dollar amount will be deemed to be $1,000.

Settlement amounts will be computed as follows:

 

   

if we elect (or are deemed to have elected) physical settlement, we will deliver to the converting Holder in respect of each $1,000 principal amount of New Second Lien Convertible Notes being converted a number of shares of common stock equal to the conversion rate;

 

   

if we elect cash settlement, we will pay to the converting Holder in respect of each $1,000 principal amount of New Second Lien Convertible Notes being converted cash in an amount equal to the sum of the daily conversion values for each of the forty (40) consecutive trading days during the related observation period; and

 

   

if we elect combination settlement, we will pay or deliver, as the case may be, to the converting Holder in respect of each $1,000 principal amount of New Second Lien Convertible Notes being converted a “settlement amount” equal to the sum of the daily settlement amounts for each of the forty (40) consecutive trading days during the related observation period.

The “daily settlement amount,” for each of the forty (40) consecutive trading days during the observation period, shall consist of:

 

   

cash equal to the lesser of (i) the maximum cash amount per $1,000 principal amount of New Second Lien Convertible Notes to be received upon conversion as specified in the notice specifying our chosen settlement method (or deemed specified as set forth above) (the “specified dollar amount”), if any, divided by forty (40) (such quotient, the “daily measurement value”) and (ii) the daily conversion value; and

 

   

if the daily conversion value exceeds the daily measurement value, a number of shares equal to (i) one fortieth (1/40th) the difference between the daily conversion value and the daily measurement value, divided by (ii) the daily VWAP for such trading day.

The “daily conversion value” means, for each of the forty (40) consecutive trading days during the observation period, one fortieth (1/40th) of the product of (1) the conversion rate on such trading day and (2) the daily VWAP for such trading day.

 

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The “daily VWAP” means the per share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg page “BBBY <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the scheduled open of trading until the scheduled close of trading of the primary trading session on such trading day (or if such volume-weighted average price is unavailable, the market value of one (1) share of our common stock on such trading day determined, using a volume-weighted average method, by us). The “daily VWAP” will be determined without regard to after-hours trading or any other trading outside of the regular trading session trading hours.

The “observation period” with respect to any New Second Lien Convertible Note surrendered for conversion means:

 

   

subject to the immediately succeeding bullet, if the relevant conversion date occurs prior to May 30, 2027, the forty (40) consecutive trading day period beginning on, and including, the second (2nd) trading day immediately succeeding such conversion date;

 

   

if the relevant conversion date occurs during the period from, and including, the date of the redemption notice until the Close of Business on the second (2nd) Scheduled Trading Day immediately preceding the related redemption date (or, if we default in the payment of the redemption price such later date on which the redemption price has been paid or duly provided for) (any such period, a “redemption period”), a redemption period, the forty (40) consecutive trading days beginning on, and including, the forty-first (41st) Scheduled Trading Day immediately preceding such redemption date; and

 

   

subject to the immediately preceding bullet, if the relevant conversion date occurs on or after May 30, 2027, the forty (40) consecutive trading days beginning on, and including, the forty-first (41st) Scheduled Trading Day immediately preceding the maturity date.

Except as described under “—Recapitalizations, Reclassifications and Changes of Our Common Stock,” we will deliver the consideration due in respect of conversion on the second (2nd) business day immediately following the relevant conversion date, if we elect physical settlement (provided that, with respect to any conversion date following the regular record date immediately preceding the maturity date where physical settlement applies to the related conversion, we will settle any such conversion on the maturity date), or on the second (2nd) business day immediately following the last trading day of the relevant observation period, in the case of any other settlement method.

We will pay cash in lieu of delivering any fractional share of common stock issuable upon conversion based on the daily VWAP for the relevant conversion date (in the case of physical settlement) or based on the daily VWAP for the last trading day of the relevant observation period (in the case of combination settlement).

Each conversion will be deemed to have been effected as to any New Second Lien Convertible Notes surrendered for conversion on the conversion date; provided, however, that the person in whose name any shares of our common stock shall be issuable upon such conversion will become the Holder of record of such shares as of the Close of Business on the conversion date (in the case of physical settlement) or the last trading day of the relevant observation period (in the case of combination settlement).

Conversion Rate Adjustments

The conversion rate will be adjusted as described below, except that we will not make any adjustments to the conversion rate if Holders of the New Second Lien Convertible Notes participate (other than in the case of (x) a share split or share combination or (y) a tender or exchange offer), at the same time and upon the same terms as holders of our common stock and solely as a result of holding the New Second Lien Convertible Notes, in any of the transactions described below without having to convert their New Second Lien Convertible Notes as if they held a number of shares of common stock equal to the conversion rate, multiplied by the principal amount (expressed in thousands) of New Second Lien Convertible Notes held by such Holder.

 

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  (1)

If we exclusively issue shares of our common stock as a dividend or distribution on shares of our common stock, or if we effect a share split or share combination, the conversion rate will be adjusted based on the following formula:

 

CR1 = CR0 x   

OS1

OS0

where,

 

CR0   =   the conversion rate in effect immediately prior to the Open of Business on the ex-dividend date of such dividend or distribution, or immediately prior to the Open of Business on the effective date of such share split or share combination, as applicable;
CR1   =   the conversion rate in effect immediately after the Open of Business on such ex-dividend date or effective date;
OS0   =   the number of shares of our common stock outstanding immediately prior to the Open of Business on such ex-dividend date or effective date; and
OS1   =   the number of shares of our common stock outstanding immediately after giving effect to such dividend, distribution, share split or share combination.

Any adjustment made under this clause (1) shall become effective immediately after the Open of Business on the ex-dividend date for such dividend or distribution, or immediately after the Open of Business on the effective date for such share split or share combination, as applicable. If any dividend or distribution of the type described in this clause (1) is declared but not so paid or made, the conversion rate shall be immediately readjusted, effective as of the date our board of directors or a committee thereof determines not to pay such dividend or distribution, to the conversion rate that would then be in effect if such dividend or distribution had not been declared.

 

  (2)

If we issue to all or substantially all holders of our common stock any rights, options or warrants (other than pursuant to a stockholders rights plan) entitling them, for a period of not more than forty-five (45) calendar days after the announcement date of such issuance, to subscribe for or purchase shares of our common stock at a price per share that is less than the average of the last reported sale prices of our common stock for the ten (10) consecutive trading day period ending on, and including, the trading day immediately preceding the announcement date of such issuance, the conversion rate will be increased based on the following formula:

 

CR1 = CR0 x  

OS0 + X

OS0 + Y

where,

 

CR0   =   the conversion rate in effect immediately prior to the Open of Business on the ex-dividend date for such issuance;
CR1   =   the conversion rate in effect immediately after the Open of Business on such ex-dividend date;
OS0   =   the number of shares of our common stock outstanding immediately prior to the Open of Business on such ex-dividend date;
X   =   the total number of shares of our common stock issuable pursuant to such rights, options or warrants; and
Y   =   the number of shares of our common stock equal to the aggregate price payable to exercise such rights, options or warrants, divided by the average of the last reported sale prices of our common stock over the ten (10) consecutive trading day period ending on, and including, the trading day immediately preceding the announcement date of the issuance of such rights, options or warrants.

 

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Any increase made under this clause (2) will be made successively whenever any such rights, options or warrants are issued and shall become effective immediately after the Open of Business on the ex-dividend date for such issuance. To the extent that shares of common stock are not delivered after the expiration of such rights, options or warrants, the conversion rate shall be decreased to the conversion rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of shares of common stock actually delivered. If such rights, options or warrants are not so issued, the conversion rate shall be decreased to the conversion rate that would then be in effect if such ex-dividend date for such issuance had not occurred.

For the purpose of this clause (2) and for the purpose of the first bullet point under “—Conversion upon Specified Corporate Events—Certain Distributions,” in determining whether any rights, options or warrants entitle the holders to subscribe for or purchase shares of our common stock at a price per share that is less than such average of the last reported sale prices for the ten (10) consecutive trading day period ending on, and including, the trading day immediately preceding the date of announcement of such issuance, and in determining the aggregate offering price of such shares of common stock, there shall be taken into account any consideration received by us for such rights, options or warrants and any amount payable on exercise or conversion thereof, the value of such consideration, if other than cash, to be determined in good faith by us.

 

  (3)

If we distribute shares of our capital stock, evidences of our indebtedness, other assets or property of ours or rights, options or warrants to acquire our capital stock or other securities, to all or substantially all holders of our common stock, excluding:

 

   

dividends, distributions or issuances as to which an adjustment was effected pursuant to clause (1) or (2) above;

 

   

dividends or distributions paid exclusively in cash as to which an adjustment was effected pursuant to clause (4) below;

 

   

distributions of reference property in exchange for our common stock in a transaction described in “—Recapitalizations, Reclassifications and Changes of Our Common Stock;”

 

   

except as otherwise described below pursuant to which an adjustment was effected, rights issued pursuant to a stockholder rights plan of ours; and

 

   

spin-offs as to which the provisions set forth below in this clause (3) shall apply;

then the conversion rate will be increased based on the following formula:

 

CR1 = CR0 x  

      SP0       

SP0 – FMV

where,

 

CR0   =   the conversion rate in effect immediately prior to the Open of Business on the ex-dividend date for such distribution;
CR1   =   the conversion rate in effect immediately after the Open of Business on such ex-dividend date;
SP0   =   the average of the last reported sale prices of our common stock over the ten (10) consecutive trading day period ending on, and including, the trading day immediately preceding the ex-dividend date for such distribution; and
FMV   =   the fair market value (as determined in good faith by us) of the shares of capital stock, evidences of indebtedness, assets, property, rights, options or warrants distributed with respect to each outstanding share of our common stock on the ex-dividend date for such distribution.

 

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Any increase made under the portion of this clause (3) above will become effective immediately after the Open of Business on the ex-dividend date for such distribution. If such distribution is not so paid or made, the conversion rate shall be decreased to be the conversion rate that would then be in effect if such distribution had not been declared.

Notwithstanding the foregoing, if “FMV” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a New Second Lien Convertible Note shall receive, in respect of each $1,000 principal amount thereof, at the same time and upon the same terms as holders of our common stock, the amount and kind of our capital stock, evidences of our indebtedness, other assets or property of ours or rights, options or warrants to acquire our capital stock or other securities that such Holder would have received if such Holder owned a number of shares of common stock equal to the conversion rate in effect on the ex-dividend date for the distribution.

With respect to an adjustment pursuant to this clause (3) where there has been a payment of a dividend or other distribution on our common stock of shares of capital stock of any class or series, or similar equity interest, of or relating to a Subsidiary or other business unit, that are, or, when issued, will be, listed or admitted for trading on a U.S. national securities exchange, which we refer to as a “spin-off,” the conversion rate will be increased based on the following formula

 

CR1 = CR0
  x
  

FMV0 + MP0

      MP0      

where,

 

CR0   =   where, the conversion rate in effect immediately prior to the end of the valuation period (as defined below);
CR1   =   the conversion rate in effect immediately after the end of the valuation period;
FMV0   =   the average of the last reported sale prices of the capital stock or similar equity interest distributed to holders of our common stock applicable to one (1) share of our common stock (determined by reference to the definition of last reported sale price set forth under “—Conversion upon Satisfaction of Sale Price Condition” as if references therein to our common stock were to such capital stock or similar equity interest) over the first ten (10) consecutive trading day period after, and including, the ex-dividend date of the spin-off (the “valuation period”); and
MP0   =   the average of the last reported sale prices of our common stock over the valuation period.

The increase in the conversion rate under the preceding paragraph will occur on the last trading day of the valuation period; provided that in respect of any conversion of New Second Lien Convertible Notes during the valuation period, references in the preceding paragraph with respect to ten (10) trading days shall be deemed to be replaced with such lesser number of trading days as have elapsed between the ex-dividend date for such spin-off and the conversion date in determining the conversion rate. If the ex-dividend date of the spin-off is after the tenth (10th) trading day immediately preceding, and including, the end of any observation period in respect of a conversion of New Second Lien Convertible Notes, references in the preceding paragraph to ten (10) trading days will be deemed to be replaced, solely in respect of that conversion, with such lesser number of trading days as have elapsed from, and including, the ex-dividend date for the spin-off to, and including, the last trading day of such observation period. If any dividend or distribution that constitutes a spin-off is not so paid or made, the conversion rate shall be decreased to the conversion rate that would then be in effect if such dividend or distribution had not been declared.

 

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  (4)

If any cash dividend or distribution is made to all or substantially all holders of our common stock, the conversion rate will be adjusted based on the following formula:

 

CR1 = CR0
  x
  

   SP0   

SP0 – C

where,

 

CR0   =   the conversion rate in effect immediately prior to the Open of Business on the ex-dividend date for such dividend or distribution;
CR1   =   the conversion rate in effect immediately after the Open of Business on the ex-dividend date for such dividend or distribution;
SP0   =   the last reported sale price of our common stock on the trading day immediately preceding the ex-dividend date for such dividend or distribution; and
C   =   the amount in cash per share we distribute to all or substantially all holders of our common stock.

Any increase made under this clause (4) shall become effective immediately after the Open of Business on the ex-dividend date for such dividend or distribution. If such dividend or distribution is not so paid, the conversion rate shall be decreased, effective as of the date our board of directors or a committee thereof determines not to make or pay such dividend or distribution, to be the conversion rate that would then be in effect if such dividend or distribution had not been declared.

Notwithstanding the foregoing, if “C” (as defined above) is equal to or greater than “SP0” (as defined above), in lieu of the foregoing increase, each Holder of a New Second Lien Convertible Note shall receive, for each $1,000 principal amount of New Second Lien Convertible Notes, at the same time and upon the same terms as holders of shares of our common stock, the amount of cash that such Holder would have received if such Holder owned a number of shares of our common stock equal to the conversion rate on the ex-dividend date for such cash dividend or distribution.

 

  (5)

If we make or any of our Subsidiaries makes a payment in respect of a tender or exchange offer for our common stock, to the extent that the cash and value of any other consideration included in the payment per share of common stock exceeds the average of the last reported sale prices of our common stock over the ten (10) consecutive trading day period commencing on, and including, the trading day next succeeding the last date on which tenders or exchanges may be made pursuant to such tender or exchange offer, the conversion rate will be increased based on the following formula:

 

CR1 = CR0
  x
  

AC + (SP1 x OS1)

      OS0 x SP1      

where,

 

CR0   =   the conversion rate in effect immediately prior to the Close of Business on the tenth (10th) trading day immediately following, and including, the trading day next succeeding the date such tender or exchange offer expires;
CR1   =   the conversion rate in effect immediately after the Close of Business on the tenth (10th) trading day immediately following, and including, the trading day next succeeding the date such tender or exchange offer expires;
AC   =   the aggregate value of all cash and any other consideration (as determined in good faith by us paid or payable for shares purchased in such tender or exchange offer;

 

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OS0   =   the number of shares of our common stock outstanding immediately prior to the date such tender or exchange offer expires (prior to giving effect to the purchase of all shares accepted for purchase or exchange in such tender or exchange offer);
OS1   =   the number of shares of our common stock outstanding immediately after the date such tender or exchange offer expires (after giving effect to the purchase of all shares accepted for purchase or exchange in such tender or exchange offer); and
SP1   =   the average of the last reported sale prices of our common stock over the ten (10) consecutive trading day period commencing on, and including, the trading day next succeeding the date such tender or exchange offer expires.

The increase in the conversion rate under the preceding paragraph will occur at the Close of Business on the tenth (10th) trading day immediately following, and including, the trading day next succeeding the date such tender or exchange offer expires; provided that in respect of any conversion of New Second Lien Convertible Notes within the ten (10) trading days immediately following, and including, the trading day next succeeding the expiration date of any tender or exchange offer, references in the preceding paragraph with respect to ten (10) trading days shall be deemed replaced with such lesser number of trading days as have elapsed between the expiration date of such tender or exchange offer and the conversion date in determining the conversion rate. In addition, if the trading day next succeeding the date such tender or exchange offer expires is after the tenth (10th) trading day immediately preceding, and including, the end of any observation period in respect of a conversion of New Second Lien Convertible Notes, references in the preceding paragraph to ten (10) trading days shall be deemed to be replaced, solely in respect of that conversion, with such lesser number of trading days as have elapsed from, and including, the trading day next succeeding the date such tender or exchange offer expires to, and including, the last trading day of such observation period.

In the event that the Company or one (1) of its Subsidiaries is obligated to purchase common stock pursuant to any such tender offer or exchange offer described herein but the Company or such Subsidiary is permanently prevented by applicable law from effecting any such purchase or any such purchase is rescinded, the applicable conversion rate shall be decreased to be the conversion rate that would then be in effect if such tender or exchange offer had not been made or had not been made only in respect of the purchases that have been effected.

If the application of the foregoing formulas would result in a decrease in the conversion rate, then no adjustment will be made (other than as a result of an adjustment pursuant to clause (1) above.

Notwithstanding the foregoing, if we have elected physical settlement in respect of a conversion and a conversion rate adjustment becomes effective on any ex-dividend date as described above, and a Holder that has converted its New Second Lien Convertible Notes on or after such ex-dividend date and on or prior to the related record date would be treated as the record holder of shares of our common stock as of the related conversion date as described under “—Settlement upon Conversion” based on an adjusted conversion rate for such ex-dividend date, then, notwithstanding the foregoing conversion rate adjustment provisions, the conversion rate adjustment relating to such ex-dividend date will not be made for such converting Holder. Instead, such Holder will be treated as if such Holder were the record owner of the shares of our common stock on an unadjusted basis and participate in the related dividend, distribution or other event giving rise to such adjustment.

Except as stated herein, we will not adjust the conversion rate for the issuance of shares of our common stock or any securities convertible into or exchangeable for shares of our common stock or the right to purchase shares of our common stock or such convertible or exchangeable securities.

As used in this section, “ex-dividend date” means the first date on which the shares of our common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive the issuance, dividend or distribution in question, from us or, if applicable, from the seller of our common stock on such exchange or market (in the form of due bills or otherwise) as determined by such exchange or market, and

 

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effective date” means the first date on which the shares of our common stock trade on the applicable exchange or in the applicable market, regular way, reflecting the relevant share split or share combination, as applicable.

If:

 

   

we elect (or are deemed to elect) combination settlement and shares of common stock are deliverable to settle the daily settlement amount for a given trading day within the observation period applicable to New Second Lien Convertible Notes that are being converted;

 

   

any distribution or transaction described in clauses (1) to (5) above has not yet resulted in an adjustment to the applicable conversion rate on the trading day in question; and

 

   

the shares received in respect of such trading day are not entitled to participate in the relevant distribution or transaction (because they were not held on a related record date or otherwise);

then we will adjust the number of shares delivered in respect of the relevant trading day to reflect the relevant distribution or transaction.

As used in this section, “record date” means, with respect to any dividend, distribution or other transaction or event in which the holders of our common stock (or other applicable security) have the right to receive any cash, securities or other property or in which our common stock (or such other security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of our common stock (or such other security) entitled to receive such cash, securities or other property (whether such date is fixed by our board of directors or a duly authorized committee thereof, statute, contract or otherwise).

Subject to the applicable listing standards of the Nasdaq Global Select Market, we are permitted to increase the conversion rate for the New Second Lien Convertible Notes by any amount for a period of at least twenty (20) business days if we determine that such increase would be in our best interest. Subject to the applicable listing standards of the Nasdaq Global Select Market, we may also (but are not required to) increase the conversion rate to avoid or diminish income tax to holders of our common stock or rights to purchase shares of our common stock in connection with a dividend or distribution of shares (or rights to acquire shares) or similar event.

A Holder may be deemed to have received a distribution for U.S. federal income tax purposes as a result of an adjustment (or a failure to make an adjustment) to the conversion rate. For a discussion of the U.S. federal income tax treatment of an adjustment to the conversion rate, see “United States Federal Income Tax Considerations.”

To the extent we have a rights plan in effect upon conversion of the New Second Lien Convertible Notes into common stock, a Holder will receive, in addition to any shares of common stock received in connection with such conversion, the rights under the rights plan. However, if. prior to any conversion, the rights have separated from the shares of common stock in accordance with the provisions of the applicable rights plan, the conversion rate for the New Second Lien Convertible Notes will be adjusted at the time of separation as if we distributed to all or substantially all holders of our common stock, shares of our capital stock, evidences of indebtedness, assets, property, rights, options or warrants as described in clause (3) above, subject to readjustment in the event of the expiration, termination or redemption of such rights.

We will not take any action that would cause the conversion price applicable to the New Second Lien Convertible Notes to fall below the par value of our common stock.

Notwithstanding any of the foregoing, the conversion rate will not be adjusted:

 

   

upon the issuance of any shares of our common stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on our securities and the investment of additional optional amounts in shares of our common stock under any plan;

 

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upon the issuance of any shares of our common stock or options or rights to purchase those shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by us or any of our Subsidiaries;

 

   

upon the issuance of any shares of our common stock pursuant to any option, warrant, right or exercisable, exchangeable or convertible security not described in the preceding bullet and outstanding as of the date the New Second Lien Convertible Notes were first issued;

 

   

upon the issuance of guarantees issued in respect of our outstanding securities;

 

   

solely for a change in the par value of our common stock; or

 

   

for accrued and unpaid interest, if any.

Adjustments to the conversion rate will be calculated to the nearest one ten thousandth (1/10,000th) of a share with five one-hundred-thousandths (5/100,000ths) rounded upward.

If an adjustment to the conversion rate otherwise required by the provisions described above would result in a change of less than 1% to the conversion rate, then, notwithstanding the foregoing, we may, at our election, defer and carry forward such adjustment, except that all such deferred adjustments must be given effect immediately upon the earliest to occur of the following: (i) when all such deferred adjustments would result in an aggregate change of at least 1% to the conversion rate; (ii) on the conversion date for any New Second Lien Convertible Notes (in the case of physical settlement); (iii) on each trading day of any observation period related to any conversion of New Second Lien Convertible Notes (in the case of cash settlement or combination settlement); and (iv) on the effective date of any Fundamental Change, in each case, unless the adjustment has already been made.

Recapitalizations, Reclassifications and Changes of Our Common Stock

In the case of:

 

   

any recapitalization, reclassification or change of our common stock (other than changes resulting from a subdivision or combination or changes in par value or to no par value),

 

   

any consolidation, merger or combination involving us,

 

   

any sale, lease or other transfer to a third party of the consolidated assets of ours and our Subsidiaries substantially as an entirety, or

 

   

any statutory share exchange,

in each case, as a result of which our common stock would be converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof), then, at and after the effective time of the transaction, the right to convert each $1,000 principal amount of New Second Lien Convertible Notes will be changed into a right to convert such principal amount of New Second Lien Convertible Notes into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of shares of common stock equal to the conversion rate immediately prior to such transaction would have owned or been entitled to receive (the “reference property”) upon such transaction. However, at and after the effective time of the transaction, (i) we will continue to have the right to determine the form of consideration to be paid or delivered, as the case may be, upon conversion of New Second Lien Convertible Notes, as set forth under “—Settlement upon Conversion” and (ii)(x) any amount payable in cash upon conversion of the New Second Lien Convertible Notes as set forth under “—Settlement upon Conversion” will continue to be payable in cash, (y) any shares of our common stock that we would have been required to deliver upon conversion of the New Second Lien Convertible Notes as set forth under “—Settlement upon Conversion” will instead be deliverable in the amount and type of reference property that a holder of that number of shares of our common stock would have received in such transaction and (z) the daily

 

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VWAP will be calculated based on the value of a unit of reference property that a holder of one (1) share of our common stock would have received in such transaction. If the transaction causes our common stock to be converted into, or exchanged for, the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), the reference property into which the New Second Lien Convertible Notes will be convertible will be deemed to be the weighted average of the types and amounts of consideration actually received by the holders of our common stock. If the holders of our common stock receive only cash in such transaction, then for all conversions that occur after the effective date of such transaction (i) the consideration due upon conversion of each $1,000 principal amount of New Second Lien Convertible Notes shall be solely cash in an amount equal to the conversion rate in effect on the conversion date, multiplied by the price paid per share of common stock in such transaction and (ii) we will satisfy our conversion obligation by paying cash to converting Holders on the second (2nd) business day immediately following the conversion date. We will notify Holders, the Convertible Second Lien Trustee and the conversion agent (if other than the Convertible Second Lien Trustee) of the weighted average as soon as practicable after such determination is made.

The supplemental indenture providing that the New Second Lien Convertible Notes will be convertible into reference property will also provide for anti-dilution and other adjustments that are as nearly equivalent as possible to the adjustments described under “—Conversion Rate Adjustments” above. If the reference property in respect of any such transaction includes shares of stock, securities or other property or assets of a company other than us or the successor or purchasing corporation, as the case may be, in such transaction, such other company will also execute such supplemental indenture, and such supplemental indenture will contain such additional provisions to protect the interests of the Holders, including the right of Holders to require us to purchase their New Second Lien Convertible Notes upon a Fundamental Change as described under “—Required Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes)” below, as we reasonably consider necessary by reason of the foregoing. We will agree in the Second Lien Indenture not to become a party to any such transaction unless its terms are consistent with the foregoing.

Adjustments of Prices

Whenever any provision of the Second Lien Indenture requires us to calculate the last reported sale prices, the daily VWAPs, the daily conversion values or the daily settlement amounts over a span of multiple days (including an observation period), we will make appropriate adjustments to each to account for any adjustment to the conversion rate that becomes effective, or any event requiring an adjustment to the conversion rate where the ex-dividend date, effective date or expiration date of the event occurs, at any time during the period when such last reported sale prices, daily VWAPs, daily conversion values or daily settlement amounts are to be calculated.

We will be responsible for making all calculations called for under the New Second Lien Convertible Notes. These calculations include, but are not limited to, determinations of the stock price, the last reported sale prices of our common stock, the daily VWAPs, the daily conversion values, the daily settlement amounts, accrued interest payable on the New Second Lien Convertible Notes and the conversion rate of the New Second Lien Convertible Notes. We will make all these calculations in good faith and, absent manifest error, our calculations will be final and binding on Holders of New Second Lien Convertible Notes. We will provide a schedule of our calculations to each of the Second Lien Trustees and the conversion agent (if other than the Convertible Second Lien Trustee), and each of the Second Lien Trustees and the conversion agent (if other than the Convertible Second Lien Trustee) is entitled to rely conclusively upon the accuracy of our calculations without independent verification. We will forward our calculations to any Holder of New Second Lien Convertible Notes upon the request of that Holder.

Optional Redemption

Optional Redemption of the New Second Lien Non-Convertible Notes

Until the one (1) year anniversary of the Issue Date, the New Second Lien Non-Convertible Notes will not be redeemable.

 

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On or after the one (1) year anniversary of the Issue Date, the Company may redeem the New Second Lien Non-Convertible Notes, at its option, in whole at any time or in part from time to time, upon not less than ten (10) nor more than sixty (60) days’ notice as described under the heading “—Selection and Notice,” for cash at 40% of the principal amount of the New Second Lien Non-Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to (but not including) the applicable redemption date (subject to the rights of Holders of New Second Lien Non-Convertible Notes on the relevant record date to receive interest due on the relevant Interest Payment Date) (the “New Second Lien Non-Convertible Note Call Price”).

Optional Redemption of the New Second Lien Convertible Notes

Until the one (1) year anniversary of the Issue Date, the New Second Lien Convertible Notes will not be redeemable.

On or after the one (1) year anniversary of the Issue Date, (the “New Second Lien Convertible Note Call Date”), the Company may redeem the New Second Lien Convertible Notes, at its option, in whole at any time or in part from time to time, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least twenty (20) trading days (whether or not consecutive) during any thirty (30) consecutive trading day period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. Such redemption would require notice upon not less than forty-five (45) nor more than sixty-five (65) days’ notice as described under the heading “—Selection and Notice.”

The redemption price will be equal to 100% of the principal amount of the New Second Lien Convertible Notes to be redeemed, plus accrued and unpaid interest, if any, to but not including, the applicable redemption date, unless the redemption date falls after a regular record date but on or prior to the immediately succeeding Interest Payment Date, in which case we will pay the full amount of accrued and unpaid interest to the holder of record as of the close of Business on such regular record date, and the redemption price will be equal to 100% of the principal amount of the New Second Lien Convertible Notes to be redeemed.

If the Depository or the Convertible Second Lien Trustee selects a portion of a Holder’s New Second Lien Convertible Notes for partial redemption and that Holder converts a portion of the same New Second Lien Convertible Notes, the converted portion will be deemed to be from the portion selected for redemption.

Notwithstanding the foregoing, in connection with any tender offer, Fundamental Change Offer or Asset Sale Offer for the New Second Lien Convertible Notes, if Holders of not less than 90% in aggregate principal amount of the then outstanding New Second Lien Convertible Notes validly tender and do not validly withdraw such New Second Lien Convertible Notes in such offer, and the Company, or any third party making such offer in lieu of the Company, purchases all of the New Second Lien Convertible Notes validly tendered and not validly withdrawn by such Holders, all of the Holders of the New Second Lien Convertible Notes will be deemed to have consented to such tender or other offer, and accordingly the Company or such third party will have the right upon not less than ten (10) nor more than sixty (60) days’ prior notice, given not more than sixty (60) days following such purchase date, to redeem all New Second Lien Convertible Notes that remain outstanding following such purchase at a price equal to the price offered to each other Holder in such offer (which may be less than par) plus, to the extent not included in the offer payment, accrued and unpaid interest to, but not including, the redemption date, unless the redemption date falls after a regular record date but on or prior to the immediately succeeding Interest Payment Date, in which case we will pay the full amount of accrued and unpaid interest to the Holder of record as of the close of business on such regular record date, and the redemption price will be equal to 100% of the principal amount of the New Second Lien Convertible Notes to be redeemed.

Purchases of New Second Lien Secured Notes

The Company or its Affiliates may at any time and from time to time purchase New Second Lien Secured Notes. Any such purchases may be made through open market or privately negotiated transactions with third parties or

 

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pursuant to one (1) or more tender or exchange offers or otherwise, upon such terms and at such prices as well as with such consideration as the Company or any such affiliates may determine, subject to compliance with the limitations set forth in “—Certain Covenants —Limitations on Restricted Payments.”

Selection and Notice

In the case of any partial redemption of either series of New Second Lien Secured Notes, selection of the New Second Lien Secured Notes of the applicable series for redemption will be made by lot (on as nearly pro rata basis as practicable) unless otherwise required by law or the rules of the principal national securities exchange, if any, on which the New Second Lien Secured Notes of the applicable series are listed (but only to the extent that the applicable Second Lien Trustee has been notified in writing of such listing by the Company); provided that the selection of the New Second Lien Secured Notes of the applicable series for redemption shall not result in a Holder of the applicable series of New Second Lien Secured Notes owning less than $2,000 in principal amount of New Second Lien Secured Notes of the applicable series; provided further that if all of the New Second Lien Secured Notes of the applicable series are in global form, interests in the New Second Lien Secured Notes of the applicable series to be redeemed will be selected for redemption by the Depository in accordance with the Applicable Procedures. If any New Second Lien Secured Note is to be purchased or redeemed in part only, the notice of purchase or redemption relating to such New Second Lien Secured Note will state the portion of the principal amount thereof that has been or is to be purchased or redeemed. Subject to the terms and procedures set forth under “Book-Entry Settlement and Clearance,” a new New Second Lien Secured Note of the applicable series in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original New Second Lien Secured Note. On and after the redemption date, interest will cease to accrue on New Second Lien Secured Notes of the applicable series or portions thereof called for redemption so long as the Company has deposited with the paying agent funds sufficient to pay the applicable redemption price to the Holder of record as of the close of business on such regular record date.

In the event of any redemption in part, we will not be required to register the transfer of or exchange for other New Second Lien Convertible Notes any New Second Lien Convertible Note so selected for redemption, in whole or in part, except the unredeemed portion of any New Second Lien Convertible Note being redeemed in part.

No New Second Lien Secured Notes may be redeemed if the principal amount of the applicable series of New Second Lien Secured Notes has been accelerated, and such acceleration has not been rescinded, on or prior to the redemption date (except in the case of an acceleration resulting from a default by us in the payment of the redemption price with respect to such New Second Lien Convertible Notes).

In connection with any redemption of New Second Lien Secured Notes, any such redemption may, at the Company’s discretion, be subject to one (1) or more conditions precedent (including, if applicable, the funding of the redemption). In addition, if such redemption or notice is subject to satisfaction of one (1) or more conditions precedent, such notice will state that, in the Company’s discretion, the redemption date may be delayed until such time as any or all such conditions are satisfied (or waived by the Company in its sole discretion), or such redemption may not occur and such notice may be rescinded in the event that any or all such conditions are not satisfied (or waived by the Company in its sole discretion) by the redemption date, or by the redemption date so delayed.

For New Second Lien Non-Convertible Notes, notices of redemption will be delivered or caused to be delivered, or in the case of New Second Lien Non-Convertible Notes in global form, delivered or caused to be delivered electronically in accordance with the Applicable Procedures at least ten (10) but not more than sixty (60) days before the redemption date to each Holder of New Second Lien Non-Convertible Notes to be redeemed at its registered address or otherwise in accordance with the Applicable Procedures (with a copy to the Non-Convertible Second Lien Trustee), except that redemption notices may be delivered more than sixty

 

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(60) days prior to the redemption date if the notice is issued in connection with a defeasance of the New Second Lien Non-Convertible Notes or a satisfaction and discharge of the Second Lien Indenture with respect to the New Second Lien Non-Convertible Notes.

For New Second Lien Convertible Notes, notices of redemption will be delivered or caused to be delivered, or in the case of New Second Lien Convertible Notes in global form, delivered or caused to be delivered electronically in accordance with the Applicable Procedures at least forty-five (45) but not more than sixty-five (65) days before the redemption date to each Holder of New Second Lien Convertible Notes to be redeemed at its registered address or otherwise in accordance with the Applicable Procedures (with a copy to the Convertible Second Lien Trustee), except that redemption notices may be delivered more than sixty-five (65) days prior to the redemption date if the notice is issued in connection with a satisfaction and discharge of the Second Lien Indenture with respect to the New Second Lien Convertible Notes.

If the Company is redeeming less than all of the New Second Lien Secured Notes of a given series, the Holders of the remaining New Second Lien Secured Notes of that series will be issued new New Second Lien Secured Notes of the applicable series and such new New Second Lien Secured Notes will be equal in principal amount to the unpurchased portion of the New Second Lien Secured Notes surrendered. The unpurchased portion of either series must be equal to $2,000 or an integral multiple of $1,000 in excess thereof.

Mandatory Redemption

The Company will not be required to make any mandatory redemption or sinking fund payments with respect to the New Second Lien Secured Notes.

Required Repurchase upon Change of Control (in the Case of New Second Lien Non-Convertible Notes) or Fundamental Change (in the Case of New Second Lien Convertible Notes)

Required Repurchase of New Second Lien Non-Convertible Notes upon a Change of Control

Upon the occurrence of any of the following events (each, a “Change of Control”) after the Issue Date, each Holder will have the right to require the Company to purchase all or any portion (provided that such portion is equal to denominations of $2,000 or integral multiples of $1,000 in excess thereof) of such Holder’s New Second Lien Non-Convertible Notes at a purchase price in cash equal to 101.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to (but not including) the date of purchase (the “Change of Control Payment”) (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date).

 

  (1)

any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, but excluding any employee benefit plan and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), acquires Beneficial Ownership of Voting Stock of the Company representing more than 50% of the aggregate ordinary voting power for the election of directors of the Company (determined on a fully diluted basis but without giving effect to contingent voting rights that have not yet vested) and files a Schedule TO or any schedule, form or report under the Exchange Act disclosing that fact; or

 

  (2)

any sale, lease or other transfer in one (1) transaction or a series of transactions of all or substantially all of the consolidated assets of us and our Subsidiaries, taken as a whole, to any person other than one (1) of our Wholly Owned Subsidiaries.

The Company will not be required to take any action pursuant to the foregoing paragraph to the extent it shall have issued a notice of redemption for all New Second Lien Non-Convertible Notes. The Company will not be required to make a Change of Control Offer upon 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 in the Second Lien Indenture applicable to a Change of Control Offer made by the Company and purchases all New Second Lien Non-Convertible Notes validly tendered and not withdrawn under such Change of Control Offer.

 

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Required Repurchase of New Second Lien Convertible Notes upon a Fundamental Change

Upon the occurrence of any of the following events (each, a “Fundamental Change”) at any time prior to the maturity date, each Holder will have the right, at their option, to require us to purchase for cash all of their New Second Lien Convertible Notes, or any portion of the principal amount thereof that is equal to denominations of the minimum denomination of $2,000 or integral multiples of $1,000 in excess thereof.

The Fundamental Change repurchase price we are required to pay will be equal to 100% of the principal amount of the New Second Lien Convertible Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the Fundamental Change repurchase date (the “Fundamental Change Payment”) (unless the Fundamental Change repurchase date falls after a regular record date but on or prior to the Interest Payment Date to which such regular record date relates, in which case we will instead pay the full amount of accrued and unpaid interest to the Holder of record on such regular record date, and the Fundamental Change repurchase price will be equal to 100% of the principal amount of the New Second Lien Convertible Notes to be repurchased).

A “Fundamental Change” will be deemed to have occurred at the time after the New Second Lien Convertible Notes are originally issued if any of the following occurs:

 

  (i)

any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act, but excluding any employee benefit plan and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), acquires Beneficial Ownership of Voting Stock of the Company representing more than 50% of the aggregate ordinary voting power for the election of directors of