Control Offer or (2) a notice of redemption has been given with respect to all the notes pursuant to the Indenture as described above under the caption “—Optional Redemption,” unless and until there is a default in payment of the applicable redemption price.
Notes repurchased by HRG pursuant to a Change of Control Offer will have the status of notes issued but not outstanding or will be retired and cancelled at the option of HRG. Notes purchased by a third party pursuant to the preceding paragraph will have the status of notes issued and outstanding.
If holders of not less than 90% in aggregate principal amount of the outstanding notes validly tender and do not withdraw such notes in a Change of Control Offer and HRG, or any third party making a Change of Control Offer in lieu of HRG as described above, purchases all of the notes validly tendered and not withdrawn by such holders, HRG or such third party will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following such purchase pursuant to the Change of Control Offer described above, to redeem all notes that remain outstanding following such purchase at a price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest to but excluding the date of redemption.
A Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control or another event, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.
The provisions under the Indenture relative to HRG’s obligation to make a Change of Control Offer may be waived or modified with the written consent of the holders of a majority in principal amount of the notes.
The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of “all or substantially all” of the properties or assets of HRG and its Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase “substantially all,” there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of the notes to require HRG to repurchase such notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of HRG and its Subsidiaries taken as a whole to another Person or group may be uncertain.
Under a Delaware Chancery Court interpretation of a change of control repurchase requirement with a continuing director provision, a board of directors may approve a slate of shareholder-nominated directors without endorsing them or while simultaneously recommending and endorsing its own slate instead. The foregoing interpretation would permit HRG’s Board of Directors to approve a slate of directors that included a majority of dissident directors nominated pursuant to a proxy contest, and the ultimate election of such directors would not constitute a “Change of Control” under the Indenture that would trigger the rights of a holder of notes to require a repurchase of the notes pursuant to this covenant.
Limitation on Asset Sales
Neither HRG nor any Guarantor will make any Asset Sale unless the following conditions are met:
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(1) | The Asset Sale is for fair market value, as determined in good faith by the Board of Directors. |
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(2) | At least 75% of the consideration consists of Cash Equivalents received at closing or Replacement Assets. For purposes of this clause (2): |
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(A) | the assumption by the purchaser, or cancellation, of Debt or other obligations (other than Subordinated Debt) of HRG or a Guarantor pursuant to a customary novation agreement or acknowledgment of such cancellation; provided, however, that such cancellation permanently retires such Debt (and in the case of a revolving credit facility, permanently reduces the commitment thereunder by such amount); |
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(B) | instruments, securities, obligations or other assets received from the purchaser that are promptly, but in any event within 120 days of the closing, converted by HRG to Cash Equivalents, to the extent of the Cash Equivalents actually so received; and |
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(C) | any Designated Non-cash Consideration received by HRG or any Guarantor in such Asset Sale having an aggregate fair market value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed $25.0 million at the time of the receipt of such Designated Non-cash Consideration (with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value) shall be considered Cash Equivalents received at closing. |
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(3) | Within 450 days after the receipt of any Net Cash Proceeds from an Asset Sale, the Net Cash Proceeds may be used to (a) acquire all or substantially all of the assets of an operating business, a majority of the Voting Stock of another Person that thereupon becomes a Subsidiary engaged in an operating business or to make other Investments in Persons other than Permitted Holders in the ordinary course of business (collectively, “Replacement Assets”), (b) make a capital contribution to a Subsidiary, the proceeds of which are used by such Subsidiary to purchase an operating business, to make capital |
