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As filed with the Securities and Exchange Commission on December 30, 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CHATTEM, INC.
(Exact name of registrant as specified in its charter)
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TENNESSEE 62-0156300
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
1715 WEST 38TH STREET
CHATTANOOGA, TENNESSEE 37409
(423) 821-4571
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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A. ALEXANDER TAYLOR, II, PRESIDENT HUGH F. SHARBER, ESQ.
CHATTEM, INC. MILLER & MARTIN LLP
1715 WEST 38TH STREET 1000 VOLUNTEER BUILDING
CHATTANOOGA, TENNESSEE 37409 CHATTANOOGA, TENNESSEE 37402
(423) 821-4571 (423) 756-6600
(Name, address, zip code and telephone number, including area code, of agents
for service)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
<PAGE>
CALCULATION OF REGISTRATION FEE
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PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, without par value........... 125,500 shares $46.59 $5,847,045 $1,625.48
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(1) All securities subject to this registration statement are being registered
on behalf of the selling shareholder.
(2) Estimated solely for the purpose of calculating the registration fee.
Pursuant to Rule 457(c), the maximum aggregate offering price and the
registration fee have been calculated based on $46.59, the average of the
high and low prices of the common stock as reported by The Nasdaq Stock
Market for trading on December 29, 1998.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE 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 (THE "SECURITIES ACT") OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SEC, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE +
+CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED +
+WITH THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES +
+UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE +
+COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL OR THE +
+SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE +
+OFFER, SOLICITATION OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 30, 1998
PROSPECTUS
CHATTEM, INC.
125,500 SHARES OF COMMON STOCK
This is an offering of 125,500 shares of common stock of Chattem, Inc. The
selling shareholder identified in this Prospectus (the "Selling Shareholder")
is offering all of the shares to be sold in this offering. Chattem will not
receive any of the proceeds from the offering. Chattem will pay all expenses of
this offering.
The Selling Shareholder may sell its shares of Chattem stock from time to
time in one or more transactions on The Nasdaq National Market System at
prevailing market prices or at privately negotiated prices.
Our common stock is traded on The Nasdaq National Market System under the
symbol "CHTT." On December 29, 1998, the last reported sale price of our common
stock was $46.81 per share.
This investment involves certain high risks. See "Risk Factors" beginning on
page 3.
-----------
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the commission
or any state securities commission passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
-----------
The date of this Prospectus is December , 1998
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation not contained in this Prospectus in
connection with the offer made hereby. If given or made, such information or
representation must not be relied upon as having been authorized by Chattem or
the Selling Shareholder. This Prospectus does not constitute an offer of any
securities other than the common stock to which it relates or an offer to sell
or a solicitation of an offer to buy any of the securities offered hereby in
any jurisdiction or to any person to whom it would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained in this
Prospectus is correct as of any time after the date hereof.
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TABLE OF CONTENTS
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PAGE
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<S> <C>
Information Available to You............................................... 2
Incorporation of Certain Documents by Reference............................ 3
Risk Factors............................................................... 3
The Company................................................................ 10
Recent Developments........................................................ 10
Use of Proceeds............................................................ 12
Selling Shareholder........................................................ 12
Plan of Distribution....................................................... 12
Legal Opinion.............................................................. 13
Experts.................................................................... 13
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INFORMATION AVAILABLE TO YOU
We are subject to the informational reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and therefore file
reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). You may read and copy any document we file at
the SEC's public reference facilities at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional offices
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10048. You can obtain copies of these materials from the Public Reference
Section of the SEC at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549
at prescribed rates. Our SEC filings are also available to the public from the
SEC's web site at http://www.sec.gov.
We have filed with the SEC a Registration Statement on Form S-3 (herein
together with all amendments, supplements and exhibits thereto called the
"Registration Statement") with respect to the securities covered by this
Prospectus. This Prospectus does not contain all of the information set forth
in the Registration Statement, as permitted by the rules and regulations of the
SEC. For further information with respect to Chattem and the securities offered
hereby, we refer you to the
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Registration Statement. Statements contained herein concerning the provisions
of certain documents filed with, or incorporated by reference in, the
Registration Statement as exhibits are not necessarily complete and each such
statement is qualified in its entirety by reference to the applicable document
filed with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this Prospectus, and later information filed with the
SEC will update and supersede this information. We incorporate by reference the
documents listed below and any further filings made with the SEC under Section
13(a), 13(c), 14, or 15(d) of the Exchange Act until our offering is completed.
(1) Chattem's Annual Report on Form 10-K for the year ended November 30,
1997, filed March 2, 1998;
(2) Chattem's Quarterly Reports on Form 10-Q filed April 14, 1998, July 14,
1998 and October 15, 1998;
(3) Chattem's Current Reports on Form 8-K filed February 25, 1998, March
10, 1998, April 8, 1998, May 28, 1998 (as amended by Form 8-K/A filed
May 29, 1998), November 18, 1998 and December 28, 1998; and
(4) The description of Chattem's common stock as set forth in Chattem's
Amended and Restated Charter filed as an exhibit to Chattem's Annual
Report on Form 10-K for the transition period ended November 30, 1992.
You may request a copy of these filings, at no cost, by writing or
telephoning us at: Chattem, Inc., 1715 West 38th Street, Chattanooga, Tennessee
37409, Attention: A. Alexander Taylor, II (Telephone: (423) 821-4571). You
should rely only on the information incorporated by reference or provided in
this Prospectus or any supplement. We have not authorized anyone else to
provide you with different information. This Prospectus is an offer to sell or
to buy only the securities referred to herein, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
Prospectus is current only as of the date hereof.
RISK FACTORS
You should consider carefully the following risk factors and other
information contained in this Prospectus before purchasing the shares offered
hereby:
LEVERAGE
The Company is highly leveraged. We estimate that, as of November 30, 1998,
on a pro forma basis after giving effect to the acquisition of the Thompson
Products, borrowings under the Credit Agreement, repayment of our existing bank
indebtedness, and the issuance of 125,500 shares of our common stock, our long-
term debt would have been $371 million (including $16 million in current
maturities) and our shareholders' equity would have been $28 million.
3
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Our leveraged position could have important consequences, including the
following:
. our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate
purposes or other purposes may be limited or become impaired;
. a portion of our borrowings are and will continue to be at variable
rates of interest, which could result in higher interest expenses if
interest rates increase; and
. our loan agreements contain financial and restrictive covenants and
our failure to comply with these covenants may result in an event of
default which, if not cured or waived, could have a material adverse
effect on the Company.
RESTRICTIVE COVENANTS
The Credit Agreement and our other loan documents contain covenants
restricting our ability to make additional investments, to sell assets and
merge with another entity. These documents require us to meet certain financial
ratios and tests. If we do not comply with the terms of the Credit Agreement
and other loan documents our lenders could accelerate our obligations and
require us to repay the loans immediately.
STATE LAW LIMITATIONS ON DISTRIBUTIONS
Under Tennessee corporate law, we cannot make a distribution if, as a result
of the transaction we would not be able to pay our debts as they become due in
the usual course of business, or our total assets would be less than the sum of
our total liabilities plus the amount that would be needed, if the Company were
to be dissolved at the time of the distribution, to satisfy the rights upon
dissolution of any preferred shareholders whose preferential rights are
superior to those receiving the distribution. Distributions include any direct
or indirect transfer of money or other property or incurrence of indebtedness
by a corporation to or for the benefit of its shareholders in respect of any of
its shares and may be in the form of a dividend, a purchase, redemption or
other acquisition of shares or a distribution of indebtedness. We presently
intend to retain earnings to finance future growth, pay interest on our debt
and for general corporate purposes and do not presently intend to pay cash
dividends on our stock. The Credit Agreement and our other loan documents also
restrict our payment of distributions.
COMPETITION
We compete in the OTC pharmaceutical, functional toiletry products, dietary
supplements and diet aid markets. These markets are highly competitive. The
markets are characterized by the frequent introduction of new products,
including the movement of prescription drugs to the OTC market, often
accompanied by major advertising and promotional programs. We compete primarily
on the basis of product quality, price, brand loyalty and consumer acceptance.
Our competitors include other OTC pharmaceutical companies and large consumer
products companies, many of which have considerably greater financial and
marketing resources than us. In addition, our competitors have often been
willing to use aggressive spending on trade promotions as a strategy for
building market share at the expense of their competitors, including us. The
private label or generic
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category has also become increasingly more competitive in certain of the
Company's product markets. Another factor affecting the OTC pharmaceutical,
skin care, dietary supplements and diet aid business is the consolidation of
retailers and increasingly more competitive negotiations for access to shelf
space.
GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and
advertising of our products are subject to regulation by federal agencies,
including the United States Food and Drug Administration ("FDA"), the Federal
Trade Commission ("FTC"), the Consumer Product Safety Commission, the United
States Department of Agriculture, the United States Environmental Protection
Agency and the Occupational Safety and Health Administration. These activities
are also regulated by various agencies of the states, localities and foreign
countries in which we sell our products. In particular, the FDA regulates the
safety, manufacturing, labeling and distribution of OTC pharmaceuticals,
functional toiletries and dietary supplements. The FDA regulations relating to
the manufacturing process are known as current Good Manufacturing Practices and
are different for drug and food products. In addition, the FTC has overlapping
jurisdiction with the FDA to regulate the promotion and advertising of OTC
pharmaceuticals, functional toiletries, dietary supplements and foods.
All of our OTC drug products are regulated by the FDA's monograph system for
OTC drugs. The monographs set out the active ingredients and labeling
indications that are permitted for certain
broad categories of OTC drug products, such as topical analgesics. Compliance
with the monograph provisions means that the product is generally recognized as
safe and effective and is not misbranded. Future changes in the monographs
could require us to revise our product labeling and formulations. We responded
to certain questions with respect to efficacy received from the FDA in
connection with clinical studies for pyrilamine maleate, one of the active
ingredients used in PAMPRIN and PREMSYN PMS. While we addressed all of the FDA
questions in detail, the final monograph for menstrual drug products will
determine if the FDA considers pyrilamine maleate effective for menstrual
relief products. We actively monitor the process and do not believe that either
PAMPRIN or PREMSYN PMS will be materially adversely affected by the FDA review.
We believe that any adverse finding by the FDA will affect our principal
competitor in the menstrual product category in the same way it affects us.
As a result of an order issued by the Consumer Products Safety Commission,
there are new packaging requirements for products containing lidocaine. To
comply with this order, in fiscal year 1998 we changed the product formulation
for our GOLD BOND creme products.
The Dietary Supplement Health and Education Act of 1994 ("DSHEA") was enacted
on October 25, 1994. DSHEA amends the Federal Food, Drug and Cosmetic Act by
defining dietary supplements, which include vitamins, minerals, nutritional
supplements, herbs and botanicals, as a new category of food separate from
conventional food. DSHEA provides a regulatory framework to ensure safe,
quality dietary supplements and to foster the dissemination of accurate
information about these products. Under DSHEA, the FDA is generally prohibited
from regulating dietary supplements as food additives or as drugs unless
product claims, such as claims that a product may diagnose, mitigate, cure or
prevent an illness, disease or malady, trigger drug status.
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RELIANCE ON BRANDS; INTELLECTUAL PROPERTY CONCERNS
In fiscal year 1997, substantially all of our net sales were from sales of
products bearing proprietary brand names, including GOLD BOND, FLEXALL, ICY
HOT, PAMPRIN, PREMSYN PMS, PHISODERM, SUN-IN and GARLIQUE. In addition, on a
pro forma basis, giving effect to the purchase of the BAN line and the Thompson
Products, BAN products and the Thompson Products would have represented
approximately 30% and 18%, respectively, of our fiscal 1998 net sales.
Accordingly, our future success may depend in part upon the goodwill associated
with our brand names, particularly BAN, GOLD BOND and DEXATRIM.
Our principal brand names are registered in the United States and certain
foreign countries. However, we cannot give any assurances that the steps we
take to protect our proprietary rights in our brand names will be adequate to
prevent the misappropriation of these registered brand names in the United
States or abroad. In addition, the laws of some foreign countries do not
protect proprietary rights in brand names to the same extent as do the laws of
the United States.
Through our subsidiary, Signal Investment & Management Co., we maintain and
have applied for patent, trademark and copyright protection in the United
States relating to certain of our existing and proposed products and processes.
We cannot give any assurances that we can successfully protect our intellectual
property and the loss of our intellectual property protection could have a
negative effect on our business. Additionally, we license certain intellectual
property from
third parties, and we cannot give any assurances that these third parties can
successfully maintain their intellectual property rights. The sale of certain
of our products rely on our ability to maintain and extend our licensing
agreements with third parties, and we cannot give any assurances that we will
be successful in maintaining these licensing agreements. If we lose the right
to use these licenses, our business could suffer.
RISK OF LOSS OF MATERIAL CUSTOMER
For the year ended November 30, 1997 and, on a pro forma basis, for the year
ended November 30, 1998, sales to Wal-Mart Stores, Inc. ("Wal-Mart") accounted
for approximately 18% of the Company's total sales. Consistent with industry
practice, the Company does not operate under a long-term written supply
contract with Wal-Mart or any of its other customers. The Company's business
could be adversely affected by the loss of Wal-Mart as a continuing major
customer. No other customer accounted for more than 10% of the Company's sales
in fiscal 1997 or is expected to account for more than 10% of the Company's
sales for the full fiscal year 1998.
RISKS RELATED TO PENDING AND POTENTIAL FUTURE ACQUISITIONS
We recently acquired the Thompson Products. Although management believes that
this acquisition is in the best interest of the Company, it involved a
substantial expenditure and risk on the part of the Company. We cannot give any
assurances that the acquisition of the Thompson Products and the assimilation
of that business into the Company will be successful or will yield the expected
benefits to the Company or will not adversely affect our business, financial
condition or results of operations.
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In addition, we may pursue other acquisitions from time to time, although we
do not have any present understandings, commitments or agreements to make any
acquisitions. Any of our future acquisitions could result in substantial
additional indebtedness, which could adversely affect our business, financial
condition and results of operations. Acquisitions involve numerous risks,
including difficulties in assimilating the operations, technologies, services
and products of the acquired companies and the diversion of management's
attention from other business concerns. We cannot give any assurances that we
can successfully integrate any of our future brand acquisitions into the
Company's operations. In addition, we cannot give any assurance that we will
complete any future acquisitions or that acquisitions will contribute favorably
to our operations and financial condition. If we make any acquisitions, we
cannot give any assurances that the Company's business, financial condition and
results of operations will not be adversely affected.
PUBLIC PERCEPTION
Our dietary supplements products contain vitamins, minerals, herbs and other
ingredients that we regard as safe when taken as directed and that various
scientific studies have suggested may offer health benefits. While we conduct
extensive quality control testing on our products, we generally do not conduct
or sponsor clinical studies relating to the benefits of our products. We are
highly dependent upon consumers' perception of the overall integrity of the
dietary supplements business, as well as the safety and quality of products in
that industry and similar products distributed by other companies which may not
adhere to the same quality standards we do. Our business could suffer if any of
our products or any similar products distributed by other companies prove to be
harmful to consumers or if scientific studies provide unfavorable findings
regarding the effectiveness of our products.
PRODUCT DEVELOPMENT RISKS
We evaluate opportunities to develop new products through product line
extensions and product modifications in the ordinary course of our business.
Product line extensions and product modifications involve numerous risks,
including difficulties in assimilating the developed products, the expenses
incurred in developing the product and the diversion of management's attention
from other business concerns. We cannot give any assurances that we can
successfully integrate newly developed products into our operations. In
addition, we cannot give any assurances that newly developed products will
contribute favorably to our operations and financial condition.
AVAILABILITY OF RAW MATERIALS
Certain of our dietary supplements contain ingredients that are harvested by
and obtained from third-party suppliers. Some of these ingredients are
harvested internationally. An unexpected interruption of supply, such as a
harvest failure, could negatively affect our business derived from these
products. We may not be able to raise prices quickly enough to immediately
offset the effects of any increased raw material costs.
ENVIRONMENTAL MATTERS
We continually assess compliance of our operations with applicable federal,
state and local health, safety and environmental laws and regulations,
including those pertaining to underground storage tanks and clean air rules. A
site near our manufacturing facility has been designated as a
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National Priorities List Superfund site. We could be named as a potentially
responsible party due to our historical discharge of wastewater into the creek
that flows through the site. Our manufacturing site utilizes chemicals and
other potentially hazardous materials and generates both hazardous and non-
hazardous waste. The transportation, treatment and storage and disposal of
these waste products are regulated by various governmental agencies.
PRODUCT LIABILITY AND INSURANCE
We are constantly at risk that consumers and users of our products will sue
us for product liability. We are not aware of any claims pending against us or
our products that if adversely decided would negatively affect us. While we
will continue to attempt to take what we consider to be appropriate
precautions, we cannot give any assurances that we will avoid significant
product liability exposure. We maintain product liability insurance through
Admiral Insurance Company. We believe our insurance coverage is adequate;
however, we cannot give any assurances that we will be able to retain our
existing coverage or that such coverage will be cost-justified or sufficient to
satisfy any future claims.
SEASONALITY
During recent fiscal years, our first quarter net sales and operating income
have trailed the other fiscal quarters, accounting for less than 20% of annual
sales and operating profit. The absence of major promotional campaigns during
this period is a primary factor contributing to first quarter
performance. Seasonality will be less significant due to the acquisition of BAN
and the Thompson Products and other recently acquired products.
DEPENDENCE ON SENIOR MANAGEMENT
Our future performance depends significantly upon the efforts and abilities
of certain members of senior management, in particular those of Zan Guerry,
Chairman of the Board and Chief Executive Officer, and A. Alexander Taylor, II,
President and Chief Operating Officer. The loss of the services of either
Messrs. Guerry or Taylor, neither of whom has an employment agreement with the
Company, could adversely affect the Company.
RISKS OF FOREIGN OPERATIONS
In 1997, approximately 7% of our revenues were attributable to our
international business. In 1998, on a pro forma basis, approximately 6% of our
revenues would have been attributable to our international business. We are
subject to the risks of doing business internationally, including unexpected
changes in legislative or regulatory requirements, fluctuations in the United
States dollar against foreign currencies, which could increase the price of our
products in foreign markets or increase the cost of certain raw materials we
purchase, delays resulting from difficulty in obtaining export licenses,
tariffs and other barriers and restrictions, potentially longer payment cycles,
greater difficulty in accounts receivable collection, potentially adverse tax
treatment and the burden of complying with a variety of foreign laws. In
addition, we are subject to geopolitical risks, such as political and economic
instability and changes in diplomatic and trade relationships, which could
affect customers' inventory levels and consumer purchasing. Although we have
not to date experienced any material adverse effect as a result of these
factors, we cannot give any assurances that these factors will not adversely
affect us in the future. In addition, the laws of certain foreign countries may
not protect our intellectual property rights to the same extent as the laws of
the United States.
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VOLATILITY OF STOCK PRICE
The trading price of our common stock could be subject to significant
fluctuations in response to variations in the results of our operations, our
leveraged financial position, general trends in the consumer products industry,
the relative illiquidity of our common stock and stock market conditions
generally.
YEAR 2000
Our Year 2000 strategic plan identifies initiatives necessary to minimize
failures of our electronic systems to process date-sensitive information in the
Year 2000 and thereafter. In connection with our Year 2000 strategic plan, we
will implement a fully integrated computer system to replace all hardware and
software we currently use in our financial, manufacturing, inventory and
customer service systems. We expect to complete the replacement of these
systems by mid-1999.
We have incurred and capitalized approximately $1.0 million to date in the
implementation of our Year 2000 strategic plan. We estimate the total cost
through completion of our Year 2000 plan to be in the range of $1.5 million to
$2.0 million. Plan costs have been budgeted in our capital expenditures budget.
Our projected costs are based on management's best estimates and actual results
could differ as the plan is implemented.
A critical step in our strategic plan is the coordination of Year 2000
readiness with third parties. We are communicating with our significant
suppliers and customers to determine the extent to which the Company and its
interface systems are vulnerable if the customer, supplier or third party fails
to resolve their Year 2000 issues. We will continue to work with all of our
major trading partners to understand the associated risks and plan for
contingencies.
We believe that necessary modifications and replacements of our critical
computer systems will be completed timely. If for any reason, our critical
service providers, suppliers or customers are unable to resolve their Year 2000
issues in a timely manner, our business could suffer. Specifically, the lack of
Year 2000 readiness by raw material/packaging suppliers could impact the
availability and expected cost of raw materials and, therefore, production.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus, including all documents incorporated herein by reference,
contains forward-looking statements relating to future events or the future
financial performance of the Company. These forward-looking statements are
within the meaning of that term in Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange act of 1934, as amended.
These statements include projections of revenues, income or loss, capital
expenditures, acquisitions, plans for growth and future operations, financing
needs or plans or plans relating to our acquisitions, as well as assumptions
relating to the foregoing. Forward-looking statements are inherently subject to
risks and uncertainties, some of which we cannot predict or quantify. Future
events and actual results could differ materially from those set forth in,
contemplated by, or underlying the forward-looking statements.
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THE COMPANY
Chattem, Inc. ("We," "Chattem" or the "Company") is a diversified
manufacturer and marketer of over-the-counter health and skin care products,
dietary supplements and diet aids. We manufacture and market:
. branded over-the-counter ("OTC") pharmaceuticals, such as GOLD BOND, FLEX
ALL, ICY HOT, ASPERCREME, CAPZASIN, SPORTSCREME, ARTHRITIS HOT,
BENZODENT, HERPECIN-L, PAMPRIN, PREMSYN PMS and NORWICH aspirin;
. functional toiletries, including PHISODERM, BULLFROG, ULTRASWIM, SUN-IN
and MUDD;
. dietary supplements, including GARLIQUE, MELATONEX, ECHINEX, PROPALMEX,
REJUVEX and HARMONEX;
. the BAN line of antiperspirants and deodorants; and
. DEXATRIM appetite suppressants.
Our objective is to offer high quality brand name products in niche market
segments in which our products can be among the market leaders. We strive to
achieve this objective by identifying brands with favorable demographic appeal,
being flexible in modifying products and promotions in response to changing
consumer demands and developing creative and cost-effective marketing and
advertising programs. We manufacture approximately half of our consumer
products.
We anticipate that the Company will continue to expand through a combination
of brand acquisitions and internal growth. Since 1986, we have acquired
approximately twenty brands, including the acquisition of DEXATRIM, ASPERCREME,
CAPZASIN, SPORTSCREME and ARTHRITIS HOT on December 21, 1998. We also acquired
other brands during this period including BAN, GARLIQUE, MELATONEX, ECHINEX,
PROPALMEX, REJUVEX, GOLD BOND, FLEX-ALL, ICY HOT, PHISODERM, BENZODENT,
NORWICH, BULLFROG and ULTRASWIM. Our acquisition strategy is to identify brands
that are embryonic or have unrealized potential, which can complement existing
brands, and which can be among the leaders in attractive niche market segments.
We also seek internal growth with programs designed to capitalize on the value
of our existing brands and product line extensions, such as ICY HOT Arthritis
Therapy Gel and GOLD BOND Medicated Foot Powder introduced in 1997 and GOLD
BOND Medicated Lotion introduced in 1998.
The Company's principal executive offices are located at 1715 West 38th
Street, Chattanooga, Tennessee 37409, and its telephone number is (423) 821-
4571.
RECENT DEVELOPMENTS
On December 21, 1998, we acquired from Thompson Medical Company, Inc. a line
of dietary aids and external analgesics sold under the DEXATRIM, ASPERCREME,
CAPZASIN, SPORTSCREME and ARTHRITIS HOT trademarks (the "Thompson Products").
We paid a total of $90 million in cash at closing and issued 125,500 shares of
our common stock. This Prospectus relates to the 125,500 shares of common stock
we used to purchase the Thompson Products.
10
<PAGE>
In connection with our purchase of the Thompson Products, we entered into an
amended and restated $165.0 million credit facility with NationsBank, N.A., as
agent for a syndicate of lenders (the "Credit Agreement"). We used the proceeds
of the credit facility to repay a portion of our existing bank indebtedness,
fund a portion of the cash purchase price paid at closing for the Thompson
Products and pay our fees and expenses in connection with the acquisition.
On December 21, 1998, we filed with the SEC a Shelf Registration Statement on
Form S-3 to register $250.0 million of debt and equity securities. The rights,
preferences, terms and conditions of these securities will be described in
supplements that we file to the prospectus filed with our S-3 Registration
Statement. We intend to use the proceeds from the sale of these securities to
fund internal growth and acquisitions.
We estimate that, as of November 30, 1998, on a pro forma basis after giving
effect to the acquisition of the Thompson Products, borrowings under the Credit
Agreement, repayment of our existing bank indebtedness and the issuance of
125,500 shares of our common stock, our total assets would have been $465
million including inventories of $25 million, accounts receivable of $37
million, debt issuance costs of $12 million, and patents, trademarks and other
purchased product rights of $367 million. Our long-term debt would have been
$371 million (including $16 million in current maturities) and our total
shareholders' equity would have been $28 million.
11
<PAGE>
USE OF PROCEEDS
This Prospectus relates to Chattem common stock being offered and sold for
the account of the Selling Shareholder. The Company will not receive any
proceeds from the sale of the shares offered hereby by the Selling Shareholder.
SELLING SHAREHOLDER
The following table sets forth the number of Shares owned by the Selling
Shareholder. The Selling Shareholder has not had a material relationship with
Chattem within the past three (3) years other than as a result of its ownership
of shares of Chattem.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR BEING OWNED
NAME OF SELLING SHAREHOLDER TO OFFERING OFFERED AFTER OFFERING
--------------------------- ------------- ---------- --------------
<S> <C> <C> <C>
Thompson Medical Company, Inc........... 125,500(1)(3) 125,500(1) 0(2)
</TABLE>
- --------
(1) Represents all the shares of common stock issued by Chattem in connection
with our purchase of the Thompson Products.
(2) Assumes, except as otherwise noted, that all shares covered by this
Prospectus are sold or otherwise disposed of and that no other shares are
acquired or transferred by the Selling Shareholder.
(3) Represents approximately 1.3% of the Company's common shares outstanding as
of December 21, 1998.
PLAN OF DISTRIBUTION
We are registering all 125,500 shares (the "Shares") on behalf of the Selling
Shareholder. As used in this Prospectus, the term "Selling Shareholder"
includes donees and pledgees selling shares received from the named Selling
Shareholder after the date of this Prospectus. We will pay all costs, expenses
and fees in connection with the registration of the Shares. The Selling
Shareholder will pay all brokerage commissions and similar selling expenses, if
any, resulting from the sale of the Shares. The Selling Shareholder may sell
the Shares from time to time in one or more types of transactions (which may
include block transactions) on the Nasdaq National Market, in the over-the-
counter market, in negotiated transactions, through put or call options
transactions relating to the Shares, through short sales of the Shares, or a
combination of such methods of sale, at market prices prevailing at the time of
sale or at negotiated prices. These transactions may or may not involve brokers
or dealers. The Selling Shareholder has advised us that it has not entered into
any agreements, understandings or arrangements with any underwriters or broker-
dealers regarding the sale of the Shares, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of Shares by
the Selling Shareholder.
The Selling Shareholder may complete its sale transactions by selling Shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. These broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Shareholder and/or the
purchasers of Shares for whom these broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The Selling Shareholder and any broker-dealers that act in connection with
the sale of the Shares might be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act, and any commissions received by these
broker-dealers and any profit on the resale of the Shares
12
<PAGE>
sold by them while acting as principals might be deemed to be underwriting
discounts or commissions under the Securities Act. We have agreed to indemnify
the Selling Shareholder against certain liabilities, including liabilities
arising under the Securities Act. The Selling Shareholder may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the Shares against certain liabilities, including
liabilities arising under the Securities Act.
Because the Selling Shareholder may be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act, the Selling Shareholder
will be subject to the Prospectus delivery requirements of the Securities Act.
We have informed the Selling Shareholder that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to its sales in
the market.
The Selling Shareholder also may resell all or a portion of the Shares in
open market transactions in reliance upon Rule 144 under the Securities Act, if
it meets the criteria and conforms to the requirements of Rule 144.
If we are notified by the Selling Shareholder that it enters into any
material arrangement or agreement with a broker-dealer for the sale of the
Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, we will file a
supplement to this Prospectus, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing (i) the name of the Selling Shareholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which the shares were sold, (iv) the commissions paid or discounts or
concessions allowed to any broker-dealer(s), where applicable, (v) that the
broker-dealer(s) did not conduct any investigation to verify the information
set out or incorporated by reference in this Prospectus and (vi) other facts
material to the transaction. In addition, if we are notified by the Selling
Shareholder that a donee or pledgee intends to sell more than five hundred
(500) shares, we will file a supplement to this Prospectus.
LEGAL OPINION
The validity of the Shares offered hereby has been passed upon for Chattem by
Miller & Martin LLP, Chattanooga, Tennessee.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
Chattem's Annual Report on Form 10-K for the fiscal year ended November 30,
1997 have been audited by Arthur Andersen LLP, independent public accountants
as indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
The financial statements of BAN as of December 31, 1997 and 1996, and for
each of the three years in the period ended December 31, 1997 incorporated by
reference in this Registration Statement, have been so included in reliance on
the report of PricewaterhouseCoopers LLP, independent public accountants, given
on the authority of said firm as experts in auditing and accounting.
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All amounts are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 1,625.48
Accounting fees and expenses..................................... 10,000.00
Legal fees and expenses.......................................... 15,000.00
Printing and engraving expenses.................................. 1,000.00
Miscellaneous.................................................... 2,374.52
----------
Total.......................................................... $30,000.00
</TABLE>
The Company will bear all expenses shown above.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14(1) of Chattem's Amended and Restated Charter provides that no
director of Chattem shall be liable to the corporation or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability: (i) for any breach of the director's duty of loyalty to the
corporation or its shareholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, or (iii)
for distributions in violation of Section 48-18-304 of the Tennessee Code
Annotated.
Section 14(2) of Chattem's Amended and Restated Charter further provides that
each person who was or is made a party or is threatened to be made a party to
or is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal (a
"proceeding"), by reason of the fact that he or she is or was a director,
officer or employee of the corporation or is or was serving at the request of
the Company as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans (hereinafter "indemnitee") whether the
basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
a director, officer, employee or agent, shall be indemnified and held harmless
by the Company to the fullest extent authorized by the Tennessee Business
Corporation Act, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than such law permitted the
Company to provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith and such indemnification shall continue
as to an indemnitee who has ceased to be a director, officer, or employee and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators; provided, however, that, except with respect to proceedings to
endorse a right to indemnification under Section 14(3) of the Company's Amended
and Restated Charter, the Company shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Company. This right to indemnification includes the right to
be paid by the Company the
II-1
<PAGE>
expenses incurred in defending any such proceeding in advance of its final
disposition ("advancement expenses"); provided, however, that, if the Tennessee
Business Corporation Act so requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a director, officer or employee shall be
made only upon (i) delivery of written affirmation of the indemnitee's good
faith belief that any applicable standard of conduct required by the Tennessee
Business Corporation Act has been met, and (ii) delivery of an undertaking, by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this paragraph or otherwise (an "undertaking").
Under Section 14(3) of Chattem's Amended and Restated Charter, if a claim is
not paid in full by the Company within sixty days after a written claim has
been received by the Company, except in the case of a claim for an advancement
of expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If the indemnitee is successful in
whole or in part in any such suit brought by the Company to recover an
advancement of expenses pursuant to the terms of the undertaking, the
indemnitee shall be entitled to also be paid the expense of prosecuting or
defending such a suit. In (i) any suit brought by the indemnitee to enforce a
right to indemnification hereunder (but not in a suit brought by the indemnitee
to enforce a right to an advancement of expenses) it shall be a defense that,
and (ii) any suit by the corporation to recover an advancement of expenses
pursuant to the terms of the undertaking the corporation shall be entitled to
such expenses upon a final adjudication that, the indemnitee has not met the
applicable standard of conduct set forth in the Tennessee Business Corporation
Act, as amended.
Neither the failure of the Company (including its board of directors,
independent legal counsel, or its shareholders) to have made a determination
prior to the commencement of such suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Tennessee Business Corporation Act, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its shareholders) that the indemnitee has not met
such applicable standard of conduct, shall create a presumption that the
indemnitee has failed to meet the applicable standard of conduct or be a
defense to such suit. In any suit brought by the indemnitee to enforce a right
hereunder, or by the Company to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to indemnification or advancement expenses shall be on the Company.
Section 14(2) further provides that the rights to indemnification and to the
advancement of expenses conferred therein shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, the
corporation's Amended and Restated Charter or Amended and Restated By-laws,
agreement, vote of shareholders or disinterested directors or otherwise.
Article II, Section 5 of Chattem's By-Laws provides that any person made or
threatened to be made a party to a suit or proceeding by reason of the fact
that he or his intestate was, is, or shall be a director or officer or Audit
Committee member of the Company or at the request of the Company a director or
officer or Audit Committee member of another corporation controlled by the
Company,
II-2
<PAGE>
shall be indemnified by the Company to the maximum extent and upon the
conditions provided by the laws of the State of Tennessee, including Tennessee
Code Annotated Sections 48-1-407 through 48-1-411.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.5 Amended and Restated Charter of Chattem, Inc. (1)
Amended and Restated By-Laws of Chattem, Inc. (2)
5.1 Opinion of Miller & Martin LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
Consent of Miller & Martin (included in opinion filed as Exhibit
23.3 5.1)
</TABLE>
References:
Previously filed as an exhibit to and incorporated by reference from:
(1) Form 10-K for the year ended November 30, 1992.
(2) Form 10-K for the year ended November 30, 1993.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to provisions described in Item 15
above, or otherwise, Chattem has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes (1) that for purposes of
determining any liability under the Act, the information omitted from the form
of prospectus filed as part of this registration statement in reliance upon
Rule 430(A) and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be
part of this
II-3
<PAGE>
registration statement as of the time it was declared effective; and (2) that
for the purpose of determining any liability under the Act, each post-effective
amendment that contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i) to include
any prospectus required by section 10(a)(3) of the Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement; II-4 and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in
the registration statement.
(2) That, for purposes of determining any liability under the Act, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chattanooga, State of Tennessee, on December 30,
1998.
CHATTEM, INC.
/s/ A. Alexander Taylor, II
BY: _________________________________
A. Alexander Taylor, II
PRESIDENT
POWER OF ATTORNEY AND SIGNATURES
WE, THE UNDERSIGNED OFFICERS AND DIRECTORS OF CHATTEM, INC., HEREBY SEVERALLY
CONSTITUTE AND APPOINT ZAN GUERRY AND A. ALEXANDER TAYLOR, II, AND EACH OF THEM
SINGLY, OUR TRUE AND LAWFUL ATTORNEYS WITH FULL POWER TO THEM, AND EACH OF THEM
SINGLY, TO SIGN FOR US AND IN OUR NAMES IN THE CAPACITIES INDICATED BELOW, THE
REGISTRATION STATEMENT ON FORM S-3 FILED HEREWITH AND ANY AND ALL PRE-EFFECTIVE
AND POST-EFFECTIVE AMENDMENTS TO SAID REGISTRATION STATEMENT, AND GENERALLY TO
DO ALL THINGS IN OUR NAMES AND ON OUR BEHALF IN OUR CAPACITIES AS OFFICERS AND
DIRECTORS TO ENABLE CHATTEM, INC. TO COMPLY WITH THE PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND ALL REQUIREMENTS OF THE SECURITIES AND
EXCHANGE COMMISSION, HEREBY RATIFYING AND CONFIRMING OUR SIGNATURES AS THEY MAY
BE SIGNED BY OUR SAID ATTORNEYS, OR EITHER OF THEM, TO SAID REGISTRATION
STATEMENT AND ANY AND ALL AMENDMENTS THERETO.
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Zan Guerry Chairman of the Board of December 30, 1998
_________________________________ Directors and Chief Executive
ZAN GUERRY Officer (Principal Executive
Officer)
/s/ A. Alexander Taylor II President and Chief Operating December 30, 1998
_________________________________ Officer, Director
A. ALEXANDER TAYLOR II
/s/ Stephen M. Powell Controller (Principal Accounting December 30, 1998
_________________________________ Officer)
STEPHEN M. POWELL
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Louis H. Barnett Director December 30, 1998
_________________________________
LOUIS H. BARNETT
/s/ Richard E. Cheney Director December 30, 1998
_________________________________
RICHARD E. CHENEY
/s/ Scott L. Probasco, Jr. Director December 30, 1998
_________________________________
SCOTT L. PROBASCO, JR.
/s/ Samuel E. Allen Director December 30, 1998
_________________________________
SAMUEL E. ALLEN
/s/ Robert E. Bosworth Director December 30, 1998
_________________________________
ROBERT E. BOSWORTH
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
5.1 Opinion of Miller & Martin LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of PricewaterhouseCoopers LLP
</TABLE>
<PAGE>
Miller & Martin LLP
Suite 1000 Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37402
December 30, 1998
Chattem, Inc.
1715 West 38th Street
Chattanooga, TN 37409
Re: Registration Statement on Form S-3 - 125,500 Shares of Common Stock
Gentlemen:
We have acted as counsel to Chattem, Inc., a Tennessee corporation
(the "Company"), in connection with the preparation and filing by the Company
with the Securities and Exchange Commission of the Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended. The Registration Statement relates to an aggregate of 125,500 shares
of the Company's common stock, without par value (the "Shares").
We have examined such corporate records, documents, instruments and
certificates of the Company and have received such representations from the
officers and directors of the Company and have reviewed such questions of law as
we have deemed necessary, relevant or appropriate to enable us to render the
opinion expressed herein. In such examination, we have assumed the genuineness
of all signatures and authenticity of all documents, instruments, records and
certificates submitted to us as originals.
Based upon such examination and review and upon the representations
made to us by the officers and directors of the Company, we are of the opinion
that the Shares have been duly and validly authorized and are validly issued,
fully paid and nonassessable.
The opinions expressed herein are limited to the corporate laws of the
State of Tennessee and we express no opinion as to the effect on the matters
covered by any other jurisdiction.
This firm consents to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to the firm under the caption "Legal
Matters" in the prospectus which is part of the Registration Statement.
Very truly yours,
MILLER & MARTIN LLP
/s/ Miller & Martin LLP
---------------------
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 19, 1998
(except with respect to the matter discussed in Note 15 to the consolidated
financial statements as to which the date is February 23, 1998) incorporated by
reference in Chattem, Inc.'s Form 10-K for the year ended November 30, 1997, and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Chattanooga, Tennessee
December 28, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Chattem, Inc. of our report dated March 3, 1998
relating to the financial statements of the BAN deodorant and antiperspirant
product lines of Bristol-Myers Products, a division of Bristol-Myers Squibb
Company, which appears on page 4 of Form 8-K of Chattem, Inc. dated March 24,
1998. We also consent to the reference to us under the heading "Experts" in the
Prospectus.
/s/ PricewaterhouseCoopers LLP
New York, New York
December 30, 1998
