<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1998
REGISTRATION STATEMENT NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CHATTEM, INC.
SIGNAL INVESTMENT & MANAGEMENT CO.
(Exact Name of Registrants as Specified in Their Charter)
<TABLE>
<S> <C> <C>
TENNESSEE 62-0156300
DELAWARE 2834 62-1290284
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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1715 WEST 38TH STREET
CHATTANOOGA, TENNESSEE 37409
(TELEPHONE: 423-821-4571)
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
A. ALEXANDER TAYLOR II
PRESIDENT AND CHIEF OPERATING OFFICER
CHATTEM, INC.
1715 WEST 38TH STREET
CHATTANOOGA, TENNESSEE 37409
(TELEPHONE: 423-821-4571)
COPY TO:
HUGH F. SHARBER, ESQ.
MILLER & MARTIN LLP
SUITE 1000 VOLUNTEER BUILDING
832 GEORGIA AVENUE
CHATTANOOGA, TENNESSEE 37402
(TELEPHONE: 423-756-6600)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes 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. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE AGGREGATE PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER NOTE PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
8 7/8% Series B Senior Subordinated Notes due
2008........................................... $200,000,000 100% $200,000,000 $60,606.06
Subsidiary Guarantees of 8 7/8% Series B Senior
Subordinated Notes Due 2008(2)................. -- -- -- --
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate
registration fee is payable with respect to the subsidiary guarantees.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MAY 26, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE ITS 8 7/8% SERIES B SENIOR
SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 FOR ANY AND ALL OUTSTANDING
8 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN TIME, ON ,
1998, UNLESS EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION (THE "EXPIRATION
DATE").
Chattem, Inc., a Tennessee corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions set forth in
this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), to exchange up to $200.0 million in aggregate
principal amount of its 8 7/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") for equal principal amounts of its outstanding 8 7/8% Series A
Senior Subordinated Notes due 2008 (the "Series A Notes"). The Exchange Notes
are identical (including principal amount, interest rate, maturity and
redemption rights) to the Series A Notes for which they may be exchanged
pursuant to this offer, except that (i) the offering and sale of the Exchange
Notes will have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and (ii) holders of Exchange Notes will not be entitled
to certain rights of holders of Series A Notes under a Registration Rights
Agreement (as defined herein) of the Company. The Series A Notes have been, and
the Exchange Notes will be, issued under an Indenture dated as of March 24, 1998
(the "Indenture") by and among the Company, Signal Investment & Management Co.,
a Delaware corporation and wholly-owned subsidiary of the Company, as guarantor
(the "Guarantor"), and SouthTrust Bank, National Association, as trustee (the
"Trustee"). The Company will not receive any proceeds from this Exchange Offer;
however, pursuant to the Registration Rights Agreement, the Company will bear
certain offering expenses. See "The Exchange Offer- Series A Notes Registration
Rights." The Series A Notes together with the Exchange Notes are referred to
herein as the "Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Series A Notes. Consequently, interest on the Exchange Notes will be
payable semi-annually on April 1 and October 1 of each year, commencing on
October 1, 1998. The Exchange Notes will mature on April 1, 2008, and may be
redeemed at the option of the Company, in whole or in part, on or after April 1,
2003, at the redemption prices set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages (as defined), if any, to the applicable
redemption date. Upon a Change of Control (as defined herein), the Company will
be required to make an offer to purchase all outstanding Exchange Notes at 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date of repurchase. See
"Description of Exchange Notes--Optional Redemption" and "Repurchase at the
Option of Holders--Change of Control."
The Exchange Notes will be general unsecured obligations of the Company,
will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company, including the Secured Credit Facility
(as defined) and will rank PARI PASSU in right of payment with $58.4 million in
aggregate principal amount of 12.75% Series B Subordinated Notes due 2004 (the
"Existing Notes") of the Company and any future senior subordinated indebtedness
of the Company. The Company's payment of principal, premium, if any, interest
and Liquidated Damages, if any, on the Exchange Notes will be guaranteed (the
"Subsidiary Guarantees"), jointly and severally, on a senior subordinated basis
by each Restricted Subsidiary (as defined) of the Company that guarantees any
other indebtedness of the Company or any other guarantor of the Notes (the
"Subsidiary Guarantors"). Upon issuance of the Exchange Notes, the only
Subsidiary Guarantor will be Signal Investment & Management Co. The Subsidiary
Guarantees will be subordinated in right of payment to all existing and future
Senior Indebtedness of the Subsidiary Guarantors, including all obligations of
the Subsidiary Guarantors under the Secured Credit Facility, will rank PARI
PASSU in right of payment with any senior subordinated indebtedness of the
Subsidiary Guarantors, and will rank senior in right of payment to all existing
and future subordinated indebtedness of the Subsidiary Guarantors. At February
28, 1998, on a pro forma basis after giving effect to the Acquisition (as
defined), the aggregate principal amount of Senior Indebtedness of the Company
would have been approximately $62.4 million (all of which would have been
Indebtedness secured by substantially all of the assets of the Company and its
domestic subsidiaries pursuant to the Secured Credit Facility). The Exchange
Notes will be structurally subordinated to all indebtedness and other
liabilities and commitments (including trade payables and capital lease
obligations) of the Company's foreign subsidiaries which will not guarantee the
Exchange Notes. As of February 28, 1998, the liabilities (including trade
payables and lease obligations) of the Company's foreign subsidiaries were $4.1
million.
The Company will accept for exchange any and all Series A Notes validly
tendered by eligible holders and not withdrawn prior to 5:00 p.m. Eastern time
on , 1998, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Series A Notes may be withdrawn at any time prior
to the Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Series A Notes may be tendered only in integral multiples of
$1,000. See "The Exchange Offer."
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY INVESTORS WITH RESPECT TO THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE 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 , 1998
<PAGE>
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
provides that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of the Exchange Notes received in exchange for Series A Notes where
such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, beginning on the date of this Prospectus and ending on the close of
business no more than one year after the date of this Prospectus, it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Explanatory Note," "The Exchange Offer Terms of the Exchange
Offer" and "Plan of Distribution."
The Series A Notes are not listed on any securities exchange and are not
traded on the National Association of Securities Dealers Automated Quotation
System, Inc. ("NASDAQ"). The Series A Notes are traded through the National
Association of Securities Dealers, Inc.'s ("NASD") PORTAL trading system, and it
is expected that the Exchange Notes will be eligible for trading through the
PORTAL system. The Company does not intend to list the Exchange Notes on any
national securities exchange or to seek admission thereof to trading on NASDAQ.
NationsBanc Montgomery Securities LLC has advised the Company that it has
made a market in the Series A Notes, and that it may make a market in the Series
A Notes and in the Exchange Notes; however, it is not obligated to do so and any
market-making activity may be discontinued at any time. As a result, there is no
assurance that an active public market will develop or continue for the Exchange
Notes, or that the market, if any, that develops for the Exchange Notes will be
similar to the limited market that currently exists for the Series A Notes. To
the extent that a market for the Exchange Notes does develop, the market value
of the Exchange Notes will depend on market conditions (such as yields on
alternative investments), general economic conditions, the Company's financial
condition and certain other factors. Such conditions might cause the Notes, to
the extent that they are traded, to trade at a significant discount from face
value. See "Risk Factors--Lack of Public Market."
Except as specifically requested by a holder on the Letter of Transmittal,
the Exchange Notes will be issued in the form of Global Notes (as defined
herein). Beneficial interests in the Global Note representing the Exchange Note
will be shown on, and transfers thereof will be effected through, records
maintained by The Depository Trust Company and its participants. See
"Explanatory Note."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection with
this Exchange Offer. See "The Exchange Offer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES A NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
No person is authorized in connection with the Exchange Offer to give any
information or to make any representation not contained in this Prospectus or
the accompanying Letter of Transmittal, and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus or the accompanying Letter of
Transmittal, nor any exchange made hereunder shall under any circumstances
create any implication that the information contained herein is correct as of
any date subsequent to the date hereof.
Until , 1998, dealers effecting transactions in the Exchange
Notes, whether or not participating in the Exchange Offer, may be required to
deliver a prospectus in connection therewith. This is in addition to the
obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
1
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the rules and regulations of the Commission. For further information with
respect to the Company, the Series A Notes and the Exchange Notes, reference is
hereby made to the Registration Statement, including the exhibits and schedules
filed or incorporated as a part thereof. Statements contained herein concerning
the provisions of any document are not necessarily complete and in each instance
reference is made to the copy of the document filed as an exhibit or schedule to
the Registration Statement. Each such statement is qualified in its entirety by
reference to the copy of the applicable documents filed with the Commission. In
addition, the Company and the Guarantor are subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Registration Statement, including the exhibits and schedules thereto,
and the periodic reports and other information filed in connection therewith,
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Seven World Trade Center, Suite
1300, New York, New York 10048 and Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Such reports, proxy and information statements and other information
may be found at the Commission's site address, http:// www.sec.gov. Copies of
such material also can be obtained from the Company upon request by writing to
Chattem, Inc., 1715 West 38th Street, Chattanooga, Tennessee 37409, Attention:
President and Chief Operating Officer.
In addition, the Company has agreed that, whether or not it is required to
do so by the rules and regulations of the Commission, for so long as any of the
Series A Notes or Exchange Notes remain outstanding, it will furnish (excluding
exhibits and schedules) to the holders of the Series A Notes and Exchange Notes
and file with the Commission (unless the Commission will not accept such a
filing) as specified in the Commission's rules and regulations: (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual combined financial statements only, a report thereon by the Company's
independent certified public accountants and (ii) all reports that would be
required to be filed with the Commission on Form 8-K if the Company were
required to file such reports. In addition, for so long as any of the Series A
Notes or Exchange Notes remain outstanding, the Company has agreed to make
available to any prospective purchaser of the Series A Notes or Exchange Notes
or beneficial owner of the Series A Notes or Exchange Notes in connection with
any sale thereof the information required by Rule 144A(d)(4) under the
Securities Act.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and 21E of the Exchange Act. Such
forward-looking statements are subject to known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Company to be materially different from future results, performance or
achievements expressed or implied by such forward-looking statements. Important
factors ("Cautionary Statements") that could cause the actual results,
performance or achievements of the Company to differ materially from the
Company's expectations are disclosed in this Prospectus, including, without
limitation, those statements made in conjunction with the forward-looking
statements included under "Risk Factors" and otherwise herein. All written or
oral forward-looking statements attributable to the Company are expressly
qualified in their entirety by the Cautionary Statements.
------------------------
TRADEMARKS OF THE COMPANY INCLUDED IN THIS PROSPECTUS APPEAR IN ALL
CAPITALIZED LETTERS. ALL OTHER TRADEMARKS APPEARING IN THIS PROSPECTUS ARE THE
PROPERTY OF THEIR RESPECTIVE OWNERS.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL DATA, INCLUDING
THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS. AS USED HEREIN, REFERENCES TO "CHATTEM" OR THE "COMPANY" ARE TO
CHATTEM, INC. REFERENCES TO "FISCAL YEAR" ARE TO THE COMPANY'S FISCAL YEAR WHICH
ENDS ON NOVEMBER 30 OF EACH YEAR. ON MARCH 24, 1998, THE COMPANY ACQUIRED THE
BAN LINE OF ANTI-PERSPIRANT/DEODORANT PRODUCTS ("BAN") FROM BRISTOL-MYERS SQUIBB
COMPANY ("BMS") (THE "ACQUISITION"). BAN'S FISCAL YEAR ENDS ON DECEMBER 31 OF
EACH YEAR. AS USED HEREIN, THE PRO FORMA FINANCIAL DATA INCLUDES THE ADJUSTMENTS
DESCRIBED IN "UNAUDITED PRO FORMA FINANCIAL DATA."
THE COMPANY
Chattem is a leading manufacturer and marketer of high quality, branded
consumer products primarily in attractive niche markets throughout the United
States and Canada. On March 24, 1998, the Company acquired BAN from BMS for a
purchase price of $165.0 million plus the assumption of up to $5.0 million in
liabilities. BAN has been one of the most recognized brands in the
anti-perspirant/ deodorant ("AP/Deo") market since its introduction in 1955 and
holds a dominant position in the roll-on market segment. On a pro forma basis,
the Company would have generated revenues and EBITDA (as defined herein) for the
twelve months ended February 28, 1998 of $240.8 million and $62.1 million,
respectively.
The Company's products are among the leaders in their respective markets
allowing the Company to establish brand loyalty among consumers, extend product
life cycles and maintain attractive margins. The Company competes in three
distinct market segments: OVER-THE-COUNTER PHARMACEUTICAL PRODUCTS, including
medicated powders (GOLD BOND), topical analgesics (FLEXALL, ICY HOT, BENZODENT)
and internal analgesics (PAMPRIN, NORWICH, PREMSYN PMS); FUNCTIONAL TOILETRIES
AND COSMETICS, including facial cleanser (PHISODERM), sunblock (BULLFROG),
shampoo (ULTRASWIM) and hair lightener (SUN-IN); and DIETARY SUPPLEMENTS
marketed under the SUNSOURCE name, including garlic extracts (GARLIQUE), a sleep
aid (MELATONEX), a product providing resistance against infections (ECHINEX), a
menopausal supplement (REJUVEX) and a newly launched St. John's Wort and
Siberian ginseng product for emotional balance and physical well being
(HARMONEX).
The Company has grown rapidly by (i) aggressive product line extensions that
capitalize on consumer awareness of the existing brand names and (ii) selective
acquisitions of new brands that can benefit from the Company's established
infrastructure and brand management expertise. Since 1992, the Company has
introduced in excess of 35 product line extensions, which accounted for a
significant amount of total sales in fiscal 1997. Chattem has traditionally
acquired either (i) established brands that have been undermanaged by larger
consumer products companies and therefore have unrealized potential or (ii)
brands of entrepreneurial companies which have achieved regional success that
would benefit from national exposure. In both cases, the Company has been
successful at increasing the acquired brand's sales and product contribution by
utilizing the Company's marketing, sales, product development and manufacturing
expertise and established distribution network.
As a result of product line extensions and strategic acquisitions, excluding
the Acquisition, the Company has achieved a compound annual growth rate ("CAGR")
in sales and EBITDA of 12.4% and 31.5%, respectively, over the last four fiscal
years.
BAN OVERVIEW
BAN is one of the most highly recognized brands in the AP/Deo market, with a
40 year history of innovation and quality. In the AP/Deo market, which is
segmented by end-user and application type, BAN is positioned as a highly
effective AP/Deo in the unisex segment, where it ranks in the top three. In
addition, BAN is the dominant brand in the high margin roll-on segment. BAN's
product portfolio is
3
<PAGE>
focused on five core products: BAN Roll-On, BAN Clear Roll-On, BAN White Solid,
BAN Clear Solid and BAN Clear Soft Solid. These products compete in all major
AP/Deo market segments except aerosol.
The addition of the BAN product line to Chattem further diversifies the
Company's revenue base and enhances its market presence. The Company believes
there are significant opportunities to increase BAN's revenues and related
contribution by augmenting the brand's current level of advertising and
promotional spending. In addition, Chattem intends to refocus the product's
marketing strategy to target specific segments within BAN's broad and
established customer base. The Company also would have realized approximately
$9.0 million in cost savings on a 1997 pro forma basis based on the terms of a
manufacturing agreement entered into between the Company and BMS, pursuant to
which BMS will manufacture BAN for Chattem.
COMPETITIVE STRENGTHS
The acquisition of BAN improves the Company's market position and increases
its overall growth prospects. The Company will continue to utilize the following
competitive strengths to enhance its position in the marketplace:
COST EFFECTIVE ADVERTISING AND PROMOTIONAL SUPPORT. The Company has a
proven ability to efficiently utilize its marketing, promotional and advertising
expertise to increase the profitability of its portfolio of well-recognized
brands. The Company traditionally invests 35% to 40% of its revenues in
advertising and trade and consumer promotions. The Company believes that it has
a significant competitive advantage compared to certain of its larger
competitors due to its ability to (i) manage advertising, trade promotion and
consumer promotion expenditures on a cost effective basis and (ii) quickly adapt
its marketing strategies to changing consumer preferences.
STRONG HISTORICAL CASH FLOW. The Company's diverse product offerings,
strong brand names and leading market positions have provided a stable base of
cash flow. As a result of these factors, the Company's four year historical
average EBITDA margin has been 18.5%. On a pro forma basis, the Company's EBITDA
margin for the twelve months ended February 28, 1998, would have improved to
25.8%. The Company's products compete in diverse markets which reduces the
Company's dependency on any one product or market segment. Further, a majority
of the Company's products are targeted to consumers over the age of 45, a
segment of the population which is expected to grow at a significantly faster
rate than the overall population.
EXPERIENCED MANAGEMENT TEAM. The Company's senior management team averages
over 15 years of experience with the Company. The Company's senior management is
actively involved in the management of the Company's brands, thereby allowing
the Company to quickly make and execute decisions regarding changes in brand
strategy. Additionally, the senior management team has lead the successful
completion and integration of five acquisitions over the past four years.
EFFECTIVE BRAND MANAGEMENT. The Company believes that it is able to (i)
effectively manage and develop brands that compete in certain niche segments of
larger overall markets and (ii) identify brands with significant intrinsic value
that may have been undermarketed or underdeveloped by prior owners. The Company
believes that for many larger consumer products companies certain brands do not
generate the sales or profitability that allow for efficient and cost effective
brand management. Conversely, the Company believes that firms that are smaller
than Chattem generally do not achieve the advertising and marketing scale
necessary to compete consistently or on a national basis. As a result, the
Company has been able to utilize brand recognition within its products'
respective markets to maintain favorable relationships with retailers, achieve
consumer loyalty and extend product life cycles.
EFFICIENT OPERATIONS. The Company has built strong marketing, sales,
product development, manufacturing, distribution and staff functions to support
its strategic emphasis on growth within the consumer products industry. Because
of its operating efficiency the Company is able to support substantial
additional
4
<PAGE>
product offerings and volume with relatively low increases in non-manufacturing
employees and fixed expenses. For example, the Company has increased sales by
approximately $53.4 million over the last four years, while its selling, general
and administrative expense as a percentage of sales has declined from 21.8% to
15.6% over the same time period.
ESTABLISHED DISTRIBUTION NETWORK. Chattem has an established distribution
network comprised of thousands of drug, food and mass merchandiser retailers
which continues to be developed and serviced through its internal sales force.
The Company has a proven ability to leverage this distribution network to
increase the market penetration of product line extensions and acquired brands.
For example, BULLFROG (acquired in 1986) and FLEXALL (acquired in 1989),
regional brands at the time of acquisition, were expanded into national brands
with combined sales in excess of $20.0 million in fiscal 1997.
GROWTH STRATEGY
By capitalizing on its competitive strengths, the Company intends to (i)
expand the market share of existing products, (ii) maximize the value of
existing brands through product line extensions and (iii) acquire established
brands with unrealized potential or successful regional brands that would
benefit from national exposure.
STRATEGY FOR BAN
The Company believes that it can increase both revenue and profitability of
BAN based upon the following strategies:
REALIZE MANUFACTURING COST SAVINGS. BAN has historically been manufactured
in a facility that has operated well below its manufacturing capacity. As a
result, BAN absorbed significant fixed overhead. Chattem has entered into a
manufacturing agreement with BMS, pursuant to which BMS will manufacture BAN at
a pro forma cost savings of approximately $9.0 million over the amount reflected
for the manufacture of BAN in the BAN financial statements for 1997.
LEVERAGE CHATTEM'S EXPERIENCED SALES FORCE. BAN, with 45 SKU's, represented
a small portion of the total SKU's of the Personal Care unit of BMS's Consumer
Products group. In contrast, BAN represents Chattem's largest product line and
therefore will be a major focus of the Company's 55 person in-house sales force.
Furthermore, Chattem's executive management team is actively involved in the
management of all the Company's brands and will be directly involved in
realizing the full potential of BAN.
ENHANCE AND REFOCUS MARKETING STRATEGY. Beginning in 1994, BAN began
receiving less media spending than in previous years. Chattem believes that it
can apply its expertise in advertising and promotion to BAN and generate strong
gains in market share with limited incremental spending above the amount spent
in 1997. To achieve this, the Company plans to (i) significantly increase
advertising support to a level that is consistent with BAN's market share and
(ii) develop a consistent marketing platform that targets certain demographic
segments where the Company believes there is a current lack of focus by the
industry.
INTRODUCE NEW AND OR IMPROVED FORMS OF BAN. Management believes that sales
gains in the AP/Deo market are driven in part by new product introductions and
product line extensions. BAN is recognized for its leadership in developing new
products. In fact, three of BAN's five existing products were leaders in
creating new segments of the AP/Deo market. Management believes there are
numerous enhancements that can be made to the BAN product line to improve
existing forms and introduce innovative line extensions.
5
<PAGE>
THE ACQUISITION
On March 24, 1998, the Company acquired the BAN line of AP/Deo products from
BMS for a purchase price of $165.0 million (subject to an inventory adjustment),
plus the assumption of up to $5.0 million of liabilities. The Company acquired
the BAN trademarks, formulae, certain patents pertaining to AP/Deo products
technology, technical information, inventory, manufacturing equipment and
packaging related assets used in the manufacture of BAN but not the right to
sell BAN in Japan. Chattem has entered into a manufacturing agreement with BMS,
pursuant to which BMS will manufacture BAN at a pro forma cost savings of
approximately $9.0 million over the amount reflected for the manufacture of BAN
in the BAN financial statements for 1997.
In connection with the Acquisition, the Company (i) amended and restated the
Credit Agreements, dated as of June 26, 1997, as amended, by and among the
Company, NationsBank of Tennessee, N.A., as agent and the other lenders party
thereto (the "Secured Credit Facility"), to permit the issuance of the Series A
Notes (the "Secured Credit Facility Amendment") and (ii) obtained the requisite
consents pursuant to a consent solicitation (the "Consent Solicitation") under
the indenture governing its 12.75% Senior Subordinated Notes due 2004 (the
"Existing Notes") to permit the Company to permit its Subsidiaries which
guarantee the Existing Notes to guarantee other indebtedness of the Company,
including the Notes. Currently, the only subsidiary of the Company that
guarantees the Existing Notes is Signal Investment & Management Co. ("Signal").
As of February 28, 1998 there were $67.0 million in aggregate principal amount
of Existing Notes outstanding. The Acquisition, the Secured Credit Facility
Amendment and the Consent Solicitation are sometimes hereinafter referred to as
the "Transaction".
The purchase price for the Acquisition, together with associated transaction
fees and expenses, were funded through the net proceeds from the sale of the
Series A Notes. See "The Acquisition."
RECENT DEVELOPMENTS
On May 12, 1998, the Company sold its CORN SILK oil control makeup brand to
Del Laboratories, Inc. for $10,750,000 plus inventories and the assumption of
certain liabilities. The Company used the proceeds from the sale to reduce
Senior Indebtedness.
On April 27, 1998, the Company repurchased $8.6 million in principal amount
of its Existing Notes. As a result, there were as of May 26, 1998 $58.4 million
in aggregate principal amount of the Existing Notes Outstanding.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered........... $200.0 million in aggregate principal amount of 8 7/8%
Series B Senior Subordinated Notes due April 1, 2008.
The Exchange Offer........... $1,000 principal amount of the Exchange Notes in exchange
for each $1,000 principal amount of Series A Notes. As of
the date hereof, all of the aggregate principal amount of
Series A Notes are outstanding. The Company will issue the
Exchange Notes to eligible holders on or promptly after the
Expiration Date of the Exchange Offer.
Based on interpretations by the staff of the Commission set
forth in no-action letters issued to unrelated third
parties, the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Series A
Notes may be offered for resale, resold and otherwise
transferred by a holder thereof (other than (i) a broker-
dealer who purchases Notes directly from the Company to
resell
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an affiliate of
the Company within the meaning of Rule 405 under the
Securities Act), without compliance with the registration
and prospectus delivery provisions of the Securities Act;
provided that the holder is acquiring the Exchange Notes in
the ordinary course of its business and is not
participating, and had no arrangement or understanding with
any person to participate, in the distribution of the
Exchange Notes. (See the No-Action Letters.) Holders of
Series A Notes who tender their Series A Notes in the
Exchange Offer with the intention of participating in a
distribution of the Exchange Notes will not be able to rely
on the No-Action Letters or similar no-action letters. Each
broker-dealer that receives Exchange Notes for its own
account in exchange for Series A Notes, where such Series A
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes.
Holders of Series A Notes will not have dissenters' rights
or appraisal rights in connection with the Exchange Offer.
See "The Exchange Offer--Appraisal Rights."
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m., Eastern time,
on , 1998, unless the Exchange Offer is extended by
the Company in its sole discretion, in which case the term
"Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain customary
conditions, which may be waived, to the extent permitted by
law, by the Company. See "The Exchange Offer--Conditions."
Procedures for Tendering
Exchange Notes............. Each eligible holder of Series A Notes wishing to accept the
Exchange Offer must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof, in accordance
with the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Series A Notes and any other
required documentation to the Exchange Agent (as defined
herein) at the address set forth in the Letter of Transmit-
tal. By executing the Letter of Transmittal, each holder
will represent to the Company that, among other things, (i)
the Exchange Notes to be acquired by such holder of Series A
Notes in connection with the Exchange Offer are being
acquired by such holder in the ordinary course of its
business, (ii) such holder has no arrangement or under-
standing with any person to participate in a distribution of
the Exchange Notes, (iii) that if such holder is a
broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of
distributing Exchange Notes, such holder will comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person
and cannot rely on the
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
position of the staff of the Commission set forth in the
No-Action Letters (see "The Exchange Offer--Resale of the
Exchange Notes"), (iv) such holder understands that a
secondary resale transaction described in clause (iii) above
and any resales of Exchange Notes obtained by such holder
directly from the Company should be covered by an effective
registration statement containing the selling security
holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and (v) such
holder is not an "affiliate" as defined in Rule 405 under
the Securities Act, of the Company. If the holder is a
broker-dealer that will receive Exchange Notes for its own
account in exchange for Series A Notes that were acquired as
a result of market-making activities or other trading
activities, such holder will be required to acknowledge in
the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a
prospectus, such holder will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities
Act. See "The Exchange Offer--Procedures for Tendering."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Series A Notes are registered in
the name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender such Series A
Notes in the Exchange Offer should contact such registered
holder promptly and instruct such registered holder to
tender on such beneficial owner's behalf. If such beneficial
owner wishes to tender on such owner's own behalf, such
owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Series A Notes,
either make appropriate arrangements to register ownership
of the Series A Notes in such owner's name or obtain a
properly completed bond power from the registered holder.
The transfer of registered ownership may take considerable
time and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery
Procedures................. Holders of Series A Notes who wish to tender their Series A
Notes and whose Series A Notes are not immediately available
or who cannot deliver the Letter of Transmittal or any other
documents required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for book-entry
transfer) prior to the Expiration Date must tender their
Series A Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer - Guaranteed
Delivery Procedures."
Withdrawal Rights............ Tenders may be withdrawn at any time prior to 5:00 p.m.,
Eastern time, on the Expiration Date pursuant to the
procedures described under "The Exchange Offer -Withdrawal
of Tenders."
Acceptance of the Series A
Notes and Delivery of the
Exchange Notes............. Subject to the satisfaction or waiver of the conditions to
the Exchange Offer, the Company will accept for exchange any
and all Series A
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Notes that are properly tendered in the Exchange Offer, and
not withdrawn, prior to 5:00 p.m., Eastern time, on the
Expiration Date. The Exchange Notes issued pursuant to the
Exchange Offer will be delivered on the earliest practicable
date following the Expiration Date. See "The Exchange Offer
Terms of the Exchange Offer."
Certain Federal Income Tax
Consequences............... For a discussion of certain federal income tax
considerations relating to the exchange of the Series A
Notes for Exchange Notes, see "Certain Federal Income Tax
Considerations."
Registration Rights
Agreement.................. The Series A Notes were sold by the Company on March 24,
1998, to the Initial Purchaser pursuant to a purchase
agreement dated March 20, 1998 (the "Purchase Agreement") by
and among the Company, the Guarantor and the Initial
Purchaser, in an offering consisting in the aggregate of
$200 million of the Series A Notes. Pursuant to the Purchase
Agreement, the Company, the Guarantor and the Initial
Purchaser entered into the Registration Rights Agreement,
which grants the holders of the Series A Notes certain
exchange and registration rights. This Exchange Offer is
intended to satisfy such rights, which generally will
terminate upon the consummation of the Exchange Offer. The
holders of the Exchange Notes will not be entitled to any
exchange or registration rights with respect to the Exchange
Notes. See "The Exchange Offer--Series A Notes Registration
Rights."
Effect on Holders of the
Series A Notes............. As a result of the making of this Exchange Offer, the
Company will have fulfilled certain of its obligations under
the Registration Rights Agreement, and holders of Series A
Notes who do not tender their Series A Notes generally will
not have any further registration rights under the
Registration Rights Agreement or otherwise. Such holders
will continue to hold the untendered Series A Notes and will
be entitled to all the rights and subject to all the
limitations, including, without limitation, transfer
restrictions, applicable thereto under the Indenture, except
to the extent such rights or limitations, by their terms,
terminate or cease to have further effectiveness as a result
of the Exchange Offer. Accordingly, if any Series A Notes
are tendered and accepted in the Exchange Offer, the trading
market, if any, for the untendered Series A Notes could be
adversely affected.
Exchange Agent............... SouthTrust Bank, National Association is serving as exchange
agent (the "Exchange Agent") in connection with the Exchange
Offer.
</TABLE>
9
<PAGE>
SUMMARY OF TERMS OF EXCHANGE NOTES
The form and terms of the Exchange Notes are identical to the form and terms
of the Series A Notes which they replace except that (i) the Exchange Offer will
have been registered under the Securities Act and, therefore, the Exchange Notes
will not bear legends restricting the transfer thereof and (ii) the holders of
Exchange Notes generally will not be entitled to further registration rights
under the Registration Rights Agreement, which rights generally will have been
satisfied when the Exchange Offer is consummated. The Exchange Notes will
evidence the same indebtedness as the Series A Notes which they replace and will
be issued under, and be entitled to the benefits of, the Indenture. See
"Description of Exchange Notes."
<TABLE>
<S> <C>
Maturity Date................ April 1, 2008
Interest Payment Dates....... April 1 and October 1, commencing October 1, 1998
Optional Redemption.......... On or after April 1, 2003, the Company may redeem the Notes,
in whole or in part, at the redemption prices set forth
herein, plus accrued and unpaid interest thereon and
Liquidated Damages, if any, to the date of redemption.
Notwithstanding the foregoing, at any time on or before
April 1, 2001, the Company may redeem up to 35% of the
original aggregate principal amount of the Notes with the
net proceeds of one or more Public Offerings (as defined) of
common stock of the Company at the redemption prices set
forth herein, plus accrued and unpaid interest thereon, if
any, to the redemption date; provided, that at least $100.0
million in aggregate principal amount of Notes remain
outstanding immediately after the occurrence of such
redemption; and, provided, further, that such redemption
shall occur within 60 days of the date of the closing of
such Public Offering. See "Description of Exchange
Notes--Optional Redemption."
Mandatory Redemption......... None.
Subordination................ The Notes are general unsecured obligations of the Company
and rank subordinate in right of payment to all existing and
future Senior Indebtedness (as defined), including
indebtedness under the Secured Credit Facility, will rank
PARI PASSU in right of payment with $58.4 million in
aggregate principal amount of the Existing Notes and will
rank senior or PARI PASSU in right of payment with all other
existing and future subordinated indebtedness of the
Company. The Subsidiary Guarantees will be general unsecured
obligations of the Subsidiary Guarantors, will rank
subordinate in right of payment to all existing and future
Senior Indebtedness of the Subsidiary Guarantors, including
their guarantees under the Secured Credit Facility, PARI
PASSU with the guarantees of the Existing Notes and will
rank senior or PARI PASSU in right of payment with all other
existing and future subordinated indebtedness of the
Subsidiary Guarantors. As of February 28, 1998, on a pro
forma basis after giving effect to the issuance of the
Series A Notes and the application of the net proceeds
therefrom, the Notes would have been subordinated to $62.4
million of Senior Indebtedness. See "Risk
Factors--Subordination." The Notes are structurally
subordinated to all indebtedness and other liabilities and
commitments (including trade payables and capital lease
obligations) of the Company's foreign subsidiaries. Any
right of
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
the Company to receive assets of any of its foreign
subsidiaries upon the latter's liquidation or reorganization
(and the consequent right of the Holders of the Notes to
participate in those assets) will be effectively
subordinated to the claims of that Subsidiary's creditors,
except to the extent that the Company is itself recognized
as a creditor of such Subsidiary, in which the claims of the
Company would still be subordinate to any security in the
assets of such Subsidiary and any indebtedness of any such
Subsidiary senior to that held by the Company. As of
February 28, 1998, the liabilities (including trade
payables) of the Company's foreign subsidiaries were $4.1
million. See "Risk Factors--Foreign Operating Subsidiaries;
Structural Subordination."
Subsidiary Guarantees........ The Notes are unconditionally guaranteed by each Restricted
Subsidiary (as defined) of the Company that guarantees any
other indebtedness of the Company or any other guarantor of
the Notes (each a "Subsidiary Guarantor" and, collectively,
the "Subsidiary Guarantors"). Upon issuance of the Exchange
Notes, the only Subsidiary Guarantor will be Signal. See the
Financial Statements of Signal included herewith.
Change of Control............ Upon a Change of Control (as defined herein), the Company
will be required to make an offer to repurchase all
outstanding Notes at 101% of the principal amount thereof
plus accrued and unpaid interest thereon and Liquidated
Damages, if any, to the date of repurchase. See "Description
of Exchange Notes--Repurchase at the Option of
Holders--Change of Control."
Covenants.................... The Indenture restricts, among other things, the ability of
the Company and its subsidiaries to incur additional
indebtedness and issue preferred stock, incur liens, pay
dividends or make certain other restricted payments, apply
net proceeds from certain asset sales, enter into certain
transactions with affiliates, merge or consolidate with any
other person, sell stock of Restricted Subsidiaries, and
assign, transfer, lease, convey or otherwise dispose of
substantially all of the assets of the Company. See
"Description of Exchange Notes--Certain Covenants."
Use of Proceeds.............. The Company will not receive proceeds from the Exchange
Offer. The net proceeds from the sale of the Series A Notes
were used to finance the Acquisition, pay associated fees
and expenses, repay revolving credit indebtedness under the
Secured Credit Facility and for general corporate purposes.
See "Use of Proceeds."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Exchange Notes.
11
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited summary pro forma combined financial information of
the Company gives effect to the consummation of the Transaction and the offering
of Series A Notes as if they occurred on March 1, 1997. The information included
in this table should be read in conjunction with the audited historical
consolidated financial statements of Chattem and the audited historical
financial statements of BAN and the respective notes thereto, "Unaudited Pro
Forma Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus. The
summary pro forma combined financial information does not purport to represent
what the Company's financial position or results of operations actually would
have been if the Transaction and the offering of Series A Notes had been
completed as of the date or for the periods presented, or to project the
Company's financial position or results of operations at any future date or for
any future period.
<TABLE>
<CAPTION>
THREE THREE TWELVE
YEAR MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED
NOVEMBER FEBRUARY FEBRUARY FEBRUARY
30, 28, 28, 28,
1997 1997 1998 1998
-------- ------- ----------- ---------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales............................................................................ $239,387 $52,939 $54,365 $240,813
Gross margin(1)...................................................................... 176,354 38,316 39,907 177,945
Income from operations............................................................... 55,423 11,526 7,520 51,417
OTHER FINANCIAL DATA:
EBITDA(2)............................................................................ $65,842 $14,002 $10,220 $ 62,060
Cash interest expense(3)............................................................. 31,916 7,989 8,371 32,298
Depreciation and amortization........................................................ 10,419 2,476 2,700 10,643
Capital expenditures................................................................. 2,858 203 566 3,221
EBITDA/cash interest expense......................................................................................... 1.9x
Total long-term debt/EBITDA.......................................................................................... 5.1x
MARGIN DATA:
Gross margin......................................................................... 73.7% 72.4% 73.4% 73.9%
Advertising and promotion............................................................ 36.4 38.5 47.0 40.4
Selling, general and administrative.................................................. 12.1 12.1 12.6 12.2
EBITDA(3)............................................................................ 27.5 26.4 18.8 25.8
<CAPTION>
AT
FEBRUARY
28, 1998
---------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................................................... $ 30,694
Total assets......................................................................................................... 366,430
Long-term debt(4).................................................................................................... 319,034
Shareholders' equity................................................................................................. 4,967
</TABLE>
- ------------------------
(1) Pro forma gross profit reflects the effect of certain manufacturing cost
savings anticipated to be realized by the Company upon consummation of the
Transaction. The Company has entered into a manufacturing agreement with BMS
pursuant to which BMS will manufacture BAN at a pro forma savings of
approximately $9.0 million over the amount reflected for the manufacture of
BAN in the BAN financial statements for 1997.
(2) EBITDA represents income from operations, plus depreciation and
amortization. The Company believes that EBITDA provides useful information
regarding the Company's ability to service its debt. However, EBITDA does
not represent cash flow from operations as defined by generally accepted
12
<PAGE>
accounting principles and should not be considered as a substitute for net
income as an indicator of the Company's operating performance or cash flow
as a measure of liquidity.
(3) Represents interest expense excluding the amortization of deferred financing
costs and the amortization of the original issue discount on the Existing
Notes.
(4) Long-term debt is net of current maturities under the Secured Credit
Facility.
13
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The information in this table should be read in conjunction with "Selected
Historical Consolidated Financial Data", "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements of the Company and the notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30 THREE MONTHS ENDED
----------------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY 28, FEBRUARY 28,
1993 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- ------------- -------------
<CAPTION>
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $ 89,861 $ 94,370 $ 100,598 $ 118,903 $ 143,235 $ 27,946 $ 34,921
Cost of sales.......... 26,717 28,495 29,755 35,120 39,253 8,394 9,682
--------- --------- --------- --------- --------- ------------- -------------
Gross margin........... 63,144 65,875 70,843 83,783 103,982 19,552 25,239
Advertising and
promotion............ 36,262 33,336 37,242 45,512 56,176 11,267 15,180
Selling, general and
administrative....... 25,132(1) 19,999 19,133 21,582 22,303 4,657 5,159
--------- --------- --------- --------- --------- ------------- -------------
Income from
operations........... 1,750 12,540 14,468 16,689 25,503 3,628 4,900
Interest expense....... (3,879) (9,360) (11,076) (13,394) (15,934) (3,798) (4,180)
Investment and other
income............... 390 112 218 2,325(2) 1,679(3) 319 192
--------- --------- --------- --------- --------- ------------- -------------
Income (loss) from
continuing operations
before income
taxes................ (1,739) 3,292 3,610 5,620 11,248 149 912
Provision for (benefit
from) income taxes... (639) 1,182 1,285 1,816 3,993 13 303
--------- --------- --------- --------- --------- ------------- -------------
Income (loss) from
continuing
operations........... $ (1,100) $ 2,110 $ 2,325 $ 3,804 $ 7,255 $ 136 $ 609
--------- --------- --------- --------- --------- ------------- -------------
--------- --------- --------- --------- --------- ------------- -------------
OTHER FINANCIAL DATA:
EBITDA (4)............. $ 10,450 $ 16,038 $ 17,874 $ 20,834 $ 31,208 $ 4,926 $ 6,422
Interest expense....... 3,879 9,360 11,076 13,394 15,934 3,798 4,180
Depreciation and
amortization......... 3,173 3,498 3,406 4,145 5,705 1,298 1,522
Capital expenditures... 2,297 2,764 2,836 1,785 2,758 203 566
MARGIN DATA:
Gross margin........... 70.3% 69.8% 70.4% 70.5% 72.6% 70.0% 72.3%
Advertising and
promotion............ 40.4 35.3 37.0 38.3 39.2 40.3 43.5
Sales, general and
administrative....... 28.0 21.2 19.0 18.2 15.6 16.7 14.8
EBITDA................. 11.6 17.0 17.8 17.5 21.8 17.6 18.4
</TABLE>
<TABLE>
<CAPTION>
AS OF FEBRUARY 28, 1998
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(5)
--------- --------------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................................................... $ 19,871 $ 30,694
Total assets.......................................................................... 178,751 366,430
Long-term debt........................................................................ 136,034 319,034
Shareholders' equity.................................................................. 4,967 4,967
</TABLE>
- ------------------------
(1) Includes nonrecurring and unusual charges of $5.5 million recorded during
the fourth quarter of 1993.
(2) Reflects a gain on the sale of SOLTICE and BLIS-TO-SOL, gain on sale of
certain investments and a full year of dividend income from the Company's
investment in Elcat, Inc.
(3) Includes dividend income from the Company's investment in Elcat, Inc.
(4) EBITDA represents income from operations, plus depreciation and
amortization. The Company believes that EBITDA provides useful information
regarding the Company's ability to service its debt. However, EBITDA does
not represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
income as an indicator of the Company's operating performance or cash flow
as a measure of liquidity. EBITDA for fiscal year 1993, as shown above,
excludes the impact of nonrecurring and unusual charges of $5.5 million.
(5) Adjusted to reflect the issuance of the Series A Notes and the application
of the net proceeds therefrom as described under "Use of Proceeds" and the
completion of the Transaction.
14
<PAGE>
RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE NOTES OFFERED HEREBY. THIS PROSPECTUS,
INCLUDING INFORMATION INCORPORATED BY REFERENCE HEREIN, CONTAINS CERTAIN
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), WHICH REPRESENT THE COMPANY'S
EXPECTATIONS OR BELIEFS, INCLUDING, BUT NOT LIMITED TO, STATEMENTS CONCERNING
INDUSTRY PERFORMANCE, THE COMPANY'S OPERATIONS, PERFORMANCE, FINANCIAL
CONDITION, GROWTH AND ACQUISITION STRATEGIES, MARGINS AND GROWTH IN SALES OF THE
COMPANY'S PRODUCTS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS
PROSPECTUS THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND
ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT
FACTORS, INCLUDING THOSE DESCRIBED IN THIS "RISK FACTORS" SECTION.
LEVERAGE
The Company is, and will continue to be, highly leveraged. On February 28,
1998, after giving pro forma effect to the offering of Series A Notes and the
application of the net proceeds therefrom, the Company would have had total
indebtedness of approximately $329.4 million (of which $200.0 million would have
consisted of the Series A Notes, $67.0 million would have consisted of Existing
Notes, and $62.4 million would have consisted of Senior Indebtedness outstanding
under the Secured Credit Facility) and shareholders' equity of approximately
$5.0 million. The Company and its subsidiaries will be permitted to incur
additional indebtedness in the future. See "Capitalization" and "Selected
Combined Financial and Operating Data" and "Descriptions of Notes."
The Company's ability to make scheduled payments of principal of, or to pay
the interest or Liquidated Damages, if any, on, or to refinance, its
indebtedness (including the Notes), or to fund planned capital expenditures and
research and development expense will depend on its future performance, which,
to a certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and anticipated revenue growth, management
believes that cash flow from operations and available cash, together with
available borrowings under the Secured Credit Facility, will be adequate to meet
the Company's future liquidity needs for at least the next several years. The
Company may, however, need to refinance all or a portion of the principal of the
Notes on or prior to maturity. There can be no assurance that the Company's
business will generate sufficient cash flow from operations, that anticipated
revenue growth will be realized or that future borrowings will be available
under the Secured Credit Facility in an amount sufficient to enable the Company
to service its indebtedness, including the Notes, or to fund its other liquidity
needs. In addition, there can be no assurance that the Company will be able to
effect any such refinancing on commercially reasonable terms or at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company will be leveraged could have important
consequences to holders of the Notes, including, but not limited to: (i) making
it more difficult for the Company to satisfy its obligations with respect to the
Notes, (ii) increasing the Company's vulnerability to general adverse economic
and industry conditions, (iii) limiting the Company's ability to obtain
additional financing to fund future working capital, capital expenditures,
research and development and other general corporate requirements, (iv)
requiring the dedication of a substantial portion of the Company's cash flow
from operations to the payment of principal of, and interest on, its
indebtedness, thereby reducing the availability of such cash flow to fund
working capital, capital expenditures, research and development or other general
corporate purposes, (v) limiting the Company's flexibility in planning for, or
reacting to, changes in its business and the industry, and (vi) placing the
Company at a competitive disadvantage vis-a-vis less leveraged competitors. In
addition, the Indenture and the Secured Credit Facility contain financial and
other restrictive covenants that limit the ability of the Company to, among
other things, borrow
15
<PAGE>
additional funds. Failure by the Company to comply with such covenants could
result in an event of default which, if not cured or waived, could have a
material adverse effect on the Company. In addition, the degree to which the
Company is leveraged could prevent it from repurchasing all of the Notes
tendered to it upon the occurrence of a Change of Control. See "Description of
Notes--Repurchase at Option of Holder--Change of Control" and "Description of
Other Indebtedness--Secured Credit Facility."
SUBORDINATION
The Notes and the Subsidiary Guarantees are subordinated in right of payment
to all current and future Senior Indebtedness of the Company and the Subsidiary
Guarantors. Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, the
holders of Senior Indebtedness will be entitled to be paid in full in cash
before any payment may be made with respect to the Notes. In addition, the
subordination provisions of the Indenture provide that payments with respect to
the Notes will be blocked in the event of a payment default on Senior
Indebtedness and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on Senior Indebtedness. In the event of a
bankruptcy, liquidation or reorganization of the Company, holders of the Notes
will participate ratably with all holders of subordinated indebtedness of the
Company that is deemed to be of the same class as the Notes, and potentially
with all other general creditors of the Company, based upon the respective
amounts owed to each holder or creditor, in the remaining assets of the Company.
In any of the foregoing events, there can be no assurance that there would be
sufficient assets to pay amounts due on the Notes. As a result, holders of Notes
may receive less, ratably, than the holders of Senior Indebtedness.
As of February 28, 1998, on a pro forma adjusted basis after giving effect
to the offering of Series A Notes and the application of the net proceeds
therefrom, the aggregate amount of Senior Indebtedness of the Company and its
subsidiaries would have been approximately $62.4 million, and approximately
$30.0 million would have been available for additional borrowing under the
Secured Credit Facility. The Indenture permits the incurrence of substantial
additional indebtedness, including Senior Indebtedness, by the Company and its
subsidiaries in the future.
FOREIGN OPERATING SUBSIDIARIES; STRUCTURAL SUBORDINATION
Certain operations of the Company are conducted through its foreign
subsidiaries, which have not guaranteed the Notes. Except to the extent that the
Company itself may be a creditor with recognized claims against its foreign
subsidiaries, the claims of creditors of (and any holders of equity interests
in) the foreign subsidiaries will have priority with respect to the assets and
cash flows of the foreign subsidiaries over claims of creditors of the Company.
As of February 28, 1998, the Company's foreign subsidiaries had total
liabilities (including trade credit) of $4.1 million. See "Management's
Discussion of Financial Condition and Results of Operations--Foreign
Operations."
RESTRICTIVE DEBT COVENANTS
The Secured Credit Facility, the indenture governing the Existing Notes (the
"Existing Notes Indenture") and the Indenture contain restrictive covenants
which limit the discretion of management of the Company with respect to various
business matters. These covenants will place certain restrictions on, among
other things, the ability of the Company and its subsidiaries to incur
indebtedness, to create liens or other encumbrances, to pay dividends or make
other restricted payments, to make investments, loans and guarantees and to sell
or otherwise dispose of a substantial portion of assets to, or merge or
consolidate with, another entity. In addition, the Secured Credit Facility and
the Existing Notes indenture contain other and more restrictive covenants and
prohibit the Company from prepaying the Notes, except in certain circumstances.
The Secured Credit Facility also requires the Company to maintain specified
financial ratios and satisfy certain financial tests. The Company's ability to
meet such financial ratios and tests may be affected by events beyond its
control. There can be no assurance that the Company will meet
16
<PAGE>
such tests. A breach of these covenants could result in an event of default
under the Secured Credit Facility. If such an event of default occurs, the
lenders under the Secured Credit Facility could elect to declare all amounts
borrowed under the Secured Credit Facility, together with accrued and unpaid
interest, to be immediately due and payable and to terminate all commitments
under the Secured Credit Facility. If the Company were unable to repay all
amounts declared due and payable, the lenders could proceed against the
collateral granted to them to satisfy the indebtedness and other obligations due
and payable. If indebtedness under the Secured Credit Facility were to be
accelerated, there can be no assurance that the assets of the Company would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Company, including the Notes and the Existing Notes. See "Description of the
Notes--Certain Covenants" and "Description of Other Indebtedness."
COMPETITION
The over-the-counter ("OTC") pharmaceutical, functional toiletries and
cosmetics and dietary supplements markets in which the Company competes are
highly competitive, and the Company expects competitive pressures to continue in
the future. 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. The Company competes
primarily on the basis of product quality, price, brand loyalty and consumer
acceptance. Competitors of certain of the Company's products include OTC
pharmaceutical companies, dietary supplement manufacturers and large consumer
products companies, many of which have considerably greater financial and
marketing resources than the Company. The products offered by these companies
are often supported by much larger advertising and promotional expenditures and
are generally backed by larger sales forces. In addition, the Company's
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 the Company. The private label or generic category is
also a competitive factor in certain of the Company's product markets. Another
factor affecting the OTC pharmaceutical, functional toiletries and cosmetics and
dietary supplements 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 the Company's products are subject to regulation by one or more
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 the Company's products are
sold. In particular, the FDA regulates the safety, manufacturing, labeling and
distribution of OTC pharmaceuticals, functional toiletries and cosmetics and
dietary supplements. The regulations that are promulgated by the FDA relating to
the manufacturing process are known as current Good Manufacturing Practices
("GMPs"), 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 and cosmetics, dietary supplements
and foods.
All of the Company's OTC drug products are regulated pursuant to 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 result in the
Company having to revise product labeling and formulations. The Company has
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 the Company addressed all of
the FDA questions in detail, the
17
<PAGE>
final monograph for menstrual drug products will determine if the FDA considers
pyrilamine maleate effective for menstrual relief products. The Company has been
actively monitoring the process and does not believe that either PAMPRIN or
PREMSYN PMS will be materially adversely affected by the FDA review. The Company
believes that any adverse finding by the FDA would likewise affect the Company's
principal competitor in the menstrual product category.
As a result of an order issued by the Consumer Products Safety Commission,
there are new packaging requirements for products containing lidocaine. The
Company has until September 1998 to develop child resistant packaging for its
GOLD BOND Cream products that are sold in tubes or change the product
formulation.
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 such 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. See "Business--Government
Regulation."
RELIANCE ON BRANDS; INTELLECTUAL PROPERTY CONCERNS
In fiscal year 1997, substantially all of the Company's 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 Acquisition, BAN products would have
represented approximately 40% of the Company's fiscal 1997 net sales.
Accordingly, the Company's future success may depend in part upon the goodwill
associated with the Company's brand names, particularly BAN and GOLD BOND.
The Company's principal brand names are registered in the United States and
certain foreign countries. However, there can be no assurance that the steps
taken by the Company to protect its proprietary rights in such brand names will
be adequate to prevent the misappropriation thereof 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.
The Company, through its subsidiary, Signal, maintains and has applied for
patent, trademark and copyright protection in the United States relating to
certain of its existing and proposed products and processes. There is no
assurance that the Company can successfully protect its intellectual property
and the loss of its intellectual property protection could have a material
adverse effect. Additionally, the Company licenses certain intellectual property
from third parties, and there is no assurance that such third parties will be
successful in maintaining their intellectual property rights. The sale of
certain of the Company's products rely on the ability of the Company to maintain
and extend its licensing agreements with third parties, and there is no
assurance that the Company will be successful in maintaining these licensing
agreements. The loss of the use of such licenses could have a material adverse
effect on the Company.
RISK OF LOSS OF MATERIAL CUSTOMER
For the year ended November 30, 1997, sales to Wal-Mart Stores, Inc.
("Wal-Mart") accounted for approximately 16% of the Company's total sales. On a
pro forma basis, sales to Wal-Mart would have represented an increased
percentage of total net sales for 1997. For the three months ended February 28,
1998, sales to Wal-Mart accounted for approximately 16% 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 materially adversely affected by the loss of
18
<PAGE>
Wal-Mart as a continuing major customer. No other customer accounted for more
than 10% of the Company's sales in fiscal 1997 or in the three month period
ended February 28, 1998.
RISKS RELATED TO PENDING AND POTENTIAL FUTURE ACQUISITIONS
Although management believes that the Acquisition of BAN was in the best
interest of the Company, it involved a substantial expenditure and risk on the
part of the Company. There can be no assurance that the Acquisition of BAN and
the assimilation of that business into the Company will be successful or will
yield the expected benefits to the Company or will not materially adversely
affect the Company's business, financial condition or results of operations. BAN
net sales during the period beginning January 1, 1998 through March 23, 1998
were approximately $5.5 million lower than for the same period of the prior
year. The Company believes that this decline is due to higher than usual net
sales levels in December 1997 which led to a reduction in customer requirements
for the beginning of 1998.
In addition, the Company may pursue other acquisitions from time to time,
although the Company has no present understandings, commitments or agreements
with respect to any such acquisitions except as described above. Future
acquisitions by the Company could result in the incurrence of substantial
additional indebtedness, which could materially adversely affect the Company's
business, financial condition and results of operations. Acquisitions involve
numerous risks, including difficulties in the assimilation of the operations,
technologies, services and products of the acquired companies and the diversion
of management's attention from other business concerns. There can be no
assurance that future brand acquisitions, if any, will be successfully
integrated into the Company's operations. In addition, there can be no assurance
that the Company will complete any future acquisitions or that acquisitions will
contribute favorably to the Company's operations and financial condition. In the
event that any such acquisition were to occur, there can be no assurance that
the Company's business, financial condition and results of operations would not
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--General."
PUBLIC PERCEPTION
The Company's dietary supplements products contain vitamins, minerals, herbs
and other ingredients that the Company regards as safe when taken as directed by
the Company and that various scientific studies have suggested may offer health
benefits. While the Company conducts extensive quality control testing on its
products, the Company generally does not conduct or sponsor clinical studies
relating to the benefits of its products. The Company is highly dependent upon
consumers' perception of the overall integrity of the dietary supplements
business, as well as the safety and quality of its products and similar products
distributed by other companies which may not adhere to the same quality
standards as the Company. The Company could be materially adversely affected if
any of the Company's products or any similar products distributed by other
companies should prove or be asserted to be harmful to consumers or if
scientific studies provide unfavorable findings regarding the effectiveness of
the Company's products. See "Business--Dietary Supplements."
PRODUCT DEVELOPMENT RISKS
The Company evaluates opportunities to develop new products through product
line extensions and product modifications in the ordinary course of its
business. Product line extensions and product modifications involve numerous
risks, including difficulties in the assimilation of the developed products, the
expenses incurred in connection with the product development and the diversion
of management's attention from other business concerns. There can be no
assurance that newly developed products, will be successfully integrated into
the Company's operations. In addition, there can be no assurance that newly
developed products will contribute favorably to the Company's operations and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
19
<PAGE>
AVAILABILITY OF RAW MATERIALS
Certain of the Company's dietary supplements contain ingredients that are
harvested by and obtained from third-party suppliers, some of which are
harvested internationally. An unexpected interruption of supply, such as a
harvest failure, could cause the Company's results of operations derived from
such products to be adversely affected. The Company may not be able to raise
prices quickly enough to immediately offset the effects of such increased raw
material costs.
PRODUCT LIABILITY AND INSURANCE
An inherent risk of the Company's business is exposure to product liability
claims brought by users of the Company's products or others. Such claims to date
have not been material and the Company is not aware of any claims pending
against the Company or its products that if adversely decided would have a
material adverse effect on the Company. While the Company will continue to
attempt to take what it considers to be appropriate precautions, there can be no
assurance that it will avoid significant product liability exposure. The
Company, through HBA Insurance Ltd., its captive insurance company subsidiary,
maintains product liability insurance that it believes to be adequate; however,
there can be no assurance that it will be able to retain its existing coverage
or that such coverage will be cost-justified or sufficient to satisfy future
claims, if any, or that the resulting publicity will not have a material adverse
effect. See "Business--Product Liability and Insurance."
ENVIRONMENTAL MATTERS
The Company is continually engaged in assessing compliance of its 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 in the vicinity of the Company's manufacturing facility
has been designated as a National Priorities List Superfund site. The Company
could be named as a potentially responsible party due to the Company's
historical discharge of wastewater into the creek that flows through the site.
The Company's 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 which are regulated by
various governmental agencies. See "Business-- Environmental Matters."
DEPENDENCE ON SENIOR EXECUTIVE MANAGEMENT
The Company's future performance will depend to a significant degree upon
the efforts and abilities of certain members of senior executive 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 have an adverse effect on the
Company. See "Management."
RISKS OF FOREIGN OPERATIONS
For the twelve months ended February 28, 1998, on a pro forma basis 6.6% of
the Company's revenues were attributable to its international business. The
Company is subject to the risk of doing business internationally, including
unexpected changes in, or impositions of, legislative or regulatory
requirements, fluctuations in the United States dollar against foreign
currencies, which could increase the price of the Company's products in foreign
markets or increase the cost of certain raw materials purchased by the Company,
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, the Company is
subject to generally geopolitical risks, such as political and economic
instability and changes in diplomatic and trade relationships, which could
affect, among other things, customers' inventory levels and
20
<PAGE>
consumer purchasing. Although the Company has not to date experienced any
material adverse effect as a result of such factors, there can be no assurance
that such factors will not adversely affect the Company in the future. In
addition, the laws of certain foreign countries may not protect the Company's
intellectual property rights to the same extent as the laws of the United
States.
FRAUDULENT CONVEYANCE RISKS
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the obligation
of, or liens securing, the Notes or any Subsidiary Guarantee in favor of other
existing or future creditors of the Company or a Subsidiary Guarantor.
Under applicable provisions of Federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the Company
or any Subsidiary Guarantor, at the time it incurred the indebtedness evidenced
by the Notes or a Subsidiary Guarantee, (i)(a) was or is insolvent or rendered
insolvent by reason of such occurrence or (b) was or is engaged in a business or
transaction for which the assets remaining with the Company or such Subsidiary
Guarantor constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability to
pay such debts as they mature, and (ii) the Company or such Subsidiary Guarantor
received or receives less than reasonably equivalent value or fair consideration
for the incurrence of such indebtedness, then the Notes and the Subsidiary
Guarantees, as the case may be, and any pledge or other security interest
securing such indebtedness, could be voided, or claims in respect of the Notes,
the Subsidiary Guarantees or the other security interest securing such
indebtedness, could be voided, or claims in respect of the Notes or the
Subsidiary Guarantees could be subordinated to all other debts of the Company or
such Subsidiary Guarantor, as the case may be. In addition, the payment of
interest and principal by the Company pursuant to the Notes or the payment of
amounts by a Subsidiary Guarantor pursuant to a Subsidiary Guarantee could be
voided and required to be returned to the person making such payment, or to a
fund for the benefit of the creditors of the Company or such Subsidiary
Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Company or a Subsidiary Guarantor would be
considered insolvent if (i) the sum of its debts, including contingent
liabilities, were greater than the fair saleable value of all of its assets at a
fair valuation or if the present fair saleable value of its assets were less
than the amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become absolute and
mature or (ii) it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Company and the Subsidiary Guarantor believe that the
indebtedness being incurred in connection with the Notes and the Subsidiary
Guarantees is being incurred for proper purposes and in good faith and that,
after giving effect thereto, the Company, and the Subsidiary Guarantor are
solvent and will continue to be solvent after issuing the Notes or its
Subsidiary Guarantee, as the case may be, will have sufficient capital for
carrying on its business after such issuance and will be able to pay its debts
as they mature. There can be no assurance, however, as to what standard a court
would apply in making such determinations or that the Court would agree with the
Company's conclusions in this regard. The Company did not obtain a solvency
opinion in connection with the offering of Series A Notes.
PURCHASE OF NOTES UPON CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to purchase
all outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase. The
source of funds for any such purchase would be the Company's available cash or
cash generated from other sources. However, there can be no assurance that
sufficient funds would be available at the time of any Change of Control to make
any required purchases of Notes tendered or that
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<PAGE>
restrictions in the Secured Credit Facility or the Existing Notes would permit
the Company to make such required purchases. See "Description of the
Notes--Repurchase at the Option of Holders."
ABSENCE OF PUBLIC MARKET
The Exchange Notes are a new issue of securities for which there is
currently no trading market. The Series A Notes are currently eligible for
trading in the PORTAL market, and it is expected that the Exchange Notes will be
eligible for trading through the PORTAL market. The Company has been advised by
the Initial Purchaser that it intends to make a market in the Exchange Notes, as
permitted by applicable laws and regulations. However, it is not obligated to do
so and any market making activities with respect to the Notes may be
discontinued at any time without notice. In addition, such market-making
activities may be limited during the Exchange Offer and the pendency of any
Shelf Registration Statement (as defined herein). Therefore, there can be no
assurance that an active trading market for the Exchange Notes will develop, or,
if such a market develops, as to the liquidity of such market. If a market were
to exist, the Exchange Notes could trade at prices that may be lower than the
initial offering price of the Series A Notes depending on many factors,
including prevailing interest rates and the market for similar securities,
general economic conditions and the financial condition and performance of, and
prospects for, the Company. The Company does not intend to apply for listing or
quotation of the Exchange Notes on any securities exchange or automated
quotation system. See "Plan of Distribution".
FAILURE TO EXCHANGE SERIES A NOTES
Exchange Notes will be issued in exchange for Series A Notes only after
timely receipt by the Exchange Agent of such Series A Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, holders of Series A Notes desiring to tender such
Series A Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company is under any
duty to give notification of defects or irregularities with respect to tenders
of Series A Notes for exchange. Series A Notes that are not tendered or are
tendered but not accepted will, following consummation of the Exchange Offer,
continue to be subject to the existing restrictions upon transfer thereof. In
addition, any holder of Series A Notes who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes will be
required to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transaction. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Series A Notes,
where such Series A Notes were acquired by such broker-dealer as a result of
market-making activities or any other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. To the extent that Series A Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Series A Notes could be adversely affected due to the limited amount, or
"float," of the Series A Notes that is expected to remain outstanding following
the Exchange Offer. Generally, a lower "float" of a security could result in
less demand to purchase such security and could, therefore, result in lower
prices for such security. For the same reason, to the extent that a large amount
of Series A Notes is not tendered or is tendered and not accepted in the
Exchange Offer, the trading market for the Exchange Notes could be adversely
affected. See "Plan of Distribution" and "The Exchange Offer."
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<PAGE>
THE ACQUISITION
On March 24, 1998, the Company acquired the BAN line of AP/Deo products from
BMS for a purchase price of $165.0 million (subject to an inventory adjustment),
plus the assumption of up to $5.0 million of indebtedness. The Company acquired
the BAN trademarks, formulae, certain patents pertaining to AP/Deo products
technology, technical information, inventory, certain manufacturing equipment
and packaging related assets used in the manufacture of BAN but not the right to
sell BAN in Japan. Chattem has entered into a manufacturing agreement with BMS,
pursuant to which BMS will manufacture BAN at a pro forma cost savings of
approximately $9.0 million over the amount reflected for the manufacture of BAN
in the BAN financial statements for 1997.
In connection with the Acquisition, the Company (i) amended and restated its
Secured Credit Facility to permit the issuance of the Series A Notes and (ii)
obtained the requisite consents pursuant to the Consent Solicitation under the
Existing Notes. Currently, the only subsidiary of the Company that guarantees
the Existing Notes is Signal. As of February 28, 1998 there were $67.0 million
in aggregate principal amount of Existing Notes outstanding.
The purchase price for the Acquisition, together with associated fees and
expenses, were funded through the net proceeds from the sale of the Series A
Notes.
RECENT DEVELOPMENTS
On May 12, 1998, the Company sold its CORN SILK oil control makeup brand to
Del Laboratories, Inc. for $10,750,000 plus inventories and the assumption of
certain liabilities. The Company used the proceeds from the sale to reduce
Senior Indebtedness.
On April 27, 1998, the Company repurchased $8.6 million in principal amount
of its Existing Notes. As a result, there were as of May 26, 1998 $58.4 million
in aggregate principal amount of the Existing Notes outstanding.
USE OF PROCEEDS
The Company will not receive proceeds from the Exchange Offer. The net
proceeds from the sale of Series A Notes were used to finance the Acquisition,
pay asociated fees and expenses, repay revolving credit indebtedness under the
Secured Credit Facility and for general corporate purposes.
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<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated capitalization of the
Company as of February 28, 1998, on an actual basis, (ii) the pro forma
adjustments to give effect to the offering of Series A Notes and the
consummation of the Transaction and (iii) the consolidated capitalization of the
Company after giving effect to the offering of the Series A Notes and the
Transaction. This table should be read in conjunction with "Use of Proceeds" and
"Selected Consolidated Financial Data" included elsewhere in this Prospectus.
For a description of the Secured Credit Facility and the Existing Notes, see
"Description of Other Indebtedness."
<TABLE>
<CAPTION>
FEBRUARY 28, 1998
--------------------------------
PRO
ACTUAL ADJUSTMENTS FORMA
-------- ----------- --------
<S> <C> <C> <C>
(IN THOUSANDS)
Current maturities of long-term debt (1).......................................................... $ 9,089 $ -- $ 9,089
-------- ----------- --------
Long term debt:
Secured Credit Facility......................................................................... 70,276 (17,000) 53,276
Existing Notes, net of unamortized discount(2).................................................. 65,758 -- 65,758
Series A Notes.................................................................................. -- 200,000 200,000
-------- ----------- --------
Total long term debt........................................................................ 136,034 183,000 319,034
-------- ----------- --------
Shareholders' equity.............................................................................. 4,967 -- 4,967
-------- ----------- --------
Total capitalization.............................................................................. $150,090 $ 183,000 $333,090
-------- ----------- --------
-------- ----------- --------
</TABLE>
- ------------------------
(1) Consists of borrowings under the Secured Credit Facility.
(2) On April 27, 1998, the Company repurchased $8.6 million in principal amount
of its Existing Notes.
24
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Balance Sheet was prepared as
if the Transaction and offering of Series A Notes had occurred on February 28,
1998. The following Unaudited Pro Forma Consolidated Statements of Income for
the year ended November 30, 1997 and the three month periods ended February 28,
1998 and 1997 give effect to the Transaction and offering of Series A Notes as
if they had occurred on December 1, 1996. The Unaudited Pro Forma Consolidated
Statements of Income do not purport to represent what the Company's results of
operations actually would have been if the Transaction and offering of Series A
Notes had occurred as of such date or what such results will be for any future
periods.
The Unaudited Pro Forma Consolidated Balance Sheet reflects the preliminary
allocation of the purchase price for the Acquisition to the Company's tangible
and intangible assets and liabilities. The final allocation of such purchase
price, and the resulting depreciation and amortization expense in the
accompanying Unaudited Pro Forma Consolidated Statements of Income, will differ
from the preliminary estimates due to the final allocation being based on: (a)
actual closing date amounts of assets and liabilities, and (b) final appraised
values of property, plant and equipment and other assets.
The Unaudited Pro Forma Financial Data are based on the historical financial
statements of the Company and the assumptions and adjustments described in the
accompanying notes. The Company believes that such assumptions are reasonable.
The Unaudited Pro Forma Financial Data should be read in conjunction with the
Consolidated Financial Statements of the Company and those of BAN and the
respective accompanying notes thereto appearing elsewhere in this Prospectus.
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<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA ADJUSTMENTS
CHATTEM BAN ------------------------
AS OF AS OF ACQUISITION
FEBRUARY 28, DECEMBER 31, OFFERING OF BAN
1998 1997 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 1,398 $ 189,600(a) $(182,350)(b) $ 8,648
Accounts receivable................. 30,596 30,596
Inventories......................... 16,737 $ 8,252 24,989
Other current assets................ 2,624 2,624
------------ ------------ -----------
Total current assets.............. 51,355 8,252 66,857
------------ ------------ -----------
Property, plant and equipment, net.... 11,045 8,934 19,979
------------ ------------ -----------
Other non-current assets:
Investment in Elcat, Inc............ 6,804 6,804
Patents, trademarks and other
purchased product rights, net..... 104,223 152,843(c) 257,066
Other non-current assets............ 5,324 10,400(d) 15,724
------------ ------------ -----------
Total non-current assets.......... 116,351 279,594
------------ ------------ -----------
Total assets.................... $ 178,751 $ 17,186 $ 366,430
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt.............................. $ 9,089 $ 9,089
Accounts payable and other accrued
liabilities....................... 9,328 9,328
13,067 $ 4,679 17,746
------------ ------------ -----------
Total current liabilities......... 31,484 4,679 36,163
------------ ------------ -----------
Long-term debt........................ 136,034 200,000(a) 319,034
(17,000)(b)
Other non-current liabilities......... 6,266 6,266
Shareholders' equity:
Net assets acquired................. -- 12,507 (12,507)(e) --
Common stock........................ 1,955 1,955
Paid-in surplus..................... 64,046 64,046
Accumulated deficit................. (59,620) (59,620)
Foreign currency translation........ (1,414) (1,414)
------------ ------------ -----------
Total shareholders' equity........ 4,967 12,507 4,967
------------ ------------ -----------
Total liabilities and
shareholders' equity............ $ 178,751 $ 17,186 $ 366,430
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
The Pro Forma Consolidated Balance Sheet reflects the Transaction and the
offering of Series A Notes as if they had occurred as of February 28, 1998
(actual amounts may differ from amounts estimated below).
(a) Reflects the issuance of the Notes and the Secured Credit Facility
Amendment:
<TABLE>
<S> <C>
Issuance of the Notes............................................................. $ 200,000
Issuance-related fees and expenses................................................ (10,400)
---------
$ 189,600
---------
---------
</TABLE>
(b) Represents the following cash payments related to the Acquisition:
<TABLE>
<S> <C>
Purchase price................................................................... $(165,000)
Acquisition expenses............................................................. (350)
Repayment of revolving credit indebtedness....................................... (17,000)
---------
$(182,350)
---------
---------
</TABLE>
(c) The Acquisition will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations". The
purchase price is being allocated first to the tangible and identifiable
intangible assets and liabilities of BAN based upon preliminary estimates of
their fair market values, with the remainder allocated to "Patents, trademarks,
and other purchased products rights" as follows:
<TABLE>
<S> <C>
Purchase price.................................................................... $ 165,000
Acquisition expenses.............................................................. 350
Book value of net assets acquired................................................. (12,507)
---------
Increase in intangible assets..................................................... $ 152,843
---------
---------
</TABLE>
(d) Reflects the deferred financing costs related to the Offering and
Secured Credit Facility Amendment.
(e) Reflects the elimination of the BAN net asset balance.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
FOR THE YEAR ENDED NOVEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
CHATTEM FOR BAN
THE YEAR FOR THE YEAR PRO FORMA ADJUSTMENTS
ENDED ENDED ---------------------------
NOVEMBER 30, DECEMBER 31, ACQUISITION OFFERING
1997 1997 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $143,235 $ 96,152 $ 239,387
Cost of sales..................................... 39,253 32,780 $ (9,000)(a) 63,033
Advertising and promotion......................... 56,176 32,037 3,821(b) 92,034
Selling, general and administrative............... 22,303 6,594 28,897
------------ ------------
Income from operations............................ 25,503 55,423
Interest expense.................................. 15,934 $ 16,658(c) 33,708
1,116(d)
Other income, net................................. (1,679) (1,679)
------------ ------------
Income from continuing operations before income
taxes........................................... 11,248 23,394
Provision for income taxes........................ 3,993 8,907(e) 1,864(e) (6,399)(e) 8,365
------------ ------------
Income from continuing operations................. $ 7,255 $ 15,029
------------ ------------
------------ ------------
Other Financial Data:
EBITDA.......................................... $ 31,208 $ 65,842
EBITDA Margin................................... 21.8% 27.5%
</TABLE>
28
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
BAN
HISTORICAL FOR THE
CHATTEM FOR PERIOD FROM
THE THREE DECEMBER 31, PRO FORMA ADJUSTMENTS
MONTHS ENDED 1997 TO ---------------------------
FEBRUARY 28, MARCH 23, ACQUISITION OFFERING
1998 1998 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 34,921 $ $
Cost of sales..................................... 9,682 $ (2,250)(a)
Advertising and promotion......................... 15,180 955(b)
Selling, general and administrative............... 5,159
------------ ------------
Income from operations............................ 4,900
Interest expense.................................. 4,180 $ 4,081(c)
279(d)
Other income, net................................. (192)
------------ ------------
Income from continuing operations before income
taxes........................................... 912
Provision for income taxes........................ 303 466(e) (1,570)(e)
------------ ------------
Income from continuing operations................. $ 609 $
------------ ------------
------------ ------------
Other Financial Data:
EBITDA.......................................... $ 6,422 $
EBITDA Margin................................... 18.4%
</TABLE>
29
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED FEBRUARY 28, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL
CHATTEM FOR BAN FOR THE
THE THREE THREE MONTHS
MONTHS ENDED ENDED
FEBRUARY 28, MARCH 31, ACQUISITION OFFERING
1997 1997 ADJUSTMENTS ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 27,946 $ $
Cost of sales..................................... 8,394 $ (2,250)(a)
Advertising and promotion......................... 11,267 955(b)
Selling, general and administrative............... 4,657
------------ ------------
Income from operations............................ 3,628
Interest expense.................................. 3,798 $ 4,081(c)
279(d)
Other income, net................................. (319)
------------ ------------
Income from continuing operations before income
taxes........................................... 149
Provision for income taxes........................ 13 486(e) (1,570)(e)
------------ ------------
Income from continuing operations................. $ 136 $
------------ ------------
------------ ------------
Other Financial Data:
EBITDA.......................................... $ $
EBITDA Margin................................... 17.6%
</TABLE>
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(a) Reflects management's estimate of the cost savings that will be generated
following consummation of the acquisition of BAN. Chattem has entered into a
manufacturing agreement with BMS, pursuant to which BMS will manufacture BAN
at a pro forma cost savings of approximately $9,000 and $2,250 over the
amounts reflected for the manufacture of BAN in the BAN financial statements
for fiscal 1997 and the first quarters of 1998 and 1997, respectively.
(b) Represents additional amortization of trademarks.
(c) Reflects the increase in cash interest expense resulting from the incurrence
of indebtedness under the Notes offset by the interest savings resulting
from the repayment of the revolving credit indebtedness. A change of 1/4% in
the interest rate on the Notes and the Secured Credit Facility would have an
impact on pro forma interest expense of $649 for the twelve months ended
February 28, 1998.
(d) To record the increase in interest expense related to the amortization of
deferred financing costs.
(e) Represents income tax expense (benefit) at an effective tax rate of 36.0%.
31
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is qualified in its
entirety by the consolidated financial statements and other information
contained elsewhere in this Prospectus. The financial data as of November 30,
1993, 1994, 1995, 1996, and 1997, and for the years then ended have been derived
from the audited financial statements of the Company contained elsewhere in this
Prospectus. The financial data as of and for the three months ended February 28,
1997 and 1998, have been derived from the unaudited financial statements of the
Company and, in the opinion of the Company's management, include all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation. Interim results are not necessarily indicative of financial
results of the Company for the full fiscal year. The following financial data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30 THREE MONTHS ENDED
----------------------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FEBRUARY FEBRUARY
1993 1994 1995 1996 1997 28, 1997 28, 1998
--------- --------- --------- --------- --------- ----------- -----------
<CAPTION>
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.......................... $ 89,861 $ 94,370 $ 100,598 $ 118,903 $ 143,235 $ 27,946 $ 34,921
Cost of sales...................... 26,717 28,495 29,755 35,120 39,253 8,394 9,682
--------- --------- --------- --------- --------- ----------- -----------
Gross margin....................... 63,144 65,875 70,843 83,783 103,982 19,552 25,239
Advertising and promotion.......... 36,262 33,336 37,242 45,512 56,176 18,267 15,180
Selling, general and
administrative................... 25,132(1) 19,999 19,133 21,582 22,303 4,657 5,159
--------- --------- --------- --------- --------- ----------- -----------
Income from operations............. 1,750 12,540 14,468 16,689 25,503 3,628 4,900
Interest expense................... (3,879) (9,360) (11,076) (13,394) (15,934) (3,798) (4,180)
Investment and other income
(expense)........................ 390 112 218 2,325(2) 1,679 319 192
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing
operations before income taxes... (1,739) 3,292 3,610 5,620 11,248 149 912
Provision for (benefit from) income
taxes............................ (639) 1,182 1,285 1,816 3,993 13 303
--------- --------- --------- --------- --------- ----------- -----------
Income (loss) from continuing
operations....................... $ (1,100) $ 2,110 $ 2,325 $ 3,804 $ 7,255 $ 136 $ 609
--------- --------- --------- --------- --------- ----------- -----------
--------- --------- --------- --------- --------- ----------- -----------
Ratio of earnings to fixed
charges(3)....................... 0.6 (5) 1.3x 1.3x 1.4x 1.7x 1.0x 1.2x
OTHER FINANCIAL DATA:
EBITDA(4).......................... $ 10,450 $ 16,038 $ 17,874 $ 20,834 $ 31,208 $ 4,926 $ 6,422
Interest expense................... 3,879 9,360 11,076 13,394 15,934 3,798 4,180
Depreciation and amortization...... 3,173 3,498 3,406 4,145 5,705 1,298 1,522
Capital expenditures............... 2,297 2,764 2,836 1,785 2,758 203 566
MARGIN DATA:
Gross margin....................... 70.3% 69.8% 70.4% 70.5% 72.6% 70.0% 72.3%
Advertising and promotion.......... 40.4 35.3 37.0 38.3 39.2 40.3 43.5
Selling, general and
administrative................... 28.0 21.2 19.0 18.2 15.6 16.7 14.8
EBITDA............................. 11.6 17.0 17.8 17.5 21.8 17.6 18.4
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital.................... 16,516 9,901 10,254 19,793 15,520 24,296 19,871
Total assets....................... 69,534 85,442 83,410 152,183 178,744 149,200 178,751
Long-term debt..................... 83,000 94,486 78,089 127,438 133,475 126,553 136,034
Shareholders' equity (deficit)..... (33,473) (29,551) (17,421) (7,180) 4,370 (7,076) 4,967
</TABLE>
- ------------------------
(1) Includes nonrecurring and unusual charges of $5.5 million recorded during
the fourth quarter of 1993.
(2) Reflects a gain on the sale of SOLTICE and BLIS-TO-SOL, gain on sale of
certain investments and a full year of dividend income from the Company's
investment in Elcat, Inc.
(3) For purposes of computing this ratio, earnings consist of income before
income taxes plus fixed charges. Fixed charges consist of interest expense
and amortization of deferred financing cost and 33.0% of the rent expense
from operating leases which the Company believes is a reasonable
approximation of the interest factor included in the rent. The pro forma
ratio of earnings to fixed charges for the twelve months ended February 28,
1998 is 1.5x.
(4) EBITDA represents income from operations, plus depreciation and
amortization. The Company believes that EBITDA provides useful information
regarding the Company's ability to service its debt. However, EBITDA does
not represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as a substitute for net
income as an indicator of the Company's operating performance or cash flow
as a measure of liquidity. EBITDA for fiscal year 1993, as shown above,
excludes the impact of nonrecurring and unusual charges of $5.5 million.
(5) In fiscal year 1993, the Company's earnings would have been insufficient to
cover its fixed charges by $1,739,000.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and results of operations
should be read in conjunction with the Consolidated Financial Statements
(including the Notes thereto) included elsewhere in this Prospectus.
GENERAL
On March 24, 1998, the Company announced the completion of the previously
reported acquisition of the BAN line of anti-perspirant/deodorant products from
Bristol-Myers Squibb Company for a purchase price of $165 million (subject to an
inventory adjustment), plus the assumption of up to $5 million of liabilities.
The Company acquired the BAN world-wide trademarks, formulae, certain patents
pertaining to the anti-perspirant/deodorant products technology, technical
information, inventory, manufacturing equipment and packaging related assets
used in the manufacture of BAN, but not the right to sell BAN in Japan.
Concurrently with the closing of the Acquisition, the Company issued $200
million of 8 7/8% Series A Senior Subordinated Notes due 2008 and amended and
restated the Secured Credit Facility. The proceeds from the offering of Series A
Notes were used to fund the Acquisition of BAN, pay related acquisition and
financing fees and expenses and repay certain bank indebtedness.
For the three months ended February 28, 1998, the Company experienced a $7.0
million or 25.0% increase in sales to $34.9 million from $27.9 million for the
first quarter of fiscal 1997. Operating income during the period likewise
increased $1.3 million or 35.1%, to $4.9 million from $3.6 million. Net income
of $609,000 or $.06 per share, was recorded during the period compared to net
income of $136,000 or $.02 per share, during the same period last year.
Seasonality is a factor in the Company's overall business with the first quarter
sales and income traditionally trailing the other fiscal quarters.
The SUNSOURCE product line, acquired in the third quarter of fiscal 1997,
was largely responsible for the improvement in the Company's operating results
for the three months ended February 28, 1998.
The Company will continue to seek increases in sales through a combination
of acquisitions and internal growth while maintaining high operating income. As
previously high growth brands mature, sales increases will become even more
dependent on acquisitions and the development of successful line extensions.
During the first quarter of fiscal 1998, the Company introduced the following
line extensions/ new products: BENZODENT cream; HERPECIN-L cold sore lip balm in
a jar; BULLFROG SPF45 for babies and SPF45 Superblock; CORNSILK (Weightless
label) light liquid makeup in six shades; CORNSILK green concealer stick; and
HARMONEX. Strategically, the Company continually evaluates its products and
businesses as part of its sales growth strategy and, in instances where the
Company's objectives are not realized, will dispose of these brands or
businesses and redeploy the assets to products or businesses with greater growth
potential or to reduce indebtedness.
Unless otherwise indicated, the following discussion relates only to the
continuing operations of the Company, which are the domestic and international
consumer products business. The results of operations and the gain on disposal
of the speciality chemical division in 1995 have been separately classified as
discontinued operations in the accompanying consolidated statements of income.
33
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth for continuing operations certain items from
the Company's consolidated statements of income, for the periods indicated,
expressed as a percentage of net sales:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED NOVEMBER 30, FEBRUARY 28,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Net sales............................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- --------- ---------
Cost and expenses:
Cost of sales...................................................... 29.6 29.5 27.4 30.0 27.7
Advertising and promotion.......................................... 37.0 38.3 39.2 40.3 43.5
Selling, general and administrative................................ 19.0 18.2 15.6 16.7 14.8
--------- --------- --------- --------- ---------
Total costs and expenses......................................... 85.6 86.0 82.2 87.0 86.0
--------- --------- --------- --------- ---------
Income from operations............................................... 14.4 14.0 17.8 13.0 14.0
Other expenses, net.................................................. (10.8) (9.3) (9.9) (12.5) (11.4)
--------- --------- --------- --------- ---------
Income before income taxes........................................... 3.6 4.7 7.9 .5 2.6
Provisions for income taxes.......................................... 1.3 1.5 2.8 -- .9
--------- --------- --------- --------- ---------
Income from continuing operations.................................... 2.3% 3.2% 5.1% 0.5% 1.7%
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 1998 AND 1997
Net sales for the three months ended February 28, 1998 increased $7.0
million or 25.0%, to $34.9 million from $27.9 million for the same period last
year. Domestic consumer products sales increased to $6.2 million, or 24.2% to
$31.8 from $25.6 million $25.6 million for last year's comparative period. Net
sales of international consumer products increased $771,000, or 33.1% from $2.3
million in the 1997 period to $3.1 million in the current period.
The increase in domestic consumer products sales in the 1998 period was
primarily due to the SUNSOURCE brands, which were acquired in the third quarter
of 1997. Sales increases were also registered for the PAMPRIN, BENZODENT and
BULLFROG product lines, while decreases were experienced by the HERPECIN-L,
NORWICH Asprin, FLEXALL, CORNSILK and GOLD BOND baby powders. All sales
variances were principally due to sales volume changes.
The increase in sales of PAMPRIN and BENZODENT reflects the effect of
extensions of these two product lines initiated in fiscal 1997 and the first
quarter of fiscal 1998. The substantial increase in BULLFROG sales represents
the introduction of two new SPF45 products in the current quarter, the addition
of several new or former customers for the 1998 season and increased advertising
and promotion support. The sales decline for CORNSILK reflects the
reintroduction of that entire line in new packaging in the first quarter of
fiscal 1997, resulting in abnormally high sales in the first quarter of fiscal
1997. The reduced GOLD BOND sales were almost entirely associated with the
CORNSTARCH PLUS Medicated Baby Powder product which was introduced in the first
quarter of fiscal 1997. The decline in sales of the remaining brands listed
above reflects the maturation of these products, increased competition in their
respective product categories and, in most instances, reduced marketing support.
International consumer product sales for the first quarter of fiscal 1998
increased $66,000 or 7.8% for the Canadian operation and $607,000 or 47.8% for
the United Kingdom business. The increase in Canadian sales was largely
associated with the GOLD BOND product line, although sales increases were
recorded for the PAMPRIN, FLEXALL, SUN-IN and ULTRASWIM brands. Sales increases
were experienced for all of the United Kingdom brands. U.S. export sales
increased $98,000 or 45.6% for the
34
<PAGE>
1998 quarter as compared to the same period in fiscal 1997, with practically all
of the increase being associated with the ICY HOT product line. All sales
variances were primarily due to sales volume changes.
Cost of goods sold as a percentage of net sales improved to 27.7% from 30.0%
in the 1997 period. The decline was primarily the result of increased sales of
higher gross margin product lines in the current period and the SUNSOURCE brands
acquired in mid 1997.
Advertising and promotion expenses increased $3.9 million or 34.7%, in the
1998 period and were 43.5% of net sales compared to 40.3% in the corresponding
1997 period. The majority of the increase in the 1998 period was related to the
SUNSOURCE product line, although significant increases were recorded for the
BULLFROG and GOLD BOND brands. Substantial declines were realized for the
FLEXALL, MUDD, CORNSILK and PHISODERM product lines.
The increase of $502,000 or 10.8% in selling, general and administrative
expenses in the 1998 period was largely associated with increased direct selling
expenses resulting from increased sales. The selling, general and administrative
expenses were 14.8% of net sales in the current period as compared to 16.7% in
the same period of last fiscal year.
Interest expense increased $382,000 or 10.1% in the 1998 period, reflecting
primarily the additional debt incurred for the SUNSOURCE products acquisition in
mid 1997.
Investment and other income decreased by $127,000 in the 1998 period largely
due to a decline in interest income and gains on sales of property items.
The increase of $473,000 in net income in 1998 was largely the result of
increased sales offset in part by increased interest charges, advertising and
promotion expenses and selling, general and administrative expenditures.
FISCAL 1997 COMPARISON TO FISCAL 1996 FOR CONTINUING OPERATIONS
For the year ended November 30, 1997, net sales increased $24.3 million, or
20.5%, to $143.2 million from $118.9 million for the previous fiscal year. This
increase consisted of a $23.6 million, or 22.6%, increase in domestic consumer
products sales from $104.4 million in 1996 to $128.0 million in 1997 and an
increase of $752,000, or 5.2%, in international sales to $15.2 million from
$14.5 million.
For domestic consumer products, sales of the GOLD BOND, HERPECIN-L, ICY HOT
and the SUNSOURCE products accounted for the majority of the sales increase in
1997, although sales increases were also realized for the SUN-IN and MUDD
brands. Sales declines were recognized for FLEXALL, NORWICH Aspirin, CORNSILK,
BULLFROG and PHISODERM. The remaining domestic brands were basically flat or had
modest declines over the prior fiscal year. All sales variances were largely the
result of changes in volume.
The increase in sales of the SUN-IN brand was largely the result of
increased marketing support, while the MUDD sales increase was primarily due to
the addition of the 5 Minute Mask to the line in 1997 and the continuing effect
of new packaging in late 1995. The sales increase of the ICY HOT brand reflect
the line extension launched in early 1997 and a 68% increase in advertising and
promotion expenditures to support the brand in 1997 over 1996.
Sales declines for the remainder of the domestic products are primarily due
to increased competition in their respective product categories, the maturation
of these brands and in most cases reduced marketing support. The decline in
sales of the BULLFROG brand reflect the loss of a major customer and the cool,
wet spring experienced in 1997.
In fiscal 1997, sales for the international consumer products' segment
increased $847,000, or 21.0%, for the Canadian operation but declined $252,000,
or 2.6%, for the United Kingdom business. The GOLD BOND product line accounted
for practically all of the net sales increase in Canada, although increases
35
<PAGE>
were also realized for the remainder of the product lines marketed in that
country, except for ULTRA-
SWIM and CORNSILK. Sales declines were recognized for all of the product lines
marketed by the United Kingdom operation, except for MUDD. These sales decreases
were largely due to a change in the United Kingdom from a dealer distribution
system to one operated by the Company's U.K. subsidiary in that country. U.S.
export sales increased $157,000, or 17.5%, in 1997 over 1996, with essentially
all of the increase being associated with the ICY HOT brand. All sales variances
were principally due to volume changes.
Cost of goods sold as a percentage of net sales in 1997 decreased to 27.4%
from 29.5% in 1996. The decrease was largely the result of a shift in product
mix of sales of domestic consumer products to higher margin products and the
addition of GOLD BOND and SUNSOURCE.
Advertising and promotion expenses increased $10.7 million, or 23.4%, to
$56.2 million in 1997 from $45.5 million in 1996 and were 39.2% of net sales
compared to 38.3% in 1996. This increase was principally associated with the
GOLD BOND and HERPECIN-L brands, which were acquired in 1996; the SUNSOURCE
product line, acquired in mid-1997; and ICY HOT. Increases in 1997 were also
recorded for the PAMPRIN, PREMSYN PMS, and SUN-IN brands.
Selling, general and administrative expenses increased $721,000, or 3.3%, to
$22.3 million in 1997 from $21.6 million in 1996, but decreased as a percentage
of net sales to 15.6% in 1997 as compared to 18.2% in 1996. This increase was
largely associated with increases in direct selling costs, freight and field
sales expenses, as a result of increased sales, offset in part by reductions in
financial and legal services expenses.
Interest expense increased $2.5 million, or 19.0%, to $15.9 million in 1997
from $13.4 million in 1996 primarily as a result of increased indebtedness
associated with the GOLD BOND and HERPECIN-L product acquisitions in 1996 and
the SUNSOURCE brands purchase in mid-1997. Interest expense is expected to
increase in 1998 due to the full year impact of the higher debt levels
associated with product acquisitions. Until the Company's indebtedness is
reduced substantially, interest expense will continue to represent a significant
percentage of the Company's net sales.
Investment and other income increased 229,000, or 15.8%, to $1.7 million in
1997 from $1.5 million in 1996.
Provisions for income taxes were 35.5% of before tax income in 1997 as
compared to 32.3% in 1996. See Note 8 of Notes to Consolidated Financial
Statements.
Income from continuing operations increased $3.5 million, or 90.7%, to $7.3
million in 1997 from $3.8 million in 1996. This increase resulted primarily from
increased sales and product sales with more favorable gross margins in 1997.
FISCAL 1996 COMPARED TO FISCAL 1995 FOR CONTINUING OPERATIONS
For the year ended November 30, 1996, net sales increased $18.3 million or
18.2%, to $118.9 million from $100.6 million for the previous fiscal year. This
increase consisted of a $17.2 million, or 19.7%, increase in domestic consumer
product sales from $87.3 million in 1995 to $104.4 million in 1996 and an
increase of $1.1 million, or 8.3%, in international sales to $14.5 million from
$13.3 million.
For domestic consumer products, sales of the GOLD BOND and HERPECIN-L
product lines, both of which were acquired in 1996, and PHISODERM Antibacterial
Hand Cleanser accounted for essentially all of the sales increase in 1996,
although sales increases were also realized for the BULLFROG, ICY HOT and MUDD
product lines. Sales declines were recognized for CORNSILK, NORWICH Aspirin and
PHISODERM facial. The remaining domestic brands were basically flat or had
modest declines over the prior fiscal year. All sales variances were largely the
result of changes in volume rather than changes in prices.
36
<PAGE>
The increase in sales of BULLFROG and MUDD brands in 1996 was largely the
result of new product introductions and/or new packaging in late 1995 and
increased marketing support. Sales growth for the ICY HOT product line was
primarily due to increased advertising and promotional expenditures.
Sales declines for the remainder of the domestic products are essentially
the result of increased competition in their respective product categories, the
maturation of these brands and reduced marketing support in most cases.
In fiscal 1996, sales for the international consumer products' segment
increased $121,000, or 3.1% for the Canadian operation and $1.4 million, or
17.9%, for the United Kingdom business. The addition of the GOLD BOND product
line in Canada accounted for more than the total of the net sales increase in
that country, although increases were also realized for the SUN-IN, ULTRASWIM
and MUDD product lines. Declines in sales of the other brands in Canada largely
offset the increases enumerated above. Sales increases for all of the product
lines sold by the United Kingdom operation were realized with the exception of
the CORNSILK brand. U.S. export sales decreased $456,000, or 33.8%, in 1996
largely resulting from unfavorable general economic conditions in Peru and
Mexico. All sales variances were principally due to volume changes.
Cost of goods sold as percentage of net sales in 1996 was essentially
unchanged at 29.5% versus 29.6% for 1995. Cost of goods sold was affected by the
partial year positive impact of GOLD BOND which was offset by increased
inventory obsolescence charges.
Advertising and promotion expenses increased $8.3 million or 22.2%, to $45.5
million in 1996 from $37.2 million in 1995 and were 38.3% of net sales compared
to 37.0% in 1995. This increase was principally associated with the GOLD BOND
and HERPECIN-L brands, which were acquired in 1996, and with the introduction of
PHISODERM Antibacterial Hand Cleanser in that year. Increases in 1996 were also
recorded for the BULLFROG, FLEXALL, ICY HOT, SUN-IN and MUDD product lines.
Selling, general and administrative expenses increased $2.4 million, or
12.8%, to $21.6 million in 1996 from $19.1 million in 1995 but decreased as a
percentage of net sales to 18.2% for 1996 as compared to 19.0% in 1995. This
increase was largely associated with increases in direct selling costs, freight
and field sales expense, as a result of increased sales.
Interest expense increased $2.3 million or 20.9%, to $13.4 million in 1996
from $11.1 million in 1995 largely as a result of increased indebtedness
associated with the acquisition of the GOLD BOND and HERPECIN-L product lines in
April and June, 1996, respectively. Until the Company's indebtedness is reduced
substantially, interest expense will continue to represent a significant
percentage of the Company's net sales.
Investment income increased $893,000 to $1.4 million in 1996 from $527,000
in 1995. This increase consisted of $113,000 of interest income, resulting from
the temporary investment of excess funds; $328,000 of dividends on the
cumulative, convertible preferred stock of Elcat, Inc. received as part of the
proceeds from the sale of the specialty chemical division in 1995; and a gain of
$452,000 on the sale of an investment.
In 1996, a gain of $875,000 from the sale of the two minor product lines,
SOLTICE and BLIS-TO-SOL, was realized.
Provisions for income taxes were 32.3% of before tax income in 1996 as
compared to 35.6% in 1995. See Note 8 of Notes to Consolidated Financial
Statements.
Income from continuing operations increased $1.5 million, or 63.6%, to $3.8
million in 1996 from $2.3 million in 1995. This increase resulted primarily from
increased sales in 1996 which more than offset increased interest expense.
37
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations with a combination of
internally generated funds and borrowings. The Company's principal uses of cash
are for operating expenses, acquisitions, working capital, capital expenditures
and long-term debt servicing.
Cash of $8.1 million and $2.8 million was used in operations for the three
months ended February 28, 1998 and 1997, respectively. The decrease in cash flow
from operations over the prior year period was primarily the result of changes
in accounts receivable, inventories, accounts payable and accrued liabilities.
The changes were due in part to the SUNSOURCE acquisition in mid 1997.
Investing activities used cash of $662,000 and $350,000 in the three months
ended February 28, 1998 and 1997, respectively. The increase of $312,000 in the
current period was largely a result of increased property, plant and equipment
additions. Investing activities used cash of $32.7 million and $47.7 million in
1997 and 1996, respectively. The usage of cash in 1997 reflects the expenditures
required for the purchase of the SUNSOURCE brands, while the 1996 amount
represents the cost of the GOLD BOND and HERPECIN-L product lines acquired in
that year. In 1997, capital expenditures totaled $2.8 million compared to $1.8
million in 1996. Expenditures of this nature are expected to be approximately
$3.0 million in fiscal 1998.
Financing activities provided cash of $5.4 million in the three months ended
February 28, 1998 compared to $735,000 for the comparable prior year period. The
increase of $4.6 million in the current period reflects additional bank
borrowings required for working capital purposes. Financing activities provided
cash of $11.4 million in 1997 and $57.1 million in 1996. The Company financed
the acquisition of the SUNSOURCE brands and repaid all outstanding bank
indebtedness with the proceeds of a new $95.0 million bank credit agreement and
the issuance of 300,000 new shares of the Company's common stock at a value of
$13.50 a share to the sellers of SUNSOURCE. In 1996, the Company financed the
acquisition of GOLD BOND and repaid all outstanding bank indebtedness with the
proceeds of a new bank facility.
In connection with certain of its acquisitions, the Company has agreed to
make certain deferred payments. The Company is obligated to make additional
payments, not to exceed $15.8 million in the aggregate, over a six year period
from the June 1997 closing if sales of the SUNSOURCE business exceeds certain
levels as defined in the purchase agreement. In addition, for new dietary
supplement products introduced in the first three years following the
acquisition of the SUNSOURCE business, the Company is obligated to pay a royalty
on net sales of such new product for a period of seven years. The Company is
obligated to pay a royalty on net sales of HERPECIN-L for each 12 month period
ending June 30, 2003. The Company is also obligated to make an additional
payment if new sales of PHISODERM products in the U.S. exceed certain levels for
each 12-month period ending June 30, 1997.
The following table presents certain working capital data at February 28,
1998 and November 30, 1997 or for the respective periods then ended:
<TABLE>
<CAPTION>
FEBRUARY 28,
ITEM 1998 NOVEMBER 30, 1997
- -------------------------------------------------------- ---------------- -----------------
<S> <C> <C>
Working capital (current assets less current
liabilities).......................................... $ 19,871,000 $ 15,520,000
Current ratio (current assets divided by current
liabilities).......................................... 1.63 1.45
Quick ratio (cash and cash equivalents, and receivables
divided by current liabilities)....................... 1.0 2.96
Average accounts receivable turnover.................... 5.62 5.92
Average inventory turnover.............................. 2.85 3.17
Working capital as a percentage of total assets......... 11.12% 8.68%
</TABLE>
38
<PAGE>
The improvement in the current and quick ratio at February 28, 1998 as
compared to November 30, 1997, reflect primarily increases in accounts
receivable and inventories, which were largely associated with the seasonal
products, e.g., BULLFROG and SUN-IN, and the reduction of accounts payable.
Total loans outstanding were $145.1 million at February 28, 1998 compared to
$142.4 million at November 30, 1997, an increase of $2.7 million during the
first quarter of 1998. The revolving line of credit is available to the Company
up to $30 million or such lesser amount as is determined to be available under
the terms of the Company's bank credit agreement. The availability of credit
under the revolver is determined based on the Company's accounts receivable and
inventories. As of February 28, 1998, the Company had $17.0 million outstanding
on its $30 million working capital line of credit.
On March 24, 1998, the Company completed the previously reported Acquisition
of the BAN line of anti-perspirant/deodorant products. Concurrently with the
closing of the Acquisition, the Company issued $200 million of 8 7/8% Series A
Senior Subordinated Notes due 2008 and amended and restated the Secured Credit
Facility. The proceeds from the offering of Series A Notes were used to fund the
Acquisition of BAN, pay related acquisition and financing fees and expenses and
repay the outstanding balance of the working capital line of credit which was
$19.0 million as of March 24, 1998.
On May 12, 1998, the Company sold its CORNSILK oil control make up brand to
Del Laboratories, Inc. Proceeds from the sale of CORNSILK were used to reduce
Senior Indebtedness. On April 27, 1998, the Company repurchased $8.6 million in
principal amount of its Existing Notes. As a result, there were as of May 26,
1998 $58.4 million in aggregate principal amount of the Existing Notes
outstanding.
Management of the Company believes that projected cash flows generated by
operations along with funds available under its credit facilities will be
sufficient to fund the Company's current commitment and proposed operations.
PRO FORMA LIQUIDITY
The Company incurred substantial indebtedness in connection with the
Transaction. As of February 28, 1998, on a pro forma basis after giving effect
to the consummation of the offering of Series A Notes and the Transaction, the
Company would have had total indebtedness of $329.4 million and shareholders'
equity of $5.0 million. Following the Transaction, the Company intends to use
cash flow from operations and borrowings under the Secured Credit Facility to
meet its working capital requirements, operating expenses, debt service
obligations and capital expenditure requirements. The Secured Credit Facility
provides for term loans in an aggregate principal amount of $63.7 million and
revolving credit borrowings of up to $30.0 million (subject to borrowing base
limitations). The revolving credit borrowings and $27.5 million of the term
loans matures on June 26, 2002, and the remaining term loan matures on June 14,
2004. Loans under the Secured Credit Facility are guaranteed by each domestic
subsidiary of the Company and are secured by substantially all of the assets of
the Company and its domestic subsidiaries (including 65% of the capital stock of
foreign subsidiaries). Signal is the only guarantor under the Secured Credit
Facility. See "Description of Other Indebtedness--Secured Credit Facility."
Based upon current and anticipated levels of operations, the Company
believes that its cash flow from operations, together with amounts available
under the Secured Credit Facility, will be adequate to meet its anticipated
requirements for working capital, capital expenditures and interest payments.
However, the Company's business is subject to prevailing economic conditions and
to financial, business and other factors, many of which are beyond its control.
Consequently, there can be no assurance that the Company's business will
continue to generate sufficient cash flows in the future to enable the Company
to service its debt, and the Company may be required to refinance all or a
portion of its indebtedness or to obtain additional financing. These increased
borrowings may result in higher interest payments. There can be no assurance
that any such refinancing would be possible or that any such additional
financing could be obtained. See "Risk Factors--Leverage."
39
<PAGE>
YEAR 2000
The Company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 software failures. Software failures due to
processing errors potentially arising from calculations using the year 2000 date
are a known risk. The Company has developed a plan to ensure its systems are
compliant with the requirements to process transactions in the year 2000. The
majority of the Company's internal information systems will be replaced with
fully compliant new systems. The total cost of the software and implementation
is estimated to be $1.5 million to $2.0 million, which will be capitalized as
incurred. The majority of actual cash payments will be made in 1998 with the
remainder to be paid in early 1999. This new system implementation is expected
to be completed during 1999.
The Company does not currently have any information concerning the year 2000
compliance status of its suppliers and customers. In the event that any of the
Company's significant suppliers or customers does not successfully and timely
achieve year 2000 compliance, the Company's business or operations could be
adversely affected.
FOREIGN OPERATIONS
The Company's primary foreign operations are conducted through its Canadian
and U.K. subsidiaries. The functional currencies of these subsidiaries are
Canadian dollars and British pounds, respectively. Fluctuations in exchange
rates can impact operating results, including total revenues and expenses, when
translations of the subsidiary financial statements are made in accordance with
SFAS No. 52, "Foreign Currency Translation." For the three months ended February
28, 1998 and 1997, these subsidiaries accounted for 8% and 8% of total revenues,
respectively, and 4% and 5% of total assets, respectively. It has not been the
Company's practice to hedge its assets and liabilities in Canada and the U.K. or
its intercompany transactions due to the inherent risks associated with foreign
currency hedging transactions and the timing of payments between the Company and
its two foreign subsidiaries. Historically, gains or losses from foreign
currency transactions have not had a material impact on the Company's operating
results. Losses of $49,000 to $10,000 for the three months ended February 28,
1998 and 1997, respectively, resulted from foreign currency transactions.
SEASONALITY
During recent fiscal years, the Company's first quarter net sales and gross
profit have trailed the other fiscal quarters on average from 25.0% to 35.0%
because of slower sales of international consumer products and the relative
absence of promotional campaigns during this quarter.
40
<PAGE>
BUSINESS
Chattem is a leading manufacturer and marketer of high quality, branded
consumer products primarily in attractive niche markets throughout the United
States and Canada. On March 24, 1998, the Company acquired BAN for $165.0
million plus the assumption of up to $5.0 million in liabilities. BAN has been
one of the most recognized brands in the AP/Deo market since its introduction in
1955 and holds a dominant position in the roll-on market segment. On a pro forma
basis, the Company would have generated revenues and EBITDA for the twelve
months ended February 28, 1998 of $240.8 million and $62.1 million,
respectively.
The Company's products are among the leaders in their respective markets
allowing the Company to establish brand loyalty among consumers, extend product
life cycles and maintain attractive margins. The Company competes in three
distinct market segments: OVER-THE-COUNTER PHARMACEUTICAL PRODUCTS, including
medicated powders (GOLD BOND), topical analgesics (FLEXALL, ICY HOT, BENZODENT)
and internal analgesics (PAMPRIN, NORWICH, PREMSYN PMS); FUNCTIONAL TOILETRIES
AND COSMETICS, including facial cleanser (PHISODERM), sunblock (BULLFROG),
shampoo (ULTRASWIM) and hair lightener (SUN-IN); and DIETARY SUPPLEMENTS
marketed under the SUNSOURCE name, including garlic extracts (GARLIQUE), a sleep
aid (MELATONEX), a product providing resistance against infections (ECHINEX), a
menopausal supplement (REJUVEX) and a newly launched St. John's Wort and
Siberian ginseng product for emotional balance and physical well being
(HARMONEX).
The Company has grown rapidly by (i) aggressive product line extensions that
capitalize on consumer awareness of the existing brand names and (ii) selective
acquisitions of new brands that can benefit from the Company's established
infrastructure and brand management expertise. Since 1992, the Company has
introduced in excess of 35 product line extensions, which accounted for a
significant amount of total sales in fiscal 1997. Chattem has traditionally
acquired either (i) established brands that have been undermanaged by larger
consumer products companies and therefore have unrealized potential or (ii)
brands of entrepreneurial companies which have achieved regional success that
would benefit from national exposure. In both cases, the Company has been
successful at increasing the acquired brand's sales and product contribution by
utilizing the Company's marketing, sales, product development and manufacturing
expertise and established distribution network.
As a result of product line extensions and strategic acquisitions, excluding
the Acquisition, the Company has achieved a CAGR in sales and EBITDA of 12.4%
and 31.5%, respectively, over the last four fiscal years.
BAN OVERVIEW
BAN is one of the most highly recognized brands in the AP/Deo market, with a
forty year history of innovation and quality. In the AP/Deo market, which is
segmented by end-user and application type, BAN is positioned as a highly
effective AP/Deo in the unisex segment, where BAN ranks in the top three. In
addition, BAN is the dominant brand in the high margin roll-on segment. BAN's
product portfolio is focused on five core products: BAN Roll-On, BAN Clear
Roll-On, BAN White Solid, BAN Clear Solid and BAN Clear Soft Solid. These
products compete in all major AP/Deo market segments except aerosol.
The addition of the BAN product line to Chattem further diversifies the
Company's revenue base and enhances its market presence. The Company believes
there are significant opportunities to increase BAN's revenues and related
contribution by augmenting the brand's current level of advertising and
promotional spending. In addition, Chattem intends to refocus the product's
marketing strategy to target specific segments within BAN's broad and
established customer base. The Company also would have realized approximately
$9.0 million in cost savings on a pro forma 1997 basis based on the terms of a
manufacturing agreement entered into between the Company and BMS, pursuant to
which BMS will manufacture BAN for Chattem.
41
<PAGE>
COMPETITIVE STRENGTHS
The acquisition of BAN improves the Company's market position and increases
its overall growth prospects. The Company will continue to utilize the following
competitive strengths to enhance its position in the marketplace:
COST EFFECTIVE ADVERTISING AND PROMOTIONAL SUPPORT. The Company has a
proven ability to efficiently utilize its marketing, promotional and advertising
expertise to increase the profitability of its portfolio of well-recognized
brands. The Company traditionally invests 35% to 40% of its revenues in
advertising and trade and consumer promotions. The Company believes that it has
a significant competitive advantage compared to several of its larger
competitors due to its ability to (i) manage advertising, trade promotion and
consumer promotion expenditures on a cost effective basis and (ii) quickly adapt
its marketing strategies to changing consumer preferences.
STRONG HISTORICAL CASH FLOW. The Company's diverse product offerings,
strong brand names and leading market positions have provided a stable base of
cash flow. As a result of these factors, the Company's four year historical
average EBITDA margin has been 18.5%. On a pro forma basis, the Company's EBITDA
margin for the twelve months ended February 28, 1998 would have improved to
25.8%. The Company's products compete in diverse markets which reduces the
Company's dependency on any one product or market segment. Further, a majority
of the Company's products are targeted to consumers over the age of 45, a
segment of the population which is expected to grow at a significantly faster
rate than the overall population.
EXPERIENCED MANAGEMENT TEAM. The Company's senior management team averages
over 15 years of experience with the Company. The Company's senior management is
actively involved in the management of the Company's brands, thereby allowing
the Company to quickly make and execute decisions regarding changes in brand
strategy. Additionally, the senior management team has lead the successful
completion and integration of five acquisitions over the past four years.
EFFECTIVE BRAND MANAGEMENT. The Company believes that it is able to (i)
effectively manage and develop brands that compete in certain niche segments of
larger overall markets and (ii) identify brands with significant intrinsic value
that may have been undermarketed or underdeveloped by prior owners. The Company
believes that for many larger consumer products companies, certain brands do not
generate the sales or profitability that allow for efficient and cost effective
brand management. Conversely, the Company believes that firms that are smaller
than Chattem generally do not achieve the advertising and marketing scale
necessary to compete consistently or on a national basis. As a result, the
Company has been able to utilize brand recognition within its products'
respective markets to maintain favorable relationships with retailers, achieve
consumer loyalty and extend product life cycles.
EFFICIENT OPERATIONS. The Company has built strong marketing, sales,
product development, manufacturing, distribution and staff functions to support
its strategic emphasis on growth within the consumer products industry. Because
of its operating efficiency the Company is able to support substantial
additional product offerings and volume with relatively low increases in
non-manufacturing employees and fixed expenses. For example, the Company has
increased sales by approximately $53.4 million over the last four years, while
its selling, general and administrative expenses as a percentage of sales has
declined from 21.8% to 15.6% over the same time period.
ESTABLISHED DISTRIBUTION NETWORK. Chattem has an established distribution
network comprised of thousands of drug, food and mass merchandiser retailers
which continues to be developed and serviced through its internal sales force.
The Company has a proven ability to leverage this distribution network to
increase the market penetration of product line extensions and acquired brands.
For example, BULLFROG (acquired in 1986) and FLEXALL (acquired in 1989),
regional brands at the time of acquisition, were expanded into national brands
with combined sales in excess of $20.0 million in fiscal 1997.
42
<PAGE>
GROWTH STRATEGY
By capitalizing on its competitive strengths, the Company intends to (i)
expand the market share of existing products, (ii) maximize the value of
existing brands through product line extensions and (iii) acquire established
brands with unrealized potential or successful regional brands that would
benefit from national exposure.
STRATEGY FOR BAN
The Company believes that it can increase both revenue and profitability of
BAN based upon the following strategies:
REALIZE MANUFACTURING COST SAVINGS. BAN has historically been manufactured
in a facility that has operated well below its manufacturing capacity. As a
result, BAN absorbed significant fixed overhead. Chattem has entered into a
manufacturing agreement with BMS pursuant to which BMS will manufacture BAN at a
pro forma cost savings of approximately $9.0 million over the amount reflected
for the manufacture of BAN in the BAN financial statements for 1997.
LEVERAGE CHATTEM'S EXPERIENCED SALES FORCE. BAN, with 45 SKU's, represented
a small portion of the total SKU's of the Personal Care unit of BMS's Consumer
Products group. In contrast, BAN represents Chattem's largest product line and
therefore will be a major focus of the Company's 55 person in-house sales force.
Furthermore, Chattem's executive management team is actively involved in the
management of all the Company's brands and will be directly involved in
realizing the full potential of BAN.
ENHANCE AND REFOCUS MARKETING STRATEGY. Beginning in 1994, BAN began
receiving less media spending than in previous years. Chattem believes that it
can apply its expertise in advertising and promotion to BAN and generate strong
gains in market share with limited incremental spending above the amount spent
in 1997. To achieve this, the Company plans to (i) significantly increase
advertising support to a level that is consistent with BAN's market share and
(ii) develop a consistent marketing platform that targets certain demographic
segments where the Company believes there is a current lack of focus by the
industry.
INTRODUCE NEW AND OR IMPROVED FORMS OF BAN. Management believes that sales
gains in the AP/Deo market are driven in part by new product introductions and
product line extensions. BAN is recognized for its leadership in developing new
products. In fact, three of BAN's five existing products were leaders in
creating new segments of the AP/Deo market. Management believes there are
numerous enhancements that can be made to the BAN product line to improve
existing forms and introduce innovative line extensions.
43
<PAGE>
PRODUCTS
The objective of the Company is to offer high quality branded products in
attractive niche market segments in which the Company's products are among the
market leaders in their respective categories.
The Company's products are:
OTC PHARMACEUTICALS
BAN--anti-perspirant/deodorant products
GOLD BOND--medicated powders and anti-itch cream
FLEXALL--topical analgesic
ICY HOT--topical analgesic
PAMPRIN--menstrual internal analgesic
PREMSYN PMS--premenstrual internal analgesic
NORWICH Aspirin--internal analgesic
BENZODENT--topical oral analgesic
HERPECIN-L--cold sore and fever blister product
FUNCTIONAL TOILETRIES AND COSMETICS
BULLFROG--sunblock
ULTRASWIM--chlorine removing shampoo
SUN-IN--spray-on hair lightener
MUDD--facial mask and cleanser
PHISODERM--facial and hand cleanser
DIETARY SUPPLEMENTS
GARLIQUE--garlic extract
MELATONEX--sleep aid
ECHINEX--infections resistance enhancer
PROPALMEX--prostate health product
REJUVEX--menopausal supplement
HARMONEX--emotional and physical well-being
The following table sets forth the Company's net sales attributable to
domestic and international OTC pharmaceuticals, functional toiletries and
cosmetics, dietary supplement and homeopathic products, other products and total
consumer products (including CORN SILK and excluding BAN) for the three months
ended February 28, 1998 and for the years ended November 30, 1995, 1996 and 1997
(dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------
THREE MONTHS ENDED
FEBRUARY 28, 1998 1997 1996 1995
------------------------ ------------------------ ------------------------ ---------
PRODUCT CLASS SALES PERCENTAGE SALES PERCENTAGE SALES PERCENTAGE SALES
- -------------------------------- --------- ------------- --------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Domestic:
OTC pharmaceuticals........... $ 15,052 43.1% $ 83,121 58.0% $ 67,214 56.5% $ 48,700
Functional toiletries and
cosmetics................... 9,433 27.0 33,887 23.7 36,232 30.5 37,519
Dietary supplements and
homeopathics................ 7,222 20.7 9,102 6.4 -- -- --
International:
OTC pharmaceuticals........... 766 2.2 3,053 2.1 2,255 1.9 2,463
Functional toiletries and
cosmetics................... 2,337 6.7 12,154 8.5 12,204 10.3 10,885
Other products:................. 111 .3 1,918 1.3 998 .8 1,031
--------- ----- --------- ----- --------- ----- ---------
Total consumer products......... $ 34,921 100.0% $ 143,235 100.0% $ 118,903 100.0% $ 100,598
--------- ----- --------- ----- --------- ----- ---------
--------- ----- --------- ----- --------- ----- ---------
<CAPTION>
PRODUCT CLASS PERCENTAGE
- -------------------------------- -------------
<S> <C>
Domestic:
OTC pharmaceuticals........... 48.4%
Functional toiletries and
cosmetics................... 37.3
Dietary supplements and
homeopathics................ --
International:
OTC pharmaceuticals........... 2.5
Functional toiletries and
cosmetics................... 10.8
Other products:................. 1.0
-----
Total consumer products......... 100.0%
-----
-----
</TABLE>
44
<PAGE>
OTC PHARMACEUTICALS
The Company markets a diversified portfolio of brand name OTC pharmaceutical
products, many of which are among the market leaders in the U.S. in their
respective categories.
The GOLD BOND brand, which is approximately 100 years old, competes in the
adult, foot and baby medicated powder and anti-itch cream markets. GOLD BOND is
the leading brand in the medicated powder market and has a rapidly growing
presence in the anti-itch cream market. The product line is heavily supported by
national television and radio advertising, as well as with consumer promotions.
The Company believes GOLD BOND represents a major growth opportunity. In
February 1997, the Company added two product line extensions with the
introduction of GOLD BOND Medicated Foot Powder and GOLD BOND Corn Starch Plus
Medicated Baby Powder.
FLEXALL is an aloe-vera based topical analgesic used primarily by people
with arthritic symptoms to alleviate pain and irritation in joints and
secondarily by persons suffering from muscle strain. The Company believes that
the advancing age of the U.S. population and the emphasis on fitness and
physical activity will increase the overall market size of the topical analgesic
market. The Company supports the brand with a marketing program that utilizes
extensive television and print media advertising. In fiscal 1996 FLEXALL Ultra
Plus, containing menthol, methyl salicylate and camphor as active ingredients,
was added to the line.
ICY HOT provides the Company with a second entry into the topical analgesic
market segment. ICY HOT is an extra strength dual action product. The Company
supports this brand with national advertising and strong promotional programs.
In February 1997, the Company began shipping ICY HOT Arthritis Therapy Gel. This
new product contains capsaicin, the active ingredient most recommended by
doctors, in an aloe based gel. The Company believes that this line extension
provides significant opportunity for growth.
In the menstrual analgesic segment, the Company markets PAMPRIN, a
combination drug specifically designed for relief of menstrual symptoms, and
PREMSYN PMS, a product formulated to relieve mild to moderate symptoms of
premenstrual syndrome. PAMPRIN was developed internally by the Company over 30
years ago, while PREMSYN PMS was introduced by the Company in 1983.
HERPECIN-L is a balm stick in the lip care category which treats and
protects cold sores in three ways. The unique formula moisturizes lips to help
prevent cracking, reduce soreness and promote healing. Also, HERPECIN-L contains
an SPF 15 sunblock to help protect lips from the harmful rays of the sun. The
Company supports the brand with television and radio advertising as well as
consumer promotions designed to generate trial during the peak winter and summer
cold sore seasons.
NORWICH is a pharmaceutical-quality, aspirin-based analgesic which
complements the Company's other OTC pharmaceuticals by offering consumers
another choice in the analgesic market segment and by permitting shared product
promotions. The Company positions the brand as a reasonably priced alternative
between private label generic aspirin and high-priced, heavily advertised
brands.
BENZODENT is a dental analgesic cream in an adhesive base for use as an
oral, topical analgesic for pain related to dentures. The Company acquired
BENZODENT in 1994 and seeks to increase the market share of this brand through a
sampling provided to dental professionals.
FUNCTIONAL TOILETRIES AND COSMETICS
The Company also markets a portfolio of brand name functional toiletries and
cosmetics, many of which are among the market leaders in the U.S. in their
respective categories.
In the sunscreen and sunblock category, BULLFROG provides long-lasting
water-durable protection from the sun. Positioned as a line of highly
efficacious sunblock products in a unique, highly concentrated formula, the
Company believes that the BULLFROG brand should continue to benefit from this
overall
45
<PAGE>
market growth as well as increasing brand awareness, broader product offerings
and increased consumer advertising, promotion and sampling programs.
ULTRASWIM is a line of chlorine-removing shampoo, conditioner and soap.
ULTRASWIM has a patented formula that the Company believes makes it superior to
formulations of other products in removing chlorine. ULTRASWIM has also
benefited as it has moved beyond the competitive swim segment to include
exercise and recreational swimmers. The Company supports this brand by selected
television advertising complemented by print advertising.
SUN-IN is a leading product line in the spray-on hair lightener market. The
target customers within this market segment are light-haired women between the
ages of 12 and 24. The Company supports SUN-IN's position as a market leader
through recent improvements in the formula and package, seasonal advertising to
teens and young adults and consumer promotions in retail stores.
MUDD is a line of clay-based products which provide deep cleansing of the
face for healthier, cleaner skin. Target customers for MUDD are women between
the ages of 18 and 49. In 1997, the Company introduced a revolutionary new
masque extension, MUDD 5 Minute Mask. The new product provides all of the
cleansing benefits of a clay-based masque product but in one-third of the time.
PHISODERM is a line of facial cleansers consisting of several formulae of
liquid cleansers, including one for infants, and a bar soap. Acquired in 1994,
PHISODERM is the Company's second entry into the facial cleanser category. In
fiscal 1995, the Company improved the formula, updated the packaging and
provided television advertising and promotional support. In fiscal 1996,
PHISODERM Antibacterial Hand Cleanser was introduced in the domestic and certain
international markets.
DIETARY SUPPLEMENTS
A majority of the Company's SUNSOURCE line of products compete in the herbal
dietary supplementals market. The herbal dietary supplements industry in the
U.S. is estimated to be between $2.0 billion and $2.5 billion. The U.S. market
for these products is considered underdeveloped by worldwide standards, as the
European market is estimated at $6.0 billion. The mass market outlets (drug,
food and mass merchandisers) accounted for only 10% of the total domestic
marketplace in 1996, and increased in retail sales by 37% from approximately
$161.0 million in 1995 to approximately $221.0 million in 1996. Dietary
supplements are profitable for mass market retailers, which are expanding their
presence in this market to take advantage of a growth opportunity.
ECHINEX is used to improve the body's natural resistance to infection. The
product was launched by SUNSOURCE in November 1996. There is little branded
competition or advertising in this category. Echinacea is the best selling herb
in U.S. health food stores.
GARLIQUE helps to lower cholesterol and blood pressure and is the second
leading branded garlic product. GARLIQUE contains a full month's supply in each
package making it more economical and convenient than any other leading garlic
supplement.
REJUVEX is a dietary supplement formulated especially for the relief of
symptoms associated with menopause. There is little competition or advertising
in this category.
MELATONEX contains melatonin, a substance already produced by the body that
regulates the body's natural sleep/wake cycle. There is substantial competition
in this category from OTC products and non-branded melatonin products.
PROPALMEX helps to support prostate health and promote free urinary flow.
The product was launched in July 1996 and has little branded competition. There
is little competitive advertising in this category.
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<PAGE>
HARMONEX, a new product launched in May 1998, contains a unique combination
of St. John's Wort for emotional well-being and Siberian ginseng for physical
well-being. HARMONEX enters the fast growing St. John's Wort category, now
selling at an annualized rate of approximately $100.0 million in sales. In
addition to significant consumer advertising levels planned for its promotion,
HARMONEX will also be supported by a powerful public relations campaign.
In connection with the acquisition of the SUNSOURCE products, the Company
also acquired a line of homeopathic products including cold and allergy
remedies.
BAN
GENERAL. BAN is one of the most recognized brand names in the AP/Deo market
in the United States and has consistently maintained a strong market position
since its introduction in 1955. BAN is positioned as a highly effective AP/Deo
that appeals to both female and male consumers. BAN's high recognition and
positive attributes have enabled it to cultivate a loyal consumer base.
BAN's product portfolio covers all of the significant AP/Deo forms available
in the market, with the exception of aerosols, and represents a competitive and
diverse product offering. Three of BAN's five core products were leaders in
creating new segments in the AP/Deo market. The overall AP/Deo market is
segmented by application type (roll-on, solid, aerosol) and by end-user (male,
female, unisex). BAN currently enjoys a dominant share of the high margin $179.0
million roll-on segment. In the $494.0 million unisex segment, BAN ranks third
with a 21.0% share. BAN is ranked sixth, with a 6.5% share, in the overall
$1.593 billion U.S. AP/Deo market.
BAN is distributed primarily in the United States through drug, food and
mass merchandiser channels. BAN has established the number three position in
drug stores in the United States, a channel which represents 22.0% of domestic
AP/Deo sales. Internationally, BAN is currently marketed in Thailand, Canada,
Latin America and certain other Asian countries.
ANTI-PERSPIRANT AND DEODORANT MARKET. AP/Deo's have become an important
element of personal hygiene throughout the United States, ranking as the seventh
largest segment of household consumer purchases of health and beauty care items
(based on units sold). With total unit sales of 706.4 million, or 5.8% of the
total health and beauty care market, households regularly purchase more
anti-perspirants/ deodorants than pain remedies, skin care or shaving products.
Brands within the AP/Deo category are segmented into five types: Solids,
Roll-Ons, Clear Solids, Gels and Aerosols. The AP/Deo market in the United
States has grown consistently from 1992 to 1997 at a compound annual growth rate
of 3.5%.
PRODUCTS. For over forty years, the BAN brand has made a significant
contribution to category expansion by introducing innovative, high growth new
products. These introductions were designed to meet consumers' preferences for
highly effective protection with less residue and greater ease of application.
BAN's most recent new product introduction, BAN Clear Soft Solid, launched in
late 1996, effectively provided these product attributes by integrating clear
technology into a gel form delivered via a unique "contoured dome" applicator.
BAN's product portfolio is focused on five core products, BAN Roll-On, BAN
Clear Roll-On, BAN White Solid, BAN Clear Solid and BAN Clear Soft Solid, which
are available in a variety of sizes and fragrances. BAN's products are as
follows:
BAN ROLL-ON. BAN's flagship product was developed in the roll-on form in
1955 and is labeled "America's #1 Roll-On." The water based formula is
designed to apply with little friction and will not stain skin or clothes.
BAN Roll-On is available in three sizes and seven fragrances.
BAN CLEAR ROLL-ON. Introduced in 1995, BAN Clear Roll-On is the first
and only clear roll-on that provides application without the "white
residue." This product has allowed BAN to solidify its leading
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<PAGE>
market position in the roll-on segment with market share increasing from
26.0% in 1994 to 34.4% in 1997.
BAN WHITE SOLID. This product competes in the largest AP/Deo category
segment and is the BAN's second largest contributor to total sales. BAN
White Solid is offered in one size and seven fragrances.
BAN CLEAR SOLID. Introduced in 1991, this product was the first clear
solid in the AP/Deo category which addressed the "white residue" problem.
BAN Clear Solid is available in one size and four fragrances.
BAN CLEAR SOFT SOLID. This product is the latest addition to the BAN
portfolio and is marketed with a unique package, a clear, non-alcohol
formula and a patented contoured-dome applicator that enables the product to
be applied comfortably.
ADVERTISING AND PROMOTION
The Company allocates a significant portion of its revenue to the
advertising and promotion of its products. As a percentage of net sales,
advertising and promotion for these purposes were 43.5%, 40.3%, 39.2%, 38.3% and
37.0%, during the three month periods ended February 28, 1998 and 1997, and each
of the fiscal years ended November 30, 1997, 1996 and 1995, respectively.
The Company's marketing objective is to develop and execute creative and
cost-effective advertising and promotional programs. The manner in which the
Company executes promotional programs and purchases advertising time creates
more flexibility in terms of adjusting spending levels. The Company believes
that managing advertising, trade promotions and consumer promotions expenditures
on a cost effective basis is an essential element in its ability to compete
successfully.
The Company develops for each of its major brands advertising strategies and
executions that focus on the particular attributes and market positions of the
products. The Company achieves cost-effective advertising by minimizing certain
expenses, such as production of commercials and payments to advertising
agencies.
The Company works directly with retailers to develop for each brand
promotional calendars and campaigns that are customized to the particular
requirements of the individual retailer. The programs, which include cooperative
advertising, temporary price reductions, in-store displays and special events,
are designed to obtain or enhance distribution at the retail level and to reach
the ultimate consumers of the product. The Company also utilizes consumer
promotions such as coupons, samples and trial sizes to increase the trial and
consumption of the products.
MANUFACTURING AND QUALITY CONTROL
The Company manufactures most of its OTC pharmaceuticals and functional
toiletries and cosmetics products at its manufacturing facility in Chattanooga,
Tennessee. GOLD BOND, NORWICH Aspirin and the dietary supplements are
manufactured by contract manufacturers. Currently, the Company has adequate
capacity to meet anticipated demand for its products. New products that are
consistent with currently manufactured products can generally be manufactured
with the adaptation of existing equipment and facilities, with the addition of
new equipment at relatively small cost or through readily available contract
manufacturers. For products that require different manufacturing processes, the
Company determines whether to manufacture such products based on its evaluation
of the economic benefit versus contract manufacturing with a third party.
Chattem has entered into a manufacturing agreement with BMS, pursuant to which
BMS has agreed to manufacture BAN for the Company for a period of three years.
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To monitor the quality of its products, the Company maintains an internal
quality control system supported by an on-site microbiology laboratory. Outside
consultants also are employed from time to time to monitor product development
and the effectiveness of the Company's operations.
The Company has not experienced any material adverse effect on its business
as a result of shortages of energy or other raw materials used in the
manufacture of its products. At present, the Company does not foresee any
significant problems in obtaining its requirements at reasonable prices, but no
assurances can be given that raw material or energy shortages will not adversely
affect its operations in the future.
PRODUCT DEVELOPMENT
The Company's product development expenditures were $275,000, $248,000, $1.2
million, $1.1 million and $1.1 million, during the three month periods ended
February 28, 1998 and 1997, and each of the fiscal years ended November 30,
1997, 1996 and 1995, respectively. No material customer-sponsored product
development activities were undertaken during these periods. The Company expects
to maintain the same general level of expenditures in fiscal 1998.
The product development effort focuses on developing improved formulations
for existing products and on the creation of formulations for product line
extensions. The preservation and improvement of the quality of the Company's
products are also integral parts of its overall strategy.
DISTRIBUTION
The Company's domestic products are sold primarily through thousands of
food, drug and mass merchandise accounts. Internationally, the products are sold
by a national broker in Canada and the Company's own sales force in the United
Kingdom and by exclusive distributors in Western Europe and Central and South
America to mass distribution channels.
Wal-Mart accounted for more than 16% of the Company's consolidated net sales
in fiscal 1997 and more than 16% of the Company's consolidated net sales in the
three month period ended February 28, 1998. On a pro forma basis, sales to
Wal-Mart would have represented an increased percentage of total net sales for
1997. No other customer accounts for more than 10% of consolidated net sales.
Boots Plc, a U.K. retailer, and Shoppers Drug Mart, a Canadian retailer, each
accounted for more than 10% of the international consumer products segment's
sales in fiscal 1997 and in the three month period ended February 28, 1998.
The Company generally maintains sufficient inventories to meet customer
orders as received absent unusual and infrequent situations. At present, the
Company has no significant backlog of customer orders and is promptly meeting
customer requirements.
The Company does not generally experience wide variances in the amount of
inventory it maintains. Inventory levels were increased during fiscals 1997 and
1996 largely as a result of product acquisitions and line extensions in both
years. In certain circumstances, the Company allows its customers to return
unsold merchandise and, for seasonal products, provides extended payment terms
to its customers.
INTERNATIONAL
The Company's products are also sold in foreign countries. This
international business is concentrated in Canada, Europe and Central and South
America.
Sales in Canada and Europe are conducted by subsidiary companies located and
locally staffed in Canada and the United Kingdom. General export sales are
handled by the Company from its offices in Chattanooga. Most of the products
sold in international markets are manufactured by the Company at its Chattanooga
and United Kingdom facilities and are packaged by subsidiary companies in small
facilities in Canada and the United Kingdom with the assistance, from time to
time, of outside contract packagers.
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Many of the Company's major domestic products are currently sold in Canada,
including the GOLD BOND, FLEXALL, PAMPRIN, SUN-IN, MUDD, ULTRASWIM and PHISODERM
brands.
Consumer product sales in the United Kingdom and on the continent of Western
Europe are currently limited to toiletry and cosmetic products. The Company's
hair lightener product is sold on the continent under the SPRAY BLOND trademark
and in the United Kingdom as SUN-IN. MUDD and ULTRASWIM are the other primary
consumer products sold by the Company's international division in Europe.
The Company's export division services various distributors primarily
located in the Caribbean, Mexico and Peru. The Company sells various products
into these markets with the primary focus being the development of its OTC
pharmaceuticals, principally ICY HOT, PAMPRIN, PHISODERM and GOLD BOND. The
Company continues to look for established distributors for its products in
Central and South America.
BAN products are sold internationally in Thailand, Canada, Latin America and
certain other Asian countries other than Japan.
TRADEMARKS AND PATENTS
The Company's trademarks are of material importance to its business and are
among its most important assets. However, except in the case of the FLEX ALL
454, PHISODERM, ICY HOT, GOLD BOND, SUNSOURCE and BAN trademarks, its business
as a whole is not materially dependent upon ownership of any one trademark. The
Company, either directly or through a wholly-owned subsidiary, owns or licenses
all of the trademarks associated with its business. All of the Company's brands
have recognized trademarks associated with them, and the Company's significant
domestic trademarks have been registered on the principal register of the United
States Patent and Trademark Office. Federally registered trademarks have a
perpetual life as long as they are timely renewed and used properly as
trademarks, subject to the right of third parties to seek cancellation of the
marks.
The Company also owns patents related to the ULTRASWIM shampoo, which expire
in 1998, and ICY HOT stick topical analgesic, which expire in 2007. After
expiration of the patents, the Company expects that these products will continue
to compete in the market primarily on the basis of the goodwill associated with
the brands.
COMPETITION
The OTC pharmaceutical, functional toiletry and dietary supplements products
markets in which the Company competes 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. The Company competes primarily on the
basis of product quality, price, brand loyalty and consumer acceptance. The
Company's competitors include OTC pharmaceutical companies and large consumer
products companies, many of which have considerably greater financial and
marketing resources than the Company. The products offered by these companies
are often supported by much larger advertising and promotional expenditures and
are generally backed by larger sales forces. In addition, the Company's
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 the Company. The private label or generic category has
also become more competitive in certain of the Company's product markets.
Another factor affecting the OTC pharmaceutical, toiletry and dietary supplement
products business is the consolidation of retailers and increasingly more
competitive negotiations for access to shelf space.
BAN's principal competitive products include Secret, Sure, Old Spice (The
Proctor & Gamble Company); Right Guard, Soft & Dri, Dry Idea (Gillette Company);
Degree, Suave, Brut (Unilever NV);
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Speed Stick, Lady Speed Stick (Colgate-Palmolive Company); Arrid (Carter-Wallace
Inc.); Mitchum, Lady Mitchum and Almay (Revlon Inc.); and Arm and Hammer (Church
& Dwight Company Inc.).
GOVERNMENT REGULATION
The manufacturing, processing, formulation, packaging, labeling and
advertising of the Company's products are subject to regulation by one or more
federal agencies, including the FDA, the FTC, the Consumer Product Safety
Commission, the United States Department of Agriculture, the United States
Postal Service, 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 the Company's products are sold. In particular, the FDA regulates the
safety, manufacturing, labeling and distribution of dietary supplements,
including vitamins, minerals and herbs, food additives, OTC and prescription
drugs an cosmetics. The regulations that are promulgated by the FDA relating to
the manufacturing process are known as GMPs, 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 and cosmetics, dietary supplements and foods.
All of the Company's OTC drug products are regulated pursuant to 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 result in the
Company having to revise product labeling and formulations. The Company
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 certain of the PAMPRIN and PREMSYN PMS. While the Company
addressed all of the FDA questions in detail, the final monograph for menstrual
drug products will determine if the FDA considers pyrilamine maleate safe and
effective for menstrual relief products. The Company has been actively
monitoring the process and does not believe that either PAMPRIN or PREMSYN PMS
will be materially adversely affected by the FDA review. The Company believes
that any adverse finding by the FDA would likewise affect the Company's
principal competitor in the menstrual product category.
As a result of an order issued by the Consumer Products Safety Commission,
there are new packaging requirements for products containing lidocaine. The
Company has until September 1998 to develop child resistant packaging for its
GOLD BOND Cream products that are sold in tubes or change the product
formulation.
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 such 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.
DSHEA provides for specific nutritional labeling requirements for dietary
supplements effective January 1, 1997, although final regulations have not been
published and the FDA has indicated that implementation will be delayed. DSHEA
permits substantiated, truthful, and non-misleading statements of nutritional
support to be made in labeling, such as statements describing general well-being
resulting from consumption of a dietary ingredient or the role of a nutrient or
dietary ingredient in affecting or maintaining a structure or function of the
body. The Company anticipates that the FDA will promulgate GMPs which are
specific to dietary supplements and require at least some of the quality control
provisions contained in the GMPs for drugs, which are more rigorous than the
GMPs for foods.
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The FDA has proposed but not finalized regulations to implement DSHEA,
including those relating to nutritional labeling requirements. The Company
cannot determine what effect such regulations, when promulgated, will have on
its business in the future. Such regulations are likely to require expanded or
different labeling for the Company's vitamin and nutritional dietary supplement
products and could, among other things, require the recall, reformulation or
discontinuance of certain products, additional recordkeeping, warnings,
notification procedures and expanded documentation of the properties of certain
products and scientific substantiation regarding ingredients, product claims,
safety or efficacy. Failure to comply with applicable FDA requirements can
result in sanctions being imposed on the Company or the manufacture of its
products, including warning letters, product recalls and seizures, injunctions
or criminal prosecution.
ENVIRONMENTAL MATTERS
The Company is continuously engaged in assessing compliance of its
operations with applicable federal, state and local environmental laws and
regulations. The Company's policy is to record liabilities for environmental
matters when loss amounts are probable and reasonably determinable. The
Company's manufacturing site utilizes chemicals and other potentially hazardous
materials and generates both hazardous and non-hazardous waste, the
transportation, treatment, storage and disposal of which are regulated by
various governmental agencies. The Company is a member of the Chattanooga
Manufacturers Association, a trade association which promotes industry awareness
of developments in environmental matters and has engaged environmental
consultants on a regular basis to assist its compliance efforts. The Company is
currently in compliance with all applicable environmental permits and is aware
of its responsibilities under applicable environmental laws. Any expenditures
necessitated by changes in law and permitting requirements cannot be predicted
at this time, although such costs are not expected to be material to the
Company's financial position or results of operations.
Since the early 1980's, the U.S. Environmental Protection Agency ("EPA") has
been investigating the extent of, and the health effects resulting from,
contamination of Chattanooga Creek, which runs through a major manufacturing
area of Chattanooga in the vicinity of the Company's manufacturing facilities.
The contamination primarily stems from the dumping of coal tar into the creek
during World War II when the federal government was leasing and operating a coke
and chemical plant adjacent to the creek. However, the EPA has been
investigating virtually all businesses that have discharged any wastewater into
the creek. A 2 1/2 mile stretch of Chattanooga Creek was placed on the National
Priorities List as a Superfund site under the Comprehensive Environmental
Response, Compensation and Recovery Act in September 1995. The Company could be
named as a potentially responsible party in connection with such site due to the
Company's historical discharge of wastewater into the creek. However,
considering the nature of the Company's wastewater, as well as the fact that the
Company's discharge point is downstream from the old coke and chemical plant
that was operated by the government, and the availability of legal defenses and
expected cost sharing, the Company does not believe that any liability
associated with such site will be material to its financial position or results
of operations.
PRODUCT LIABILITY AND INSURANCE
An inherent risk of the Company's business is exposure to product liability
claims brought by users of the Company's products or by others. The Company has
not had any material claims in the past and is not aware of any material claims
pending or threatened against the Company or its products. While the Company
will continue to attempt to take what it considers to be appropriate
precautions, there can be no assurance that it will avoid significant product
liability exposure. The Company maintains product liability insurance,
principally through a captive insurance subsidiary, that it believes to be
adequate; however, there can be no assurance that it will be able to maintain
its existing coverage or that such coverage will be cost justified or sufficient
to satisfy future claims, if any, or that the resulting publicity will not have
a material adverse effect.
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EMPLOYEES
The Company employs approximately 303 persons on a full-time basis in the
U.S. and 37 persons at its foreign subsidiaries' offices. The Company's
employees are not represented by any organized labor union, and management
considers its labor relations to be good.
PROPERTIES
The Company's headquarters and administrative offices are located at 1715
West 38th Street, Chattanooga, Tennessee. The Company's primary production
facilities are adjacent to the Company's headquarters on land owned by the
Company. The Company leases the primary warehouse and distribution center,
located at 3100 Williams Street, Chattanooga, Tennessee, for its domestic
consumer products. The following table describes in detail the principal
properties owned and leased by the Company:
<TABLE>
<CAPTION>
TOTAL
BUILDINGS FACILITY
TOTAL AREA (SQUARE -----------------------------------------------
(ACRES) FEET) USE SQUARE FEET
--------------- ------------ ---------------------------------- -----------
<S> <C> <C> <C> <C>
Owned Properties:
Chattanooga, Tennessee............. 10 111,200 Manufacturing Office & 71,800
Administration 39,400
Leased Properties:
Chattanooga, Tennessee............. 4.0 100,000 Warehousing 103,800
Chattanooga, Tennessee............. 0.1 3,800
Chattanooga, Tennessee............. 1.0 35,200 Warehousing & Manufacturing 35,200
Mississauga, Ontario, Canada....... 0.3 15,000 Warehousing 10,500
Office & Administration 3,000
Packaging 1,500
Basingstoke, Hampshire England..... 0.3 21,900 Warehousing 13,900
Office & Administration 6,500
Packaging 1,500
</TABLE>
The Company is currently operating its facilities at approximately 70% of
total capacity. All of these facilities are FDA registered and are capable of
further utilization through the use of full-time second and third shifts.
LEGAL PROCEEDINGS
Claims, suits and complaints arise in the ordinary course of the Company's
business involving such matters as patents and trademarks, product liability and
other alleged injuries or damage. The outcome of such litigation cannot be
predicted, but, in the opinion of management, no such pending matters would have
a material adverse effect on the consolidated operating results or financial
position of the Company if disposed of unfavorably.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table lists the names of all executive officers and directors
of the Company, their ages and their positions and offices with the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Zan Guerry........................................... 49 Chairman of the Board and Chief Executive Officer;
Director
A. Alexander Taylor, II.............................. 44 President and Chief Operating Officer; Director
Robert E. Bosworth................................... 50 Director
Samuel E. Allen...................................... 61 Director
Louis H. Barnett..................................... 79 Director
Richard E. Cheney.................................... 76 Director
Scott L. Probasco, Jr................................ 69 Director
</TABLE>
ZAN GUERRY has served as Chairman of the Board of the Company since June
1990 and Chief Executive Officer of the Company since January 1998. Previously,
Mr. Guerry served as President of the Company from 1990 to 1998, as Executive
Vice President of the Company from 1983 to 1990, as President of Chattem
Consumer Products from 1984 to 1989 and as Chief Operating Officer from 1989 to
1990. Mr. Guerry is also a director of SunTrust Bank, Chattanooga, N.A. Mr.
Guerry was first elected as a director of the Company in 1981.
A. ALEXANDER TAYLOR, II has served as President and Chief Operating Officer
of the Company since January 1998. Previously he was a partner with the law firm
of Miller & Martin LLP, general counsel to the Company, from 1983 to 1998. Mr.
Taylor is also a director of U.S. Xpress Enterprises, Inc., a transportation
company located in Chattanooga, Tennessee and The Krystal Company, a
quick-service restaurant company located in Chattanooga, Tennessee. Mr. Taylor
was first elected as a director of the Company in 1993.
ROBERT E. BOSWORTH served as Executive Vice President of the Company from
June 1990 to January 1998 and Chief Financial Officer of the Company from April
1985 to January 1998. Mr. Bosworth was first elected as a director of the
Company in 1986.
LOUIS H. BARNETT, a director since 1970, is a consultant to the Company and
others regarding plastics and chemicals and oil investments and operations. Mr.
Barnett is also a director of Overton Bank and Trust and A/F Protein, Inc.
RICHARD E. CHENEY, a director since 1984, is former Chairman Emeritus,
director and member of the executive committee, Hill and Knowlton, Inc. Mr.
Cheney is also a director of HolloPak Technologies, Inc. and Rowe Furniture
Corporation.
SCOTT L. PROBASCO, JR., a director since 1966, is Chairman of the Executive
Committees of SunTrust Bank, N.A., Chattanooga, since March 1989, and SunTrust
Banks of Tennessee, Inc., since January 1990. Mr. Probasco is also a director of
SunTrust Banks, Inc., Coca-Cola Enterprises Inc. and Provident Life and Accident
Insurance Company.
SAMUEL E. ALLEN, a director since 1993, is Chairman of Globalt, Inc.
EXECUTIVE COMPENSATION
The following table sets forth information for the past three fiscal years
concerning compensation paid or accrued by the Company to or on behalf of the
Company's chief executive officer and the other most
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highly compensated executive officer, the only executive officers of the Company
during the fiscal year ended November 30, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
FISCAL ---------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS AWARDED (1) COMPENSATION (2)
- ------------------------------------- ----------- ---------- ---------- ----------------------- -----------------
<S> <C> <C> <C> <C> <C>
Zan Guerry(3)........................ 1997 $ 285,750 $ 202,500 0 $ 2,895
Chairman of the Board and Chief 1996 253,000 133,650 40,000 2,854
Executive Officer 1995 236,000 108,324 0 2,760
Robert E. Bosworth(4)................ 1997 $ 211,667 $ 125,000 0 $ 3,099
Executive Vice President and Chief 1996 192,500 81,400 25,000 3,032
Financial Officer 1995 181,760 119,819(5) 0 2,663
</TABLE>
- ------------------------
(1) Represents non-qualified stock options granted on January 31, 1996 under the
Company's 1994 Stock Option Plan at an exercise price of $4.875 per share.
(2) Represents premiums paid by the Company under life insurance policies with
respect to which the named executive is entitled to a death benefit of up to
$450,000 as follows for the 1997 fiscal year: Mr. Guerry $520; Mr. Bosworth
$724. Also represents the Company's contributions with respect to the
Company's Savings and Investment Plan for the named executive as follows for
the 1997 fiscal year: Mr. Guerry $2,375; Mr. Bosworth $2,375.
(3) Mr. Guerry was appointed Chief Executive Officer of the Company on January
13, 1998.
(4) Mr. Bosworth resigned from his position as Executive Vice President and
Chief Financial Officer on January 13, 1998.
(5) Includes one-time incentive bonus of $50,000 for the 1995 fiscal year.
AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into severance agreements with the officers named in
the Summary Compensation Table. These severance agreements are operative only
upon the occurrence of a change in control of the Company and are intended to
encourage key executives to remain in the Company's employ by providing them
with greater security and imposing various restrictions on competitive
employment should an officer leave the Company's employment. Absent a change in
control of the Company, the severance agreements do not require the Company to
retain any executive or to pay him any specified level of compensation.
If the severance agreements become operative, and if the employment with the
Company of one of these officers is terminated or the officer is constructively
discharged within two years of the occurrence of a change in control of the
Company, the officer will be entitled to receive a termination payment equal to
three times his average annualized includible compensation from the Company
during the five most recently completed fiscal years and the continuation of
certain Company-provided benefits. Includible compensation for purposes of
calculating the severance benefit generally includes all compensation paid to
the officer by the Company and will be calculated in accordance with the
applicable provisions of the Internal Revenue Code.
A change of control of the Company will be deemed to occur if (i) there is a
change of one-third or more of the directors of the Company within any 12-month
period; (ii) there is a change of one-half or more of the directors of the
Company within any 24-month period; or (iii) any person acquires ownership or
the right to vote 35% or more of the Company's outstanding voting shares.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Set forth below is information, as of February 27, 1998, with respect to
beneficial ownership by (a) each person who is known to the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (b) each
director and nominee, (c) the chief executive officer and the other most highly
compensated executive officer for the previous fiscal year, and (d) all
directors and executive officers of the Company as a group. As of February 27,
1998 there were issued and outstanding 9,127,970 shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENT
NAME OF BENEFICIAL OWNER (1) OF CLASS (2)
- ---------------------------------------------------------------- ---------------------- -------------
<S> <C> <C>
Palisade Capital Management, L.L.C.............................. 1,313,200(3) 14.4%
Suite 695
One Bridge Plaza
Fort Lee, NJ 07024
Zan Guerry...................................................... 1,250,639(4)(5 (7) 13.5
1715 W. 38th St.
Chattanooga, TN 37409
Robert E. Bosworth.............................................. 988,648(7)(8 (9) 10.7
1715 W. 38th St.
Chattanooga, TN 37409
Hamico, Inc..................................................... 891,865(10) 9.8
1715 W. 38th Street
Chattanooga, TN 37409
Piedmont Capital Management Corporation......................... 794,700(11) 8.7
One James Center
Suite 1500
Richmond, VA 23219
Barrow, Hanley, Mewhinney & Strauss, Inc........................ 636,800(12) 7.0
One McKinney Plaza
15th Floor, 3232 McKinney Avenue
Dallas, TX 75204
Putnam Investments, Inc......................................... 591,700(13) 6.5
One Post Office Square
Boston, MA 02109
Louis H. Barnett................................................ 122,219(14) 1.3
Richard E. Cheney............................................... 15,460 *
Scott L. Probasco, Jr........................................... 91,176(15) 1.0
Samuel E. Allen................................................. 14,250 *
A. Alexander Taylor, II......................................... 9,175 *
Directors and Executive Officers as a Group
(7 persons)................................................... 1,599,702 17.1
</TABLE>
- ------------------------
* Less than 1.0%.
(1) Except as otherwise indicated, refers to either shared or sole voting and
investment power. Includes the following numbers of shares subject to
purchase pursuant to options that are exercisable within 60 days of February
27, 1998 under the Company's Non-Statutory Stock Option Plan--1993 (the
"1993 Stock Option Plan"), the Company's Non-Statutory Stock Option
Plan--1994 (the "1994 Stock Option Plan") or the Company's Non-Statutory
Stock Option Plan for Non-Employee Directors (the "Director Plan"): Mr.
Guerry--124,600 shares, Mr. Bosworth--71,250 shares, Mr. Probasco--7,000
shares, Messrs. Allen and Taylor--6,750 shares each, Messrs. Barnett and
Cheney--6,500 shares each,
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<PAGE>
and all directors and executive officers as a group--229,350 shares. Also
includes the following numbers of shares subject to purchase pursuant to the
exercise of warrants issued in June, 1994 in connection with the Company's
Existing Notes due 2004: Mr. Guerry--1,464 shares, Mr. Barnett-- 1,581
shares, and all directors and executive officers as a group--3,045 shares.
(2) For the purpose of computing the percentage of outstanding shares owned by
each beneficial owner, the shares issuable pursuant to presently exercisable
stock options or warrants held by such beneficial owner are deemed to be
outstanding. Such shares are not deemed to be outstanding for the purpose of
computing the percentage owned by any other person.
(3) This information is based solely upon a Schedule 13G filed by Palisade
Capital Management, L.L.C. on or about January 14, 1998.
(4) Includes 37,081 shares held by a trust for the benefit of Mr. Guerry's
sister, of which he serves as a co-trustee. Mr. Guerry disclaims beneficial
ownership of the shares held by this trust.
(5) Includes 6,000 shares held in trust for Mr. Guerry pursuant to the terms of
the Company's Savings and Investment Plan.
(6) Includes 2,685 shares which Mr. Guerry holds as custodian for his children.
Mr. Guerry disclaims beneficial ownership of these custodial shares.
(7) Includes 878,100 shares and 13,765 shares subject to purchase pursuant to
the exercise of warrants owned by Hamico, Inc., a charitable foundation for
which Messrs. Guerry and Bosworth serve as directors and executive officers.
Messrs. Guerry and Bosworth disclaim beneficial ownership of all such
shares.
(8) Includes 23,433 shares held in trust for Mr. Bosworth pursuant to the terms
of the Company's Savings and Investment Plan.
(9) Includes 600 shares which Mr. Bosworth holds as custodian for his daughter.
Mr. Bosworth disclaims beneficial ownership of these custodial shares.
(10) Includes 13,765 shares subject to purchase pursuant to the exercise of
warrants issued June, 1994 in connection with the Company's 12.75% senior
subordinated notes due 2004.
(11) Includes shares held by various officers and affiliates of Piedmont Capital
Management Corporation for which shares Piedmont Capital Management
Corporation disclaims beneficial ownership.
(12) This information is based solely upon a Schedule 13G filed by Barrow,
Hanley, Mewhinney & Strauss, Inc. on or about February 13, 1997.
(13) Consists solely of shares held by certain wholly-owned subsidiaries of
Putnam Investments, Inc., which are registered investment advisors, for the
benefit of clients of such investment advisors and for which shares Putnam
Investments, Inc. disclaims beneficial ownership. This information is based
solely upon a Schedule 13G filed by Putnam Investments, Inc. on or about
January 27, 1997.
(14) Includes 103,778 shares which are held in trust for the benefit of various
family members. Mr. Barnett disclaims beneficial ownership of these shares.
(15) Includes 1,500 shares which are held in trust for the benefit of Mr.
Probasco's spouse. Mr. Probasco disclaims beneficial ownership of these
shares.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The sole purpose of the Exchange Offer is to fulfill certain obligations of
the Company with respect to the Registration Rights Agreement.
The Series A Notes were originally issued and sold on March 24, 1998 (the
"Issue Date") to the Initial Purchaser pursuant to the Purchase Agreement. Such
sales were not registered under the Securities Act in reliance upon the
exemption provided by Section 4(2) of the Securities Act and Rule 144A of the
Securities Act. In connection with the sale of the Series A Notes, the Company
and the Initial Purchaser of the Series A Notes entered into the Registration
Rights Agreement dated March 24, 1998, pursuant to which the Company agreed to
(i) cause to be filed with the Commission no later than 60 days after March 24,
1998, a Registration Statement under the Securities Act relating to the Exchange
Notes and the Exchange Offer (the "Exchange Offer Registration Statement," which
is this Registration Statement), (ii) use its best efforts to cause such
Registration Statement to become effective at the earliest possible time, but in
no event later than 150 days after March 24, 1998, (iii) in connection with the
foregoing, file (A) all pre-effective amendments to such Registration Statement
as may be necessary in order to cause such Registration Statement to become
effective, (B) if applicable, a post effective amendment to such Registration
Statement pursuant to Rule 430A under the Securities Act and (C) cause all
necessary filings in connection with the registration and qualification of the
Exchange Notes to be made under the Blue Sky laws of such jurisdictions as are
necessary to permit the Exchange Offer to be consummated, and (iv) upon the
effectiveness of such Registration Statement, commence the Exchange Offer. The
Company shall cause the Exchange Offer Registration Statement to be effective
continuously and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 30 business days. The Company has agreed to cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Exchange Notes are to be included in the Exchange
Offer Registration Statement. The Company has agreed to use its best efforts to
cause the Exchange Offer to be consummated on the earliest practicable date
after the Exchange Offer Registration Statement has become effective, but in no
event later than 30 business days thereafter. The Company has agreed to use its
best efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of the
Registration Rights Agreement to the extent necessary to ensure that it is
available for resales of Exchange Notes acquired by broker-dealers for their own
accounts as a result of market making activities or other trading activities,
and to ensure that it conforms with the requirements of the Registration Rights
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as announced from time to time, for a period of one year from the
date on which the Exchange Offer Registration Statement is declared effective.
The Company shall provide sufficient copies of the latest version of this
Prospectus to broker-dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in the No-Action Letters, the Company believes
that a holder (other than (i) a broker-dealer who purchases Notes directly from
the Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) who exchanges
Series A Notes for Exchange Notes in the ordinary course of business and who is
not participating, does not intend to participate, and has no arrangement with
any person to participate, in a distribution of the Exchange Notes, will be
allowed to resell Exchange Notes to the public without further registration
under the Securities Act and without delivering to the purchasers of the
Exchange Notes a prospectus that satisfies the requirements of Section 10 of the
Securities Act. See the No-Action Letters. However, if any holder acquires
Exchange Notes in the
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<PAGE>
Exchange Offer for the purpose of distributing or participating in the
distribution of the Exchange Notes or is a broker-dealer, such holder cannot
rely on the position of the staff of the Commission enumerated in the No-Action
Letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-dealer
that receives Exchange Notes for its own account in exchange for Series A Notes,
where such Series A Notes were acquired by such broker-dealer as a result of
market making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for Series A
Notes where such Series A Notes were acquired by such broker-dealer as a result
of market-making or other trading activities. Pursuant to the Registration
Rights Agreement, the Company has agreed to make this Prospectus, as it may be
amended or supplemented from time to time, available to broker-dealers for use
in connection with any resale for a period of up to one year after the date of
this Prospectus. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Series A
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal amount of outstanding Series A Notes surrendered pursuant
to the Exchange Offer. Series A Notes may be tendered only in integral multiples
of $1,000.
The form and terms of the Exchange Notes are identical to the form and terms
of the Series A Notes except that (i) the Exchange Offer will be registered
under the Securities Act and, therefore, the Exchange Notes will not bear
legends restricting the transfer thereof and (ii) holders of the Exchange Notes
will not be entitled to any of the rights of holders of Series A Notes under the
Registration Rights Agreement, which rights will generally terminate upon the
consummation of the Exchange Offer. The Exchange Notes will evidence the same
indebtedness as the Series A Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture, which also authorized
the issuance of the Series A Notes, such that both series of Notes will be
treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $200 million in aggregate principal
amount of the Series A Notes are outstanding. Only a registered holder of the
Series A Notes (or such holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of the Series A Notes entitled to participate in the Exchange
Offer. The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Securities Act, the Exchange Act and the rules and regulations of the
Commission thereunder.
The Company shall be deemed to have accepted validly tendered Series A Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Series A Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Series A Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Series A
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "Fees and Expenses."
59
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" shall mean 5:00 p.m., New York City time on , 1998, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. In order to extend the Exchange Offer, the Company will (i)
notify the Exchange Agent of any extension by oral or written notice, (ii) mail
to the registered holders an announcement thereof and (iii) issue a press
release or other public announcement which shall include disclosure of the
approximate number of Series A Notes deposited to date, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which the Company may choose to
make a public announcement of any delay, extension, amendment or termination of
the Exchange Offer, the Company shall have no obligation to publish, advertise,
or otherwise communicate any such public announcement, other than by making a
timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Series A Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such delay,
extension or termination to the Exchange Agent. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by oral or written notice thereof to the registered holders. If the Exchange
Offer is amended in a manner determined by the Company to constitute a material
change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of five to ten business
days, depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 8 7/8% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on each
April 1 and October 1, commencing October 1, 1998. Holders of Exchange Notes
will receive interest on October 1, 1998 from the date of initial issuance of
the Exchange Notes, plus an amount equal to the accrued interest on the Series A
Notes from the date of initial delivery to the date of exchange thereof for
Exchange Notes. Holders of Series A Notes that are accepted for exchange will be
deemed to have waived the right to receive any interest accrued on the Series A
Notes.
PROCEDURES FOR TENDERING
Only a registered holder of Series A Notes may tender such Series A Notes in
the Exchange Offer. To tender in the Exchange Offer, a holder of Series A Notes
must complete, sign and date the Letter of Transmittal, or a facsimile thereof,
have the signatures thereon guaranteed if required by the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile to
the Exchange Agent at the address set forth below under "--Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Series A Notes must be received by the Exchange Agent along with the Letter
of Transmittal, (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Series A Notes, if such procedure is
available, into the Exchange Agent's account at the Depositary pursuant to the
procedure for book-entry transfer described below, must be received by the
Exchange Agent prior to the Expiration Date or (iii) the holder must comply with
the guaranteed delivery procedures described below.
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<PAGE>
The tender by a holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the Letter
of Transmittal.
THE METHOD OF DELIVERY OF SERIES A NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR SERIES A NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Series A Notes whose Series A Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Series A Notes, either make appropriate
arrangements to register ownership of the Series A Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed by
an Eligible Institution (as defined below) unless the Series A Notes tendered
pursuant thereto are tendered (i) by a registered holder who has not completed
the box titled "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be made by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Exchange Act which is a member of one of
the recognized signature guarantee programs identified in the Letter of
Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Series A Notes listed therein, such Series A Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Series A
Notes.
If the Letter of Transmittal or any Series A Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Series A Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Series A Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Series A Notes not properly tendered or any Series A Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
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<PAGE>
irregularities or conditions of tender as to particular Series A Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series A Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Series A Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Series A Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Series A Notes that are
not tendered in the Exchange Offer or to file a registration statement to permit
resales of any Series A Notes that are not tendered pursuant to the Exchange
Offer, the Company reserves the right in its sole discretion to purchase or make
offers for any Series A Notes that remain outstanding subsequent to the
Expiration Date or, as set forth below under "--Conditions," to terminate the
Exchange Offer and, to the extent permitted by applicable law, purchase Series A
Notes in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.
By tendering, each holder of Series A Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such holder of
Series A Notes in connection with the Exchange Offer are being acquired by such
holder in the ordinary course of business of such holder, (ii) such holder has
no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iii) such holder acknowledges and agrees
that any person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purposes of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in certain no-action letters,
(iv) such holder understands that a secondary resale transaction described in
clause (iii) above and any resales of Exchange Notes obtained by such holder in
exchange for Series A Notes acquired by such holder directly from the Company
should be covered by an effective registration statement containing the selling
security holder information required by Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such holder is not an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. If the holder is a
broker-dealer that will receive Exchange Notes for such holder's own account in
exchange for Series A Notes that were acquired as a result of market-making
activities or other trading activities, such holder will be required to
acknowledge in the Letter of Transmittal that such holder will deliver a
prospectus in connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, such holder will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
RETURN OF SERIES A NOTES
If any tendered Series A Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Series A Notes are
withdrawn or are submitted for a greater principal amount than the holder
desires to exchange, such unaccepted, withdrawn or non-exchanged Series A Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Series A Notes tendered by book-entry transfer into the Exchange Agent's
account at the Depositary pursuant to the book-entry transfer procedures
described below, such Series A Notes will be credited to an account maintained
with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Series A Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
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<PAGE>
entry delivery of Series A Notes by causing the Depositary to transfer such
Series A Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Series A Notes may be effected through book-entry transfer at the Depositary,
the Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under
"--Exchange Agent" on or prior to the Expiration Date or pursuant to the
guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series A Notes and (i) whose Series A Notes
are not immediately available or (ii) who cannot deliver their Series A Notes,
the Letter of Transmittal or any other required documents to the Exchange Agent
prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number(s) of such Series A Notes and the principal
amount of Series A Notes tendered, stating that the tender is being made thereby
and guaranteeing that, within five New York Stock Exchange trading days after
the Expiration Date, the Letter of Transmittal (or a facsimile thereof),
together with the certificate(s) representing the Series A Notes in proper form
for transfer or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof), as
well as the certificate(s) representing all tendered Series A Notes in proper
form for transfer and all other documents required by the Letter of Transmittal
are received by the Exchange Agent within five New York Stock Exchange trading
days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Series A Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series A Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Series A Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Series A Notes to be withdrawn (the "Depositor"), (ii) identify the Series A
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Series A Notes) and (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Series A Notes were tendered (including any required signature guarantees). All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company in its sole discretion, whose
determination shall be final and binding on all parties. Any Series A Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no Exchange Notes will be issued with respect thereto unless
the Series A Notes so withdrawn are validly retendered. Properly withdrawn
Series A Notes may be retendered by following one of the procedures described
above under "The Exchange Offer--Procedures for Tendering" at any time prior to
the Expiration Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Series A Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Series A Notes, if the Exchange Offer violates applicable
law, rules or regulations or an applicable interpretation of the staff of the
Commission.
If the Company determines in its sole discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Series A
Notes and return all tendered Series A Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Series A Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Series A Notes (see "Withdrawal of Tenders") or (iii) waive such
unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Series A Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Series A Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
SERIES A NOTES REGISTRATION RIGHTS
If (i) the Company is not required to file an Exchange Offer Registration
Statement or to consummate the Exchange Offer because the Exchange Offer is not
permitted by applicable law or Commission policy (after the procedures set forth
in the Registration Rights Agreement have been complied with) or (ii) if any
holder of Transfer Restricted Securities (as defined in the Registration Rights
Agreement) shall notify the Company within 20 business days after the Exchange
Offer shall have been consummated (A) that such holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
(B) that such holder may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such holder, or (C) that such
holder is a broker-dealer and holds Series A Notes acquired directly from the
Company or one of its affiliates, then the Company shall (x) cause to be filed a
Shelf Registration Statement on or prior to the Shelf Filing Deadline, which
Shelf Registration Statement shall provide for resales of all Transfer
Restricted Securities the holders of which shall have provided certain
information required pursuant to the Registration Rights Agreement; and (y) use
its best efforts to cause such Shelf Registration Statement to be declared
effective by the Commission on or before the 150th day after the obligation to
file the Shelf Registration Statement arises. The Company shall use its best
efforts to keep such Shelf Registration Statement continuously effective,
supplemented and amended as required by certain provisions of the Registration
Rights Agreement to the extent necessary to ensure that it is available for
resales of Notes by the holders of Transfer Restricted Securities entitled to
the benefit of the Shelf Registration, and to ensure that it conforms with the
requirements of the Registration Rights Agreement, the Securities Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the date on which such Shelf
Registration Statement first becomes effective under the Act, or such shorter
period as will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto.
The Registration Rights Agreement provides that a registration default will
occur if (i) any of the registration statements required by the Registration
Rights Agreement are not filed with the Commission on or prior to the date
specified for such filing in the Registration Rights Agreement, (ii) any of such
Registration Statements have not been declared effective by the Commission on or
prior to the date specified for such effectiveness in the Registration Rights
Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not
been consummated within 30 business days after the Effectiveness Target Date
with respect to the Exchange Offer Registration Statement or (iv) any
registration statement required by the Registration Rights Agreement is filed
and declared effective but shall thereafter cease to be
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effective or fail to be usable in connection with resales of Transfer Restricted
Securities during the time period specified by the Registration Rights Agreement
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself immediately
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default").
The Registration Rights Agreement provides that in the event of a
Registration Default, the Company is required to pay as liquidated damages
("Liquidated Damages") to each holder of Transfer Restricted Securities (as
defined in the Registration Rights Agreement), with respect to the first 90-day
period immediately following the occurrence of such Registration Default, in an
amount equal to $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such holder for each week or portion thereof that the
Registration Default continues. The amount of the liquidated damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued Liquidated Damages shall be paid to record
holders by the Company by wire transfer of immediately available funds or by
federal funds check on each damages payment date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of Liquidated Damages with respect
to such Transfer Restricted Securities will cease. All obligations of the
Company set forth in this paragraph that are outstanding with respect to any
Transfer Restricted Security at the time such security ceases to be a Transfer
Restricted Security shall survive until such time as all such obligations with
respect to such security shall have been satisfied in full. The filing and
effectiveness of the Registration Statement of which this Prospectus is a part
and the consummation of the Exchange Offer will eliminate all rights of the
holders of Series A Notes eligible to participate in the Exchange Offer to
receive damages that would have been payable if such actions had not occurred.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Series A Notes eligible to participate in the Exchange
Offer will terminate upon consummation of the Exchange Offer except with respect
to the Company's continuing obligations (i) to indemnify such holders (including
any broker-dealers) and certain parties related to such holders against certain
liabilities (including liabilities under the Securities Act), (ii) to provide,
upon the request of any holder of a transfer-restricted Senior Note, the
information required by Rule 144A(d)(4) under the Securities Act in order to
permit resales of such Series A Notes pursuant to Rule 144A, (iii) to use its
best efforts to keep the Registration Statement effective to the extent
necessary to ensure that it is available for resales of transfer-restricted
Series A Notes by broker-dealers for a period of up to one year from the date of
this Prospectus, (iv) to provide copies of the latest version of the Prospectus
to broker-dealers upon their request for a period of up to one year from the
date of this Prospectus and (v) to pay Liquidated Damages pursuant to the
Registration Rights Agreement accruing prior to the effectiveness of the
Exchange Offer Registration Statement.
EXCHANGE AGENT
SouthTrust Bank, National Association has been appointed as Exchange Agent
of the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
By Overnight Courier or by Hand or by Registered or Certified Mail:
SouthTrust Bank, National Association
100 Office Park Drive
Birmingham, Alabama 35223
Attention: Corporate Trust Services
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In addition, questions and requests may be directed to the Exchange Agent by
telephone at (205) 254-5105, or by facsimile at (205) 254-4180.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
[$ ]. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Series A Notes pursuant to the Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the exchange of the Series A Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Series A
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Series A Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Series A
Notes may be resold only (i) to a person whom the seller reasonably believes is
a qualified institutional buyer as defined in Rule 144A of the Securities Act in
a transaction meeting the requirements of Rule 144A of the Securities Act, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
APPRAISAL RIGHTS
HOLDERS OF NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL RIGHTS IN
CONNECTION WITH THE EXCHANGE OFFER.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an Indenture (the "Indenture")
among the Company, the Guarantor and SouthTrust Bank, National Association, as
trustee (the "Trustee"). The terms of the Exchange Notes are identical in all
respects to the terms of the Series A Notes for which they may be exchanged
pursuant to this Exchange Offer, except that (i) the Exchange Offer will have
been registered under the Securities Act, and therefore, the Exchange Notes will
not bear legends restricting the transfer thereof and (ii) the holders of the
Exchange Notes will generally not be entitled to registration rights under the
Registration Rights Agreement. The Exchange Notes will evidence the same debt as
the Series A Notes. The terms of the Exchange Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (the "Trust Indenture Act"). The Exchange Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and the Trust Indenture Act for a statement thereof. The following summary of
the material provisions of the Indenture does not purport to be complete and is
qualified in its entirety by reference to the Indenture, including the
definitions therein of certain terms used below. A copy of the Indenture is
available as set forth below under "--Additional Information." The definitions
of certain terms used in the following summary are set forth below under
"--Certain Definitions." For purposes of this summary, the term "Company" refers
only to Chattem, Inc. and not to any of its Subsidiaries.
The Exchange Notes will be general unsecured obligations of the Company,
will be subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including Senior Indebtedness under the Senior
Credit Facility, and will rank PARI PASSU or senior in right of payment with all
existing and future subordinated indebtedness of the Company. As of February 28,
1998, on a pro forma basis after giving effect to the Transaction (including the
offering of Series A Notes), the aggregate principal amount of Senior
Indebtedness (excluding trade payables and other accrued liabilities) of the
Company would have been approximately $62.4 million, all of which would have
been Indebtedness secured by substantially all of the assets of the Company and
the Guarantor pursuant to the Senior Credit Facility. The terms of the Indenture
limit, subject to compliance with a Fixed Charge Coverage Ratio test, the
ability of the Company and its subsidiaries to incur additional Indebtedness.
Presently, all of the Company's Subsidiaries are Restricted Subsidiaries.
However, under certain circumstances, the Company will be able to designate
current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants set forth
in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $200.0 million and
will mature on April 1, 2008. The Indenture provides for the issuance of up to
$75.0 million aggregate principal amount of additional Notes having identical
terms and conditions to the Exchange Notes (the "Additional Notes"), subject to
compliance with the covenants contained in the Indenture. Any Additional Notes
will be part of the same issue as the Exchange Notes and will vote on all
matters with the Exchange Notes. For purposes of this "Description of Exchange
Notes," references to the Exchange Notes do not include Additional Notes.
Interest on the Notes will accrue at the rate of 8 7/8% per annum and will be
payable semi-annually in arrears on April 1 and October 1, commencing on October
1, 1998, to Holders of record on the immediately preceding March 15 and
September 15. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages on the Notes will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders
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of the Notes at their respective addresses set forth in the register of Holders
of Notes; provided that all payments of principal, premium, interest and
Liquidated Damages with respect to Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Indebtedness,
whether outstanding on the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes will be entitled to receive any payment with respect to the Notes, and
until all Obligations with respect to Senior Indebtedness are paid in full, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that Holders of Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under the
caption "--Legal Defeasance and Covenant Defeasance") if (i) a default in the
payment of the principal of, premium, if any, or interest on Designated Senior
Indebtedness occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Indebtedness that permits holders of the Designated Senior Indebtedness
as to which such default relates to accelerate its maturity and the Trustee
receives a notice of such default (a "Payment Blockage Notice") from the Company
or the holders of any Designated Senior Indebtedness. Payments on the Notes may
and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the date on which the applicable Payment Blockage Notice is
received, unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced unless and until
(i) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal, premium,
if any, interest and Liquidated Damages, if any, on the Notes that have come due
have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the Trustee
shall be, or be made, the basis for a subsequent Payment Blockage Notice.
The Indenture requires that the Company promptly notify holders of Senior
Indebtedness if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Company who are holders of Senior Indebtedness. On a pro forma
basis, after giving effect to the Transaction (including the offering of Series
A Notes) and the application of the proceeds therefrom, the principal amount of
Senior Indebtedness outstanding at February 28, 1998, would have been
approximately $62.4 million. The Indenture limits, subject to certain financial
tests, the amount of additional Indebtedness, including Senior Indebtedness,
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that the Company and its Subsidiaries can incur. See " --Certain Covenants --
Incurrence of Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes are fully and
unconditionally, jointly and severally guaranteed on a senior subordinated basis
(the "Subsidiary Guarantees") by the Guarantors. The Subsidiary Guarantees are
subordinated in right of payment to all existing and future Senior Indebtedness
of the Guarantors, including all obligations of the Guarantors under the Senior
Credit Facility and rank PARI PASSU or senior in right of payment with any
subordinated indebtedness of the Guarantors. The obligation of each Guarantor
under its Subsidiary Guarantee limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Conveyance
Risks."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture and (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Repurchase at
Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to April 1, 2003.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 104.4375%
2004.............................................................................. 102.9583%
2005.............................................................................. 101.4791%
2006 and thereafter............................................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, at any time on or before April 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 108.875% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds to
the Company of one or more Public Offerings; PROVIDED that at least $100.0
million in the aggregate principal amount of Notes originally issued remain
outstanding immediately after the occurrence of such redemption (excluding Notes
held by the Company or any of its Subsidiaries); and PROVIDED, further, that
such redemption shall occur within 60 days of the date of the closing of such
Public Offering.
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SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; PROVIDED
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 20 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture will provide
that, prior to complying with the provisions of this covenant, but in any event
within 90 days following a Change of Control, the Company will either repay all
outstanding Senior Indebtedness or obtain the requisite consents, if any, under
all agreements governing outstanding Senior Indebtedness to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
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The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Company
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
The Senior Credit Facility provides that certain change of control events
with respect to the Company would constitute a default thereunder. Any future
credit agreements or other agreements relating to Senior Indebtedness to which
the Company becomes a party may contain similar restrictions and provisions. In
the event a Change of Control occurs at a time when the Company is prohibited
from repurchasing Notes, the Company could seek the consent of its lenders to
the repurchase of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from repurchasing Notes. In
such case, the Company's failure to repurchase tendered Notes would constitute
an Event of Default under the Indenture which would, in turn, constitute a
default under the Senior Credit Facility. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to
Holders of 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 set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing 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 Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Qualified Proceeds, PROVIDED, that the aggregate fair market value of Qualified
Proceeds which may be received in consideration for Asset Sales pursuant to this
clause (ii) shall not exceed $5.0 million since the Issue Date; PROVIDED,
FURTHER that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently repay
(and reduce the commitments under) Senior
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Indebtedness of the Company or a Guarantor or (b) to the acquisition of a
Permitted Business, or a majority of the Voting Stock of, a Permitted Business,
the making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in a Permitted Business. Pending the final application
of any such Net Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Company will be required to make an offer to
all Holders of Notes and all holders of other Indebtedness containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes and such other Indebtedness that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture and such other
Indebtedness. To the extent that any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other Indebtedness to be purchased on a
pro rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
other distributions payable to the Company or a Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is PARI PASSU with or subordinated to the Notes (other than
Notes), except a payment of interest or principal at Stated Maturity; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock"; and
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(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii) and (iv) of the next succeeding paragraph),
is less than the sum, without duplication, of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after the date of
the Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company since the date of the Indenture as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary
of the Company), plus (iii) to the extent that any Restricted Investment
that was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of capital
with respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment plus (iv) $7.5
million.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of PARI PASSU or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; PROVIDED that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $500,000 in any twelve-month period and no
Default or Event of Default shall have occurred and be continuing immediately
after such transaction.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or
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appraisal issued by an accounting, appraisal or investment banking firm of
national standing if such fair
market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and the Guarantors may incur
Indebtedness (including Guarantees) or issue preferred stock if the Fixed Charge
Coverage Ratio for the Company's most recently ended four full fiscal quarters
for which internal financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such Disqualified
Stock or preferred stock is issued would have been at least 2.0 to 1.0,
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock or preferred stock had been issued, as the case may be, at
the beginning of such four-quarter period.
The foregoing provisions will not apply to the incurrence of any of the
following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness (including letters of
credit, with letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company and its Restricted Subsidiaries
thereunder) under the Senior Credit Facility; PROVIDED that the aggregate
principal amount of all Indebtedness (including letters of credit) outstanding
under the Senior Credit Facility after giving effect to such incurrence does not
exceed an amount equal to $92.5 million less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently repay any such Indebtedness
pursuant to the covenant described above under the caption "Repurchase at the
Option of Holders--Asset Sales."
(ii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the Notes
(other than any Additional Notes) and the Exchange Notes (other than any
Additional Notes) and the incurrence by the Guarantors of Indebtedness
represented by the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Subsidiary, in an aggregate principal amount not to exceed $10.0 million at any
time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that is either the Existing Indebtedness or was permitted by the
Indenture to be incurred under the first paragraph hereof or clauses (iii), (iv)
or (v) of this paragraph;
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(vi) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its Wholly
Owned Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly Owned
Restricted Subsidiary thereof shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or such Restricted Subsidiary, as
the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(viii) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that is permitted to be
incurred by another provision of this covenant;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness (in addition to Indebtedness or Guarantees permitted by any other
clause of this paragraph) in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (ix), not to exceed $15.0 million;
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (x); and
(xi) the incurrence of Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, incurred
in connection with the disposition of any business, assets or Subsidiary of the
Company (other than Guarantees of Indebtedness incurred by any Person acquiring
all or any portion of such business, assets or Subsidiary for the purpose of
financing such acquisition), provided that none of the foregoing results in
Indebtedness required to be reflected as Indebtedness on the balance sheet of
the Company or any such Subsidiary in accordance with GAAP and the maximum
aggregate liability in respect of all such Indebtedness shall at no time exceed
100% of the gross proceeds actually received by the Company and its Subsidiaries
in connection with such disposition.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xi) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms, and the payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an
issuance of Disqualified Stock for purposes of this covenant; PROVIDED, in each
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued.
LIENS
The Indenture provides that the Company will not, and will not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade
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payables on any asset now owned or hereafter acquired, or any income or profits
therefrom or assign or convey any right to receive income therefrom, except
Permitted Liens, unless all payments due under the Indenture and the Notes are
secured on an equal and ratable basis with the Indebtedness so secured until
such time as such is no longer secured by a Lien; provided that if such
Indebtedness is by its terms expressly subordinated to the Notes or any
Subsidiary Guarantee, the Lien securing such Indebtedness shall be subordinate
and junior to the Lien securing the Notes and the Subsidiary Guarantees with the
same relative priority as such subordinate or junior Indebtedness shall have
with respect to the Notes and the Subsidiary Guarantees.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (h) Permitted Refinancing
Indebtedness, PROVIDED that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (i) Liens securing Indebtedness otherwise permitted to be
incurred pursuant to the provisions of the covenant described above under the
caption "--Liens" that limits the right of the debtor to dispose of the assets
securing such Indebtedness, (j) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (k) restrictions on
cash or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business, and (l) the Senior Credit Facility,
PROVIDED that such restrictions are no more restrictive than those contained in
the Senior Credit Facility as in effect on the Issue Date.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the
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Company) or the entity or Person to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made assumes all the
obligations of the Company under the Registration Rights Agreement, the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the
Company or the entity or Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) will, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors or the payment of fees and indemnities of directors of
the Company and its Subsidiaries, in each case, in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (ii) loans or advances to employees in the ordinary course of
business and consistent with past practice, (iii) transactions between or among
the Company and/or its Restricted Subsidiaries, (iv) payment of reasonable
directors fees to Persons who are not otherwise Affiliates of the Company, and
(v) Restricted Payments (other than Restricted Investments) that are permitted
by the provisions of the Indenture described above under the caption
"--Restricted Payments."
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LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Equity Interests in any Restricted Subsidiary of the
Company to any Person (other than the Company or a Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests in such Restricted Subsidiary and (b) the cash
Net Proceeds from such transfer, conveyance, sale, lease or other disposition
are applied in accordance with the covenant described above under the caption
"--Asset Sales," and (ii) will not permit any Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Restricted Subsidiary of the Company.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Indebtedness and senior
in any respect in right of payment to the Notes and (ii) no Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness of such Guarantor that is subordinate or junior in right of payment
to any Indebtedness of such Guarantor and senior in any respect in right of
payment to the Subsidiary Guarantee of such Guarantor.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company nor any of its Subsidiaries
will, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the Notes unless such consideration is offered to be paid or
is paid to all Holders of the Notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K if the
Company were required to file such Forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations" that describes
the financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operation of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to
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securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that (i) the Company will not permit any of its
Restricted Subsidiaries that is not a Subsidiary Guarantor to Guarantee or
secure through the granting of Liens the payment of any Indebtedness of the
Company or any Subsidiary Guarantor and (ii) the Company will not and will not
permit any of its Restricted Subsidiaries to pledge any intercompany notes
representing obligations of any of its Restricted Subsidiaries, to secure the
payment of any Indebtedness of the Company or any Subsidiary Guarantor, in each
case unless such Subsidiary, the Company and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Subsidiary Guarantee
(providing for the unconditional guarantee by such Restricted Subsidiary, on a
senior subordinated basis, of the Notes).
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries to comply with the provisions described under
the captions "--Change of Control," "--Asset Sales," "--Restricted Payments" or
"--Incurrence of Indebtedness and Issuance of Preferred Stock", (iv) failure by
the Company or any of its Restricted Subsidiaries for 60 days after notice to
comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $7.5 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $7.5 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Restricted
Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Restricted Subsidiary
or any group of Restricted Subsidiaries that, taken together, would constitute a
Significant Restricted Subsidiary, all outstanding Notes will become due and
payable without further action or notice. Holders of the Notes may not enforce
the Indenture or the Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any
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continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to April
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to April 1, 2003 then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages,
if any, on the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must
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specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Covenant Defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant Defeasance
had not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (vi) the Company
must have delivered to the Trustee an opinion of counsel to the effect that
after the 91st day following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; (vii) the Company must deliver to
the Trustee an Officers' Certificate stating that the deposit was not made by
the Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
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Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders"), (viii) release any Guarantor
from any of its obligations under its Subsidiary Guarantee or the Indenture,
except in accordance with the terms of the Indenture or (ix) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the Notes to cure any ambiguity, defect or inconsistency, to
provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of Notes in the case of a merger or consolidation or sale
of all or substantially all of the Company's assets, to provide for the issuance
of Additional Notes in accordance with the provisions set forth in the Indenture
on the Issue Date, to make any change that would provide any additional rights
or benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with requirements of
the Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Chattem, Inc., 1715
West 38th Street, Chattanooga, Tennessee 37409, Attention: Chief Operating
Officer.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes will initially
be issued in the form of one Global Note (the "Global Note"). The Global Note
will be deposited on the date of the consummation of the Exchange Offer (the
"Closing Date") with, or on behalf of, The Depository Trust Company (the
"Depositary") and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
Exchange Notes that are issued as described below under "-Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchaser), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Note and (ii) ownership of the Exchange Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Exchange Notes evidenced by the
Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of and premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of the
Depositary. Payments by the
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Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Securities Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Notes in the form of Certificated
Securities. Upon any such issuance, the Trustee is required to register such
Certificated Securities in the name of, and cause the same to be delivered to,
such person or persons (or the nominee of any thereof). All such certificated
Notes would be subject to the legend requirements described herein under "Notice
to Investors." In addition, if (i) the Company notifies the Trustee in writing
that the Depositary is no longer willing or able to act as a depositary and the
Company has not located a qualified successor within 90 days after delivery of
notice from the Depositary of such resignation or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance of
Notes in the form of Certificated Securities under the Indenture, then, upon
surrender by the Global Note Holder of its Global Note, Notes in such form will
be issued to each person that the Global Note Holder and the Depositary identify
as being the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in the Depositary's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in any
certificated Notes will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person,
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whether through the ownership of voting securities, by agreement or otherwise;
PROVIDED that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
(provided that the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of the Indenture described
above under the caption "--Change of Control" and/or the provisions described
above under the caption "--Merger, Consolidation or Sale of Assets" and not by
the provisions of the Asset Sale covenant), and (ii) the issue by any Restricted
Subsidiaries of the Company of any Equity Interests of such Restricted
Subsidiary and the sale by the Company or any of its Restricted Subsidiaries of
Equity Interest of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following items shall not be deemed to be Asset Sales: (i) a transfer of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments", (iv) the issuance by the Company of
shares of its Capital Stock, (v) the sale or other disposition of cash or Cash
Equivalents, (vi) the sale or disposition of damaged, worn out or other obsolete
personal property in the ordinary course of business, (vii) the surrender or
waiver of contract rights or the settlement, release or surrender of contract,
tort or other claims of any kind, (viii) the granting of Liens not prohibited by
the Indenture or (ix) the execution and performance of contracts to provide
manufacturing and other services, including in connection with Asset Sales.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and surplus
in excess of $500 million and a Thompson Bank Watch Rating of "B" or better,
(iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case maturing within six months after the date of acquisition and (vi)
money market funds the assets of which constitute Cash Equivalents of the kinds
described in clauses (i)--(v) of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of
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related transactions, of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares); (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or; (iv) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance).
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was included in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations but excluding amortization
of debt issuance costs), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, the
provision for taxes on the income or profits of, and the depreciation and
amortization and other non-cash expenses of, a Restricted Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent (and in the same proportion) that the
Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
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Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof that is a Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) so long as the Senior Credit
Facility is outstanding, Obligations under the Senior Credit Facility and (ii)
thereafter, any other Senior Indebtedness permitted under the Indenture the
aggregate principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Indebtedness."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the Holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"--Certain Covenants-- Restricted Payments."
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"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments (if any) pursuant to Hedging
Obligations but excluding the amortization of debt issuance costs) and (ii) the
consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person and
its Restricted Subsidiaries for such period. In the event that the referent
Person or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (iii) the Fixed Charges attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements
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by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"GUARANTORS" means (i) each domestic Subsidiary of the Company on the Issue
Date and (ii) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Subsidiary of the Company sells or otherwise disposes of
any Equity Interests of any direct or indirect Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "--Restricted Payments."
"ISSUE DATE" means the closing date for the sale and original issuance of
the Notes under the Indenture.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
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"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain or loss, realized in
connection with (a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain or loss, together
with any related provision for taxes on such extraordinary or nonrecurring gain
or loss.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than debt under the Senior Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness, including with respect to
Indebtedness under the Senior Credit Facility, interest accruing after the
filing of a petition initiating any proceeding pursuant to any bankruptcy law
whether or not the claim for such interest is allowed as a claim after such
filing in any proceeding under such bankruptcy law.
"PERMITTED BUSINESS" means the business conducted by the Company and its
Restricted Subsidiaries on the Issue Date and businesses reasonably related
thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Wholly Owned Restricted Subsidiary of the Company or (ii) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (f) the conversion of preferred
stock of Elcat, Inc. owned by the Company on the Issue Date into common stock of
Elcat, Inc. in accordance with the terms of such preferred stock; and (g) other
Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value),
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when taken together with all other Investments made pursuant to this clause (f)
that are at the time outstanding, not to exceed $12.5 million.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Indebtedness pursuant to the Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company or any of the
Guarantors securing Senior Indebtedness under the Senior Credit Facility that
were permitted by the terms of the Indenture to be incurred; (ii) Liens in favor
of the Company; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with the Company or any Subsidiary of the
Company;PROVIDEDthat such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than those of
the Person merged into or consolidated with the Company; (iv) Liens on property
existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, PROVIDED that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (v)
Liens to secure Indebtedness (including Capital Lease Obligations) permitted by
clause (iv) of the second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only the assets acquired
with such Indebtedness; (vi) Liens existing on the date of the Indenture; (vii)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, PROVIDED that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens incurred in the ordinary course of business of
the Company or any Subsidiary of the Company with respect to obligations that do
not exceed $5.0 million at any one time outstanding and that (a) are not
incurred in connection with the borrowing of money or the obtaining of advances
or credit (other than trade credit in the ordinary course of business) and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use thereof in the operation of business by the Company or
such Subsidiary; (ix) Liens on any insurance policies arising out of borrowings
against the cash surrender value of such insurance policies held by the Company,
PROVIDED that such Liens do not exceed the amount of Indebtedness and are
secured only by the cash surrender value of such insurance policies; (x) Liens
on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (xi) Liens on assets of the Company securing Senior
Indebtedness of the Company that was permitted to be incurred by the terms of
the Indenture and Liens on assets of a Guarantor securing Senior Indebtedness of
such Guarantor that was permitted to be incurred by the terms of the Indenture;
and (xii) other than a deferred payment obligation of a purchase price for the
purchase of assets or a business or by means of a royalty or otherwise based on
sales of an acquired asset or business.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premium and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on
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terms at least as favorable to the Holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Company or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"PUBLIC OFFERING" means an underwritten public offering of common stock
(other than Disqualified Stock) of the Company, pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act.
"QUALIFIED PROCEEDS" means any of the following or any combination of the
following: (i) long-term assets that are used or useful in a Permitted Business,
(ii) the Capital Stock of any Person engaged primarily in a Permitted Business
if, in connection with the receipt by the Company or any Restricted Subsidiary
of the Company of such Capital Stock, (a) such Person becomes a Wholly-Owned
Subsidiary and a Guarantor or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or any Wholly-Owned Subsidiary of
the Company that is a Guarantor.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR CREDIT FACILITY" means those certain Credit Agreements, dated as of
June 26, 1997, as amended, by and among the Company, NationsBank of Tennessee,
N.A., as agent and the other lenders party thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"SENIOR INDEBTEDNESS" means (i) all Obligations of the Company or any of its
Subsidiaries outstanding under the Senior Credit Facility and all Hedging
Obligations with respect thereto, (ii) any other Indebtedness permitted to be
incurred by the Company or any of its Subsidiaries under the terms of the
Indenture, unless the instrument under which such Indebtedness is incurred
expressly provides that it is on a parity with or subordinated in right of
payment to the Notes or any Guarantor's Subsidiary Guarantee of the Notes and
(iii) all Obligations with respect to the foregoing. Notwithstanding anything to
the contrary in the foregoing, Senior Indebtedness will not include (w) any
liability for federal, state, local or other taxes owed or owing by the Company
or any of its Subsidiaries, (x) any Indebtedness of the Company or any of its
Subsidiaries to any Subsidiary or other Affiliate, (y) any trade payables or (z)
any Indebtedness that is incurred in violation of the Indenture. Senior
Indebtedness will not include the Existing Notes.
"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date of
the Indenture.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner
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or the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described above under the caption
"Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period and (ii) no Default or Event of Default would be in existence
following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF OTHER INDEBTEDNESS
SECURED CREDIT FACILITY
GENERAL. Concurrently with the consummation of the Transaction, the Company
entered into the Secured Credit Facility Amendment consisting of (i) an amended
and restated credit agreement (the "New Credit Agreement") with NationsBank of
Tennessee, N.A. (the "Agent"), as agent and a syndicate of lenders, providing
for borrowings in an aggregate principal amount of up to $30.0 million (the
"Secured Revolving Credit Facility") and (ii) an amended and restated credit
agreement (the "Supplemental Credit Agreement") with the Agent and a syndicate
of lenders providing for a Tranche A term loan (the "Amended Term Loan A") in
the principal amount of $27.5 million and a Tranche B term loan (the "Amended
Term Loan B") in the principal amount of $34.8 million (the "Secured Term Loan
Facility") (the New Credit Agreement and Supplemental Credit Agreement may be
referred to collectively herein as the "Credit Agreements"). The Secured Credit
Facility Amendment is guaranteed by each of the Company's existing and hereafter
acquired domestic subsidiaries. This information relating to the Secured Credit
Facility Amendment is qualified in its entirety by reference to the complete
text of the documents entered into in connection therewith. The following is a
description of the general terms of the Secured Credit Facility Amendment.
SECURITY. Indebtedness under the Secured Credit Facility Amendment is
secured by (i) substantially all of the assets of the Company and its domestic
subsidiaries, (ii) 100% of the outstanding capital stock of the Company's
domestic subsidiaries and (iii) 65% of the outstanding capital stock of any
foreign subsidiary of the Company other than HBA Insurance Ltd.
INTEREST. The Company may elect either the greater of the prime rate or
federal funds plus 1/2%, or a Eurodollar interest rate option applicable to the
term and revolving credit loans under the Secured Credit Facility Amendment. The
greater of the prime rate or federal funds plus 1/2%, and Eurodollar interest
rate options are based on a base rate plus a rate margin that fluctuates on the
basis of the Company's leverage ratio. The maximum rate margin for the Amended
Term Loan A and the Secured Revolving Credit Facility is 2.0% for the prime rate
option and 3.0% for the Eurodollar rate option. The maximum rate margin for the
Amended Term Loan B is 2.5% for the prime rate option and 3.5% for the
Eurodollar rate option.
BORROWING BASE. Pursuant to the terms of the Secured Revolving Credit
Facility, advances under the Secured Revolving Credit Facility are limited to a
borrowing base comprised of specified percentages of eligible accounts
receivable and eligible inventory.
MATURITY. Loans made pursuant to the Secured Revolving Credit Facility may
be borrowed, repaid and reborrowed from time to time until June 26, 2002,
subject to the satisfaction of certain conditions on the date of any such
borrowing. Loans under Amended Term Loan A are due June 26, 2002, and loans
under Amended Term Loan B are due June 14, 2004.
COVENANTS. The Secured Credit Facility Amendment contains a number of
financial, affirmative and negative covenants that regulate the operation of the
Company and its subsidiaries. Financial covenants require the Company to
maintain: (i) a minimum consolidated net worth, (ii) a minimum fixed charge
coverage ratio (iii) a minimum interest coverage ratio, (iv) a maximum leverage
ratio and (v) a maximum senior leverage ratio of senior debt to EBITDA. Negative
covenants will restrict, among other things, the incurrence of debt, the
existence of liens, transactions with affiliates, loans, advances and
investments, payment of dividends and other distributions to shareholders,
dispositions of assets, mergers, consolidations and dissolutions, contingent
liabilities and changes in business.
EVENTS OF DEFAULT; REMEDIES. The Credit Agreements contain customary events
of default, including (i) the non-payment of principal, interest or other
amounts, (ii) violation of covenants, (iii) inaccuracy of representations and
warranties, (iv) cross-defaults to certain other indebtedness in material
agreements (including the Notes), (iv) certain events of bankruptcy and
insolvency, (v) ERISA, (vi) actual or asserted
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invalidity of any loan documents or security interests, (vii) changes in control
in ownership of the Company, and (viii) bankruptcy. If any such event of default
occurs, the Agent will be entitled, on behalf of the lenders, to take all
actions permitted to be taken by a secured creditor under the Uniform Commercial
Code, enforce all rights created under the Credit Agreements and to accelerate
the amounts due under the Secured Credit Facility Amendment and may require all
such amounts outstanding thereunder to be immediately paid in full.
EXISTING NOTES
In 1994, the Company issued 75,000 units consisting of (i) $75.0 million in
aggregate principal amount of Existing Notes and (ii) five year warrants to
purchase 417,182 shares of common stock (the "Warrants").
The Existing Notes mature on June 15, 2004, and interest is payable
semi-annually on June 15 and December 15. The Existing Notes may be redeemed at
the option of the Company, in whole or in part, at 101.594% of the principal
amount thereof (plus accrued interest thereon) from June 15, 2001 through June
14, 2002 and at par (plus accrued interest thereon) thereafter. Upon the
occurrence of certain events constituting a change of control triggering event,
the holders of the Existing Notes may require the Company to repurchase the
Existing Notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest. The Existing Notes are guaranteed by
Signal, a wholly-owned subsidiary of the Company.
The Existing Notes are issued under an indenture with an indenture trustee,
which restricts, among other things, the ability of the Company and its
subsidiaries to (i) incur additional indebtedness, (ii) pay dividends, (iii)
sell or issue capital stock of a subsidiary, (iv) create encumbrances on the
ability of any subsidiary to pay dividends or make other restricted payments,
(v) engage in certain transactions with affiliates, (vi) dispose of certain
assets, (vii) merge or consolidate with or into, or sell or otherwise transfer
all or substantially all their properties and assets as an entirety to another
person, or (viii) create additional liens.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion describes the material federal income tax
consequences expected to result to holders whose Series A Notes are exchanged
for Exchange Notes in the Exchange Offer. This discussion is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. There can be no assurance that the Internal Revenue Service (the
"Service") will not take a contrary view, and no ruling from the Service has
been or will be sought with respect to the Exchange Offer. Legislative, judicial
or administrative changes or interpretations may be forthcoming that could alter
or modify the statements and conclusions set forth herein. Any such changes or
interpretations may or may not be retroactive and could affect the tax
consequences to holders. Certain holders (including, but not limited to,
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) may be subject to special rules not discussed
below. EACH HOLDER OF SERIES A NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF EXCHANGING SERIES A NOTES FOR EXCHANGE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Exchange Notes for Series A Notes pursuant to the Exchange
Offer should not be treated as an "exchange" for federal income tax purposes
because the Exchange Notes should not be considered to differ materially in kind
or extent from the Series A Notes. Rather, the Exchange Notes received by a
Holder should be treated as a continuation of the Series A Notes in the hands of
such Holder. As a result, there should be no federal income tax consequences to
Holders exchanging Series A Notes for Exchange Notes pursuant to the Exchange
Offer. If, however, the exchange of Series A Notes for
95
<PAGE>
Exchange Notes were treated as an "exchange" for federal income tax purposes,
such exchange should constitute a recapitalization for federal income tax
purposes. Holders exchanging Series A Notes for Exchange Notes pursuant to such
recapitalization should not recognize any gain or loss upon the exchange.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with the resales of Exchange Notes received in exchange for Series A
Notes where such Series A Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that for a period
of up to one year after the date of this Prospectus, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders of Series A Notes (including any broker-dealers), and
certain parties related to such holders, against certain liabilities, including
liabilities under the Securities Act. The Company has agreed to reimburse the
Initial Purchaser and holders of Transfer Restricted Securities being tendered
in the Exchange Offer and or resold pursuant to this Plan of Distribution or
registered pursuant to a Shelf Registration Statement, as applicable, for
reasonable attorneys' fees.
Each holder of the Series A Notes who wishes to exchange its Series A Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer Terms of the
Exchange Offer."
The Initial Purchaser and certain of its affiliates have engaged in and may
in the future engage in investment banking and commercial banking transactions
with the Company in the ordinary course of business. The Initial Purchaser also
was the arranger and syndication agent under the Secured Credit Facility.
NationsBank of Tennessee, N.A., an affiliate of the Initial Purchaser, was a
lender and administrative agent under the Secured Credit Facility, in respect of
which it receives customary fees.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of
96
<PAGE>
which information is given herein. The Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Series A Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, the
Company may at its discretion, take such action as it may deem necessary to make
the Exchange Offer in any such jurisdiction and extend the Exchange Offer to
holders of Series A Notes in such jurisdiction. In any jurisdiction the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Offer will be passed
upon for the Company by Miller & Martin LLP, Chattanooga, Tennessee.
EXPERTS
The Consolidated Financial Statements of the Company included in this
registration statement to the extent and for the periods indicated in their
reports have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said firm
as experts in accounting and auditing in giving said reports.
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 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as expert in
auditing and accounting.
97
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
As of November 30, 1996 and 1997, and February 28, 1998 (unaudited), and for the years ended November 30,
1995, 1996, and 1997, and for the three months ended February 28, 1997 and 1998 (unaudited):
Chattem, Inc. and Subsidiaries
Report of Independent Public Accountants................................................................. F-2
Consolidated Balance Sheets.............................................................................. F-3
Consolidated Statements of Income........................................................................ F-4
Consolidated Statements of Shareholders' Equity (Deficit)................................................ F-5
Consolidated Statements of Cash Flows.................................................................... F-6
Notes to Consolidated Financial Statements............................................................... F-7
Signal Investment & Management Co.
Report of Independent Public Accountants................................................................. F-23
Balance Sheets........................................................................................... F-24
Statements of Income..................................................................................... F-25
Statements of Shareholders' Equity....................................................................... F-26
Statements of Cash Flows................................................................................. F-27
Notes to Financial Statements............................................................................ F-28
As of December 31, 1996 and 1997, and for the years ended December 31, 1995, 1996, and 1997:
U.S. Ban
Report of Independent Public Accountants................................................................. F-31
Statement of U.S. Assets and Liabilities................................................................. F-32
Statement of U.S. Net Sales and Product Contribution..................................................... F-33
Notes to the Statement of U.S. Assets and Liabilities and the Statement of U.S. Net Sales and Product
Contribution........................................................................................... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Chattem, Inc.:
We have audited the accompanying consolidated balance sheets of Chattem,
Inc. (a Tennessee corporation) and subsidiaries as of November 30, 1996 and 1997
and the related consolidated statements of income, shareholders' equity
(deficit) and cash flows for each of the three years in the period ended
November 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Chattem, Inc. and
subsidiaries as of November 30, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
January 19, 1998 (EXCEPT WITH
RESPECT TO THE RESTATEMENT OF NET INCOME PER COMMON SHARE AS DISCUSSED IN NOTE 2
AND THE MATTER DISCUSSED IN NOTE 15 AS TO WHICH THE DATE IS MARCH 24, 1998)
F-2
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY
------------------ 28,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents............. $ 9,254 $ 4,858 $ 1,398
Accounts receivable, less allowance
for doubtful accounts of $450 in
1996, $500 in 1997 and $500 in
1998................................ 20,276 28,078 30,596
Refundable and deferred income
taxes............................... 5,405 1,876 1,876
Inventories........................... 10,295 14,493 16,737
Prepaid expenses and other current
assets.............................. 912 667 748
-------- -------- --------
Total current assets.............. 46,142 49,972 51,355
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, NET...... 9,774 10,988 11,045
-------- -------- --------
OTHER NONCURRENT ASSETS:
Investment in Elcat, Inc.............. 5,984 6,640 6,804
Patents, trademarks and other
purchased product rights, net....... 76,024 104,972 104,223
Debt issuance costs, net.............. 3,819 3,118 3,166
Other................................. 10,440 3,054 2,158
-------- -------- --------
Total other noncurrent assets..... 96,267 117,784 116,351
-------- -------- --------
TOTAL ASSETS.................... $152,183 $178,744 $178,751
-------- -------- --------
-------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term
debt................................ $ 3,906 $ 8,919 $ 9,089
Accounts payable...................... 6,602 9,319 3,960
Payable to bank....................... 1,710 2,618 5,368
Accrued liabilities................... 14,131 13,596 13,067
-------- -------- --------
Total current liabilities......... 26,349 34,452 31,484
-------- -------- --------
LONG-TERM DEBT, less current
maturities............................ 127,438 133,475 136,034
-------- -------- --------
DEFERRED INCOME TAXES................... 2,917 3,290 3,290
-------- -------- --------
OTHER NONCURRENT LIABILITIES............ 2,659 3,157 2,976
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 5,
10 and 12)
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred shares, without par value,
authorized 1,000, none issued....... -- -- --
Common shares, without par value,
authorized 20,000, issued 8,592 in
1996, 9,082 in 1997 and 9,128 in
1998................................ 1,843 1,945 1,955
Paid-in surplus....................... 58,561 63,975 64,046
Accumulated deficit................... (66,114) (60,229) (59,620 )
-------- -------- --------
(5,710) 5,691 6,381
Minimum pension liability
adjustment.......................... (112) -- --
Foreign currency translation
adjustment.......................... (1,358) (1,321) (1,414 )
-------- -------- --------
Total shareholders' equity
(deficit)....................... (7,180) 4,370 4,967
-------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)..................... $152,183 $178,744 $178,751
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
YEAR ENDED NOVEMBER 30, FEBRUARY 28,
---------------------------- ------------------
1995 1996 1997 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
NET SALES.......................... $100,598 $118,903 $143,235 $ 27,946 $ 34,921
-------- -------- -------- -------- --------
COSTS AND EXPENSES:
Cost of sales.................... 29,755 35,120 39,253 8,394 9,682
Advertising and promotion........ 37,242 45,512 56,176 11,267 15,180
Selling, general and
administrative................. 19,133 21,582 22,303 4,657 5,159
-------- -------- -------- -------- --------
Total costs and expenses..... 86,130 102,214 117,732 24,318 30,021
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS............. 14,468 16,689 25,503 3,628 4,900
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense................. (11,076) (13,394) (15,934) (3,798) (4,180)
Investment and other income,
net............................ 218 1,450 1,679 319 192
Gain on product divestitures..... -- 875 -- -- --
-------- -------- -------- -------- --------
Total other income
(expense).................. (10,858) (11,069) (14,255) (3,479) (3,988)
-------- -------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES.............. 3,610 5,620 11,248 149 912
PROVISION FOR INCOME TAXES......... 1,285 1,816 3,993 13 303
-------- -------- -------- -------- --------
INCOME FROM CONTINUING
OPERATIONS....................... 2,325 3,804 7,255 136 609
-------- -------- -------- -------- --------
DISCONTINUED OPERATIONS:
Income from operations, less
provision for income taxes of
$417........................... 674 -- -- -- --
Gain on disposal, less provision
for income taxes of $5,696..... 9,334 -- -- -- --
-------- -------- -------- -------- --------
Income from discontinued
operations..................... 10,008 -- -- -- --
-------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY LOSS... 12,333 3,804 7,255 136 609
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT, NET OF
INCOME TAXES (Note 5)............ (367) (532) (1,370) -- --
-------- -------- -------- -------- --------
NET INCOME......................... $ 11,966 $ 3,272 $ 5,885 $ 136 $ 609
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
COMMON SHARES:
Weighted average shares
outstanding.................... 7,292 8,052 8,793 8,603 9,087
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Weighted average and dilutive
potential shares outstanding... 7,292 8,143 9,123 8,807 9,491
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
NET INCOME PER COMMON SHARE:
BASIC:
Continuing operations.......... $ .32 $ .47 $ .83 $ .02 $ .07
Discontinued operations........ 1.37 -- -- -- --
Extraordinary loss............. (.05) (.06) (.16) -- --
-------- -------- -------- -------- --------
Total........................ $ 1.64 $ .41 $ .67 $ .02 $ .07
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
DILUTED:
Continuing operations.......... $ .32 $ .47 $ .80 $ .02 $ .06
Discontinued operations........ 1.37 -- -- -- --
Extraordinary loss............. (.05) (.07) (.15) -- --
-------- -------- -------- -------- --------
Total........................ $ 1.64 $ .40 $ .65 $ .02 $ .06
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM FOREIGN
PENSION CURRENCY
COMMON PAID-IN ACCUMULATED LIABILITY TRANSLATION
SHARES SURPLUS DEFICIT ADJUSTMENT ADJUSTMENT TOTAL
----------- --------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 30, 1994................... $ 1,519 $ 51,797 $ (81,352) -- $ (1,515) $ (29,551)
Net income................................. -- -- 11,966 -- -- 11,966
Stock options granted...................... -- 302 -- -- -- 302
Foreign currency translation adjustment.... -- -- -- -- (138) (138)
----------- --------- ------------ ----- ----------- ----------
Balance, November 30, 1995................... 1,519 52,099 (69,386) -- (1,653) (17,421)
Net income................................. -- -- 3,272 -- -- 3,272
Stock options exercised.................... 63 223 -- -- -- 286
Issuance of common shares.................. 261 6,239 -- -- -- 6,500
Foreign currency translation adjustment.... -- -- -- -- 295 295
Minimum pension liability adjustment....... -- -- -- (112) -- (112)
----------- --------- ------------ ----- ----------- ----------
Balance, November 30, 1996................... 1,843 58,561 (66,114) (112) (1,358) (7,180)
Net income................................. -- -- 5,885 -- -- 5,885
Stock options exercised.................... 25 962 -- -- -- 987
Stock warrants exercised................... 15 464 -- -- -- 479
Issuance of common shares.................. 62 3,988 -- -- -- 4,050
Foreign currency translation adjustment.... -- -- -- -- 37 37
Minimum pension liability adjustment....... -- -- -- 112 -- 112
----------- --------- ------------ ----- ----------- ----------
Balance, November 30, 1997................... 1,945 63,975 (60,229) -- (1,321) 4,370
Net income................................. -- -- 609 -- -- 609
Stock options exercised.................... 8 48 -- -- -- 56
Stock warrants exercised................... 2 23 -- -- -- 25
Foreign currency translation adjustment.... -- -- -- -- (93) (93)
----------- --------- ------------ ----- ----------- ----------
Balance, February 28, 1998 (Unaudited)....... $ 1,955 $ 64,046 $ (59,620) $ -- $ (1,414) $ 4,967
----------- --------- ------------ ----- ----------- ----------
----------- --------- ------------ ----- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
YEAR ENDED NOVEMBER 30, ENDED FEBRUARY 28,
---------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
---------- ---------- ---------- --------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 11,966 $ 3,272 $ 5,885 $ 136 $ 609
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 4,072 4,829 6,381 1,467 1,691
Deferred income tax provision.................................... 645 1,797 1,120 -- --
Gain on sale of specialty chemicals division..................... (9,334) -- -- -- --
Gain on product divestitures..................................... -- (875) -- -- --
Gain on sale of investment....................................... -- (452) -- -- --
Proceeds from sale of investment................................. -- 452 -- -- --
Gain on termination of interest rate cap......................... (454) (281) -- -- --
Extraordinary loss on early extinguishment of debt, net.......... 367 532 1,370 -- --
Dividend receivable from Elcat, Inc.............................. (328) (656) (656) (164) (164)
Other, net....................................................... 2,251 (379) (106) 282 (285)
Changes in operating assets and liabilities:
Accounts receivable............................................ 1,973 (3,063) (5,140) (2,603) (2,518)
Refundable income taxes........................................ 106 (2,519) 3,425 2,386 --
Inventories.................................................... (2,488) 745 (2,401) (1,429) (2,244)
Prepaid expenses and other current assets...................... (166) (359) 252 1,285 659
Accounts payable and accrued liabilities....................... (7,780) (185) (14) (4,177) (5,877)
---------- ---------- ---------- --------- ---------
Net cash provided by operating activities........................ 830 2,858 10,116 (2,817) (8,129)
---------- ---------- ---------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment......................... (2,836) (1,785) (2,758) (203) (566)
Proceeds from sale of specialty chemicals division, net............ 19,397 -- -- -- --
Proceeds from product divestitures................................. -- 1,000 -- -- --
Proceeds from notes and sales of assets............................ 227 253 75 -- --
Purchases of patents, trademarks and other product rights.......... -- (43,048) (29,293) -- (96)
Increase in other assets........................................... (26) (4,128) (746) (147) --
---------- ---------- ---------- --------- ---------
Net cash provided by (used in) investing activities.............. 16,762 (47,708) (32,722) (350) (662)
---------- ---------- ---------- --------- ---------
FINANCING ACTIVITIES:
Repayment of long-term debt........................................ (48,704) (15,032) (76,636) (1,363) (3,318)
Proceeds from long-term debt....................................... 31,100 67,944 87,500 -- 6,000
Change in payable to bank.......................................... (117) 526 908 2,125 2,750
Proceeds from sale of interest rate cap............................ 984 -- -- -- --
Proceeds from issuance of common stock, net........................ -- 5,500 -- -- --
Exercise of stock options and warrants............................. -- 286 1,274 -- 88
Debt issuance costs................................................ (253) (2,099) (1,612) -- --
Other, net......................................................... -- -- -- (27) (169)
---------- ---------- ---------- --------- ---------
Net cash provided by (used in) financing activities.............. (16,990) 57,125 11,434 735 5,351
---------- ---------- ---------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS......... -- 129 (10) (115) (20)
---------- ---------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the year................................... 602 12,404 (11,182) (2,547) (3,460)
At beginning of year............................................... 3,034 3,636 16,040 16,040 4,858
---------- ---------- ---------- --------- ---------
At end of year..................................................... $ 3,636 $ 16,040 $ 4,858 $ 13,493 $ 1,398
---------- ---------- ---------- --------- ---------
---------- ---------- ---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE: ALL MONETARY AMOUNTS ARE EXPRESSED IN THOUSANDS OF DOLLARS UNLESS
CONTRARILY EVIDENT.
(1) NATURE OF OPERATIONS
Chattem, Inc. and its wholly-owned subsidiaries (the Company) manufacture
and market branded consumer products consisting primarily of over-the-counter
pharmaceuticals, cosmetics, toiletries, dietary supplements and homeopathics.
The consumer products are sold primarily through independent and chain drug
stores, drug wholesalers, mass merchandisers and food stores in the United
States and in various markets in approximately 50 countries throughout the
world.
Geographic data for 1995, 1996 and 1997 is included in the schedule of
geographical information on page 37, which is an integral part of these
financial statements.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Chattem, Inc. and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all short-term
deposits and investments with original maturities of three months or less to be
cash equivalents, including cash and cash equivalents available exclusively for
the repayment of long-term debt (Note 5).
INVENTORIES
Inventory costs include materials, labor and factory overhead. Inventories
in the United States are valued at the lower of last-in, first-out (LIFO) cost
or market, while international inventories are valued at the lower of first-in,
first-out (FIFO) cost or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is provided
using both straight-line and accelerated methods over the estimated useful lives
of 10 to 40 years for buildings and improvements and 3 to 12 years for machinery
and equipment. Expenditures for maintenance and repairs are charged to expense
as incurred. Depreciation expense for 1995, 1996 and 1997 was $1,319, $1,352 and
$1,502, respectively.
PATENTS, TRADEMARKS AND OTHER PURCHASED PRODUCT RIGHTS
The costs of acquired patents, trademarks and other purchased product rights
are capitalized and amortized over periods ranging from 5 to 40 years. Total
accumulated amortization of these assets at November 30, 1996 and 1997 was
$8,369 and $11,246, respectively. Amortization expense for 1995, 1996 and 1997
was $1,467, $2,086 and $2,877, respectively. Royalty expense related to other
purchased product rights for 1995, 1996 and 1997 was $1,030, $1,140 and $522,
respectively. Amortization and royalty expense are included in advertising and
promotion expense in the accompanying consolidated statements of income.
F-7
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEBT ISSUANCE COSTS
The Company has incurred debt issuance costs in connection with its
long-term debt. These costs are capitalized and amortized over the term of the
debt. Amortization expense related to debt issuance costs was $471, $498 and
$490 in 1995, 1996 and 1997, respectively. Accumulated amortization of these
costs was $817 and $1,004 at November 30, 1996 and 1997, respectively.
PAYABLE TO BANK
Payable to bank includes checks outstanding in excess of certain cash
balances.
REVENUE RECOGNITION
Revenue is recognized when the Company's products are shipped to its
customers.
RESEARCH AND DEVELOPMENT
Research and development costs relate primarily to the development of new
products and are expensed as incurred. Such expenses were $1,140, $1,117 and
$1,207 in 1995, 1996 and 1997, respectively.
ADVERTISING EXPENSES
The cost of advertising is expensed when the related advertising first takes
place. Advertising expense for 1995, 1996 and 1997 was $18,015, $22,789 and
$29,923, respectively. At November 30, 1996 and 1997, the Company reported
$1,293 and $1,066, respectively, of advertising paid for in 1996 and 1997 which
will run or did in 1997 and 1998 as other noncurrent assets in the accompanying
consolidated balance sheets.
NET INCOME PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." SFAS No. 128 changes the criteria for reporting earnings
per share (EPS) by replacing primary EPS with basic EPS and fully diluted EPS
with diluted EPS. The Company adopted SFAS No. 128 on December 1, 1997 for the
three months ended February 28, 1998. All prior periods' EPS data have been
restated. The impact of adopting SFAS No. 128 did not have a material impact on
EPS for any period presented.
For the years ended November 30, 1995, 1996, and 1997, the weighted average
and dilutive potential common shares outstanding consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Weighted average common shares outstanding............................................... 7,292 8,052 8,793
Dilutive potential shares
Stock options.......................................................................... -- 55 207
Warrants............................................................................... -- 37 123
--------- --------- ---------
Weighted average and dilutive potential common shares outstanding........................ 7,292 8,143 9,123
--------- --------- ---------
</TABLE>
Options and warrants to purchase common shares were outstanding at November
30, 1995 but were not included as dilutive potential common shares because the
options' and warrants' exercise prices were greater than the average market
price of the common shares.
F-8
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's Canadian and U.K. subsidiaries are
translated to United States dollars at year-end exchange rates. Income and
expense items are translated at average rates of exchange prevailing during the
year. Translation adjustments are accumulated as a separate component of
shareholders' equity (deficit). Gains and losses which result from foreign
currency transactions are included in the accompanying consolidated statements
of income.
INCOME TAXES
The Company uses the asset and liability approach to accounting for deferred
income taxes based on currently enacted tax rates and estimated differences in
financial reporting and income tax bases of assets and liabilities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company has entered into interest rate swap agreements as a means of
managing its interest rate exposure and not for trading purposes. These
agreements have the effect of converting a portion of the Company's variable
rate obligations to fixed rate obligations. Net amounts paid or received are
reflected as adjustments to interest expense.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which subject the Company to concentrations of credit
risk consist primarily of accounts receivable, short-term cash investments and
the investment in Elcat, Inc. (Note 3). The Company's exposure to credit risk
associated with nonpayment of accounts receivable is affected by conditions or
occurrences within the retail industry. As a result, the Company performs
ongoing credit evaluations of its customers' financial position but generally
requires no collateral from its customers. The Company's largest customer
accounted for 16% of sales in 1996 and 1997. No other customer exceeded 10% of
the Company's sales in 1995, 1996 or 1997. Short-term cash investments are
placed with high credit-quality financial institutions or in low risk, liquid
instruments. No losses have been experienced on such investments.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the 1997
presentation.
F-9
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) INVESTMENT IN ELCAT, INC.
Investment in Elcat, Inc. (Elcat) consists of 40,000 shares of 13.125%
cumulative, convertible preferred stock of Elcat (the Elcat Preferred Shares)
which was received as part of the consideration from the sale of the Company's
specialty chemicals division in 1995 (Note 14). The Elcat Preferred Shares are
nonvoting and are convertible, in whole or in part, at any time on or after
April 1, 1998, into a 21% common stock ownership of Elcat. At the option of
Elcat, the Elcat Preferred Shares may be redeemed, in whole or in part, on or
after April 1, 1998, at par value ($125 per share) plus any accrued and unpaid
dividends. If all of the then outstanding Elcat Preferred Shares are not
converted or redeemed on or before April 1, 2005, Elcat is obligated to redeem
all of the then outstanding Elcat Preferred Shares at par value plus any accrued
and unpaid dividends.
The dividends, which amount to $656 annually, on the Elcat Preferred Shares
accumulate quarterly but are non-payable until the shares are called or
redeemed. After three years, however, if the shares are still outstanding, a
cash dividend of $200 will be received by the Company in fiscal year 1999,
increasing ratably to the full $656 in fiscal year 2002.
This investment is classified as held-to-maturity and is accounted for using
the cost method of accounting. As Elcat stock is not publicly traded in the open
market and a market price is not readily available, it is not practicable to
estimate the fair value of the investment in Elcat at November 30, 1997. In the
opinion of management, however, the fair value of this investment is in excess
of its carrying value as of November 30, 1997.
(4) PENSION PLANS
The Company has a noncontributory defined benefit pension plan (the Plan)
which covers substantially all employees. The Plan provides benefits based upon
years of service and the employee's compensation. The Company's contributions
are based on computations by independent actuaries. Plan assets at November 30,
1996 and 1997 were invested primarily in United States government and agency
securities, corporate debt securities and equity securities.
Pension cost for the years ended November 30, 1995, 1996 and 1997 included
the following components:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost (benefits earned during the
period)......................................... $ 544 $ 610 $ 545
Interest cost on projected benefit obligation..... 745 775 741
Actual return on plan assets...................... (828) (637) (845)
Net amortization and deferral..................... 98 107 365
----- ----- -----
Net pension cost.................................. $ 559 $ 855 $ 806
----- ----- -----
----- ----- -----
</TABLE>
In addition to net pension cost, a net lump-sum settlement loss of $598 was
recorded in 1996 related to lump-sum distributions to certain employees. This
expense is included in selling, general and administrative expenses in the
accompanying consolidated statements of income. In 1995, as a result of the sale
of the Company's specialty chemicals division, a charge of $662 was recognized
for pension curtailment and settlement expense and is included in the gain on
the sale of discontinued operations for 1995 (Note 14).
F-10
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) PENSION PLANS (CONTINUED)
The following table sets forth the funded status of the Plan as of November
30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation....................... $ 7,152 $ 7,108
Nonvested benefit obligation.................... 129 57
-------------- -------
Accumulated benefit obligation................ $ 7,281 $ 7,165
-------------- -------
-------------- -------
Plan assets at fair market value.................. $ 5,069 $ 6,471
Projected benefit obligation...................... (9,340) (11,072)
-------------- -------
Plan assets less than projected benefit
obligation...................................... (4,271) (4,601)
Unrecognized net loss............................. 2,898 4,186
Unrecognized prior service cost................... (147) (131)
Unrecognized initial asset........................ (511) (369)
Minimum pension liability adjustment.............. (181) --
-------------- -------
Pension liability recognized in balance sheets at
end of year..................................... $ (2,212) $ (915)
-------------- -------
-------------- -------
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation were
7.5% and 5.0%, respectively, in both 1996 and 1997. The expected long-term rate
of return on plan assets was 9.0%.
In accordance with the provisions of SFAS No. 87, "Employers' Accounting for
Pensions," the Company recorded an additional liability at November 30, 1996
representing the excess of the accumulated benefit obligation over the fair
value of plan assets and accrued pension liability for its pension plan. At
November 30, 1997, the unrecognized prior service cost exceeded the minimum
liability, and the minimum pension liability was eliminated.
The Company has a defined contribution plan covering substantially all
employees. Eligible participants can contribute up to 10% of their annual
compensation and receive a 25% matching employer contribution up to 6% of their
annual compensation. The defined contribution plan expense was $141 for 1995,
$120 for 1996 and $155 for 1997.
F-11
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT
Long-term debt consisted of the following at November 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Revolving line of credit payable to banks at
variable rates (8.44% at November 30, 1997)..... $ -- $ 13,000
Term loans payable to banks at variable rates
(8.71% weighted average at November 30, 1997)... -- 63,683
Revolving line of credit payable to banks at
variable rates, repaid in 1997.................. 24,000 --
Term loans payable to banks at variable rates,
repaid in 1997.................................. 41,819 --
12.75% Senior Subordinated Notes, due 2004, net of
unamortized discount of $1,475 for 1996 and
$1,289 for 1997................................. 65,525 65,711
-------------- --------------
Total long-term debt.............................. 131,344 142,394
Less: current maturities.......................... 3,906 8,919
-------------- --------------
Total long-term debt, net of current maturities... $ 127,438 $ 133,475
-------------- --------------
-------------- --------------
</TABLE>
The Company entered into a new credit agreement with a syndicate of banks
(the New Credit Agreement) on June 26, 1997. The purpose of the New Credit
Agreement was to finance the acquisition of SUNSOURCE (Note 12), and to repay
all existing bank debt. The New Credit Agreement is divided into a $30,000
revolving line of credit for working capital purposes, a five year $30,000 Term
A loan and a six and three-quarter year $35,000 Term B loan facility.
The combined Term A and B loans are payable in remaining quarterly
installments as follows:
<TABLE>
<S> <C>
December 31, 1997 to September 30, 1998........... $ 1,318
December 31, 1998 to September 30, 1999........... $ 1,488
December 31, 1999 to June 30, 2001................ $ 1,738
September 30, 2001................................ $ 2,650
December 31, 2001 to March 31, 2002............... $ 4,900
June 30, 2002..................................... $ 5,000
September 30, 2002 to December 31, 2003........... $ 3,250
February 14, 2004................................. $ 3,350
</TABLE>
The Company may elect either a prime rate or Eurodollar interest rate option
applicable to the term and revolving line loans under the New Credit Agreement.
The prime rate and Eurodollar interest rate options are based on a base rate
plus a rate margin that fluctuates on the basis of the Company's leverage ratio.
The maximum rate margin for the Term A and revolving line loans is 2.0% for the
prime rate option and 3.0% for the Eurodollar rate option. The maximum rate
margin for the Term B loan is 2.5% for the prime rate option and 3.5% for the
Eurodollar rate option.
The New Credit Agreement is secured by substantially all of the Company's
assets. The more restrictive financial covenants require the maintenance of
minimum amounts of consolidated tangible net worth, fixed charge coverage,
interest coverage and leverage ratios. The provisions of the New Credit
Agreement also include restrictions on capital expenditures and the payment of
dividends. The New Credit Agreement is guaranteed by one of the Company's
subsidiaries, Signal Investment & Management Co.
F-12
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT (CONTINUED)
The revolving line of credit is available to the Company up to $30,000 or
such lesser amount as is determined to be available under the terms of the New
Credit Agreement, and is due and payable on June 26, 2002. The availability of
credit under the revolver is determined based on the Company's accounts
receivable and inventories.
The Company entered into a credit agreement with a syndicate of banks (the
Credit Agreement) on April 29, 1996 and as amended on June 6, 1996. The purpose
of the Credit Agreement was to finance the acquisitions of GOLD BOND and
HERPECIN-L (Note 12), and to repay all existing bank debt. The Credit Agreement
was divided into a $24,000 revolving line of credit for working capital
purposes, a five year $20,000 Term A loan facility, and a seven and one-half
year $22,500 Term B loan facility. These loans were repaid in 1997 with part of
the proceeds from the New Credit Agreement.
The amount of cash and cash equivalents on deposit up to the calculated
availability was included in other noncurrent assets in the accompanying
consolidated balance sheet at November 30, 1996 and was available exclusively
for the repayment of long-term bank debt. The amount of cash and cash
equivalents on deposit in excess of the calculated availability is included as a
current asset in the accompanying consolidated balance sheet at November 30,
1996 and was available for general operating purposes. All of the above cash and
cash equivalents were invested in highly liquid short-term investments.
In 1994, the Company issued $75,000 of 12.75% Senior Subordinated Notes due
2004 (the Notes) with five year warrants to purchase 417,182 shares of common
stock (the Warrants). The Notes consisted of 75,000 units, each consisting of
$1,000 principal amount of the Notes and a warrant to purchase shares of the
Company's common stock (Note 9). The price of the Notes was $73,967, or 98.6% of
the original principal amount of the Notes, resulting in a discount of $1,033.
The value assigned to the Warrants was $955 (Note 9), resulting in a total
original issue discount of $1,988. The proceeds of the Notes were used to repay
a prior credit agreement.
The Notes mature on June 15, 2004, and interest is payable semi-annually on
June 15 and December 15 of each year. The Notes are senior subordinated
obligations of the Company and are subordinated in right of payment to all
existing and future senior debt of the Company. The Notes, which were registered
under the Securities Act of 1933, may not be redeemed until June 15, 2001, after
which they may be redeemed at the option of the Company. Upon the occurrence of
certain events constituting a change of control, the holders of the Notes may
require the Company to repurchase the Notes at a purchase price equal to 101% of
the principal amount thereof, plus accrued and unpaid interest. The Notes are
guaranteed by Signal Investment & Management Co., a wholly-owned subsidiary of
the Company.
The Notes are issued under an indenture with an indenture trustee, which
restricts, among other things, the ability of the Company and its subsidiaries
to (i) incur additional indebtedness, (ii) pay dividends, (iii) sell or issue
capital stock of a subsidiary, (iv) create encumbrances on the ability of any
subsidiary to pay dividends or make other restricted payments, (v) engage in
certain transactions with affiliates, (vi) dispose of certain assets, (vii)
merge or consolidate with or into, or sell or otherwise transfer all or
substantially all their properties and assets as an entirety to another person,
or (viii) create additional liens.
During 1995, 1996 and 1997 the Company prepaid previously outstanding
long-term debt, with funds received from refinancing in 1996 and 1997 and the
sale of the specialty chemicals division in 1995. In connection with the
prepayment of those borrowings, the Company incurred extraordinary losses, net
of income taxes, in 1995, 1996 and 1997 of $367, $532 and $1,370, respectively,
or $.05, $.07 and $.15 per
F-13
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM DEBT (CONTINUED)
share, respectively. The losses related to the write-off of debt issuance and
other deferred costs. The 1997 amount includes costs associated with the
termination of two interest rate swap agreements.
Future maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998.............................................. $ 8,919
1999.............................................. 5,950
2000.............................................. 6,950
2001.............................................. 7,863
2002.............................................. 31,050
Thereafter........................................ 82,951
--------------
143,683
Less: unamortized discount........................ (1,289)
--------------
$ 142,394
--------------
--------------
</TABLE>
The 2002 maturities include the amount outstanding under the revolving line
of credit which was $13,000 as of November 30, 1997.
The Company is also required to pay $3,649 during 1998. This amount was
determined based upon the excess cash flow calculation, as defined in the New
Credit Agreement, and is included in the 1998 maturities.
Cash interest payments during 1995, 1996 and 1997 were $10,811, $12,710 and
$15,259, respectively.
(6) DERIVATIVE FINANCIAL INSTRUMENTS
On July 21, 1997, the Company entered into two interest rate swap agreements
with NationsBank, N.A. in notional amounts of $40,000 and $5,000. The Company
entered into these agreements as hedges on its variable rate debt and not for
trading purposes. The term of the $40,000 swap is for a five year period ending
July 22, 2002. The Company will receive interest payments on the notional amount
at a rate equal to the one month London Interbank Offered Rate (LIBOR) (5.59% as
of November 30, 1997) and will pay interest on the same notional amount at a
fixed interest rate of 6.38%. The term of the $5,000 swap is for a five year
period ending July 22, 2002. The agreement may be terminated by NationsBank,
N.A. at each quarterly date. The Company will receive interest payments on the
notional amount at a rate equal to the three month LIBOR (5.64% as of November
30, 1997) and will pay interest on the same notional amount at a fixed interest
rate of 5.62%.
The Company is exposed to credit losses in the event of nonperformance by
the counterparty to its interest rate swap agreements but has no off-balance
sheet credit risk of accounting loss. The Company anticipates, however, that the
counterparty will be able to fully satisfy its obligations under the agreements.
At November 30, 1996, the Company had two interest rate swap agreements
outstanding with financial institutions, each in a notional amount of $15,000.
Both of these interest rate swaps were terminated in 1997 in connection with the
refinancing of long-term debt. (Note 5). The resulting extraordinary loss, net
of tax, is included in the 1997 consolidated statement of income as part of the
extraordinary loss on the early extinguishment of debt.
During June 1993, the Company entered into an interest rate cap agreement in
a notional principal amount of $30,000. On January 12, 1995, the interest rate
cap was terminated resulting in a gain of approximately $729 to the Company. The
gain was deferred and was amortized over the remaining life of the original cap
agreement as a reduction of interest expense. In 1996, the remaining deferred
gain of $281 was recognized.
F-14
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," and
SFAS No. 119, "Disclosure about Derivative Financial Instruments and Fair Value
of Financial Instruments" require the disclosure of the fair value of all
financial instruments. Unless otherwise indicated elsewhere in the notes to the
consolidated financial statements, the carrying value of the Company's financial
instruments approximates fair value.
At November 30, 1997, the estimated fair values of the revolving line of
credit and the term loans payable to banks approximate the carrying amounts of
such debt because the interest rates change with market interest rates.
The estimated fair value of the Notes at November 30, 1997 exceeded their
carrying value by approximately $9,600. The fair value was estimated based on
quoted market prices for the same or similar issues.
The fair values of the interest rate swap agreements are the estimated
amounts that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
credit worthiness of the counterparties. At November 30, 1997, the Company
estimates it would have paid $603 to terminate the agreements.
(8) INCOME TAXES
The provision for income taxes from continuing operations includes the
following components:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................................ $ 470 $ (203) $ 2,639
State.......................................................... 170 222 234
Deferred......................................................... 645 1,797 1,120
--------- --------- ---------
$ 1,285 $ 1,816 $ 3,993
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income tax assets and liabilities for 1996 and 1997 reflect the
impact of temporary differences between the amounts of assets and liabilities
for financial reporting and income tax reporting
F-15
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) INCOME TAXES (CONTINUED)
purposes. Temporary differences and carryforwards which give rise to deferred
tax assets and liabilities at November 30, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals.................................................. $ 1,790 $ 2,005
Accrued promotional expenses........................................... 770 720
Accrued postretirement health care benefits............................ 535 559
Repriced stock option expense.......................................... 690 251
Accruals for discontinued operations................................... 237 --
Other.................................................................. 260 310
--------- ---------
Gross deferred tax assets............................................ 4,282 3,845
--------- ---------
Deferred tax liabilities:
Excess tax depreciation and amortization............................... 3,317 4,486
Prepaid advertising.................................................... 309 318
Inventory.............................................................. 190 190
Other.................................................................. 772 277
--------- ---------
Gross deferred tax liabilities....................................... 4,588 5,271
--------- ---------
Net deferred liability............................................... $ (306) $ (1,426)
--------- ---------
--------- ---------
</TABLE>
The difference between the provision for income taxes and the amount
computed by multiplying income from continuing operations before income taxes by
the U.S. statutory rate is summarized as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Expected tax provision........................................... $ 1,227 $ 1,911 $ 3,837
Dividend exclusion benefit....................................... (78) (140) (178)
State income taxes, net of federal income tax benefit............ 112 147 154
Other, net....................................................... 24 (102) 180
--------- --------- ---------
$ 1,285 $ 1,816 $ 3,993
--------- --------- ---------
--------- --------- ---------
</TABLE>
Included in "refundable and deferred income taxes" in current assets in the
accompanying consolidated balance sheets are income tax refunds receivable of
$2,794 and $12 at November 30, 1996 and 1997, respectively.
Income taxes paid in 1995, 1996 and 1997 were $5,026, $2,459 and $2,162,
respectively. The Company received income tax refunds of $163, $215 and $2,719
during 1995, 1996 and 1997, respectively.
F-16
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (DEFICIT)
STOCK ISSUANCE
On June 26, 1997, the Company issued to the sellers of the SUNSOURCE product
line 300,000 shares of its common stock at a value of $13.50 per share to fund a
portion of the purchase price for the brands.
In April 1996, the Company issued 1,100,000 shares of common stock to a
group of investors, including certain officers, directors and affiliates, in
order to partially fund the acquisition of GOLD BOND (Note 12). In addition, the
Company issued to the seller of GOLD BOND 155,792 shares of the Company's common
stock at $6.42 per share.
STOCK OPTIONS
Although the Company adopted SFAS No. 123, Accounting For Stock-Based
Compensation, during 1997, it elected to continue to account for compensation
expense under its stock option plans under APB No. 25. Accordingly, no
compensation cost has been recognized for stock option grants since the options
have exercise prices equal to the market value of the common stock at the date
of grant.
The Company's 1993 Non-Statutory Stock Option Plan (1993 Plan) provides for
issuance of up to 350,000 shares of common stock to key employees. In addition,
the Company's 1994 Non-Statutory Stock Option Plan and the 1994 Non-Statutory
Stock Option Plan for Non-Employee Directors (1994 Plans) provide for the
issuance of up to 350,000 and 80,000 shares, respectively, of common stock.
Options vest ratably over four years and are exercisable for a period of up to
ten years from the date of grant.
For SFAS No. 123 purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions for grants in 1996 and 1997:
expected dividend yield of 0%, expected volatility of 49%, risk-free interest
rates of 6.48% and 5.39%, and expected lives of 6 years.
Had compensation cost for 1996 and 1997 stock option grants been determined
based on the fair value at the grant dates consistent with the method prescribed
by SFAS No. 123, the Company's net income and net income per share would have
been adjusted to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Net income:
As reported.............................................................. $ 3,272 $ 5,885
Pro forma................................................................ $ 2,877 $ 5,683
Net income per share:
As reported.............................................................. $ 0.40 $ 0.65
Pro forma................................................................ $ 0.35 $ 0.62
</TABLE>
The pro forma effect on net income in this disclosure is not representative
of the pro forma effect on net income in future years because it does not take
into consideration pro forma compensation expense related to grants made prior
to 1996.
F-17
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
A summary of the activity of stock options during 1995, 1996, and 1997 is
presented below (shares in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
------------------------ ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDER EXERCISE UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE OPTION PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.... 675 $ 7.69 646 $ 7.60 613 $ 6.39
Granted........................... 18 4.79 318 5.07 91 9.01
Exercised......................... -- -- (44) 6.93 (120) 6.65]
Cancelled......................... (47) 7.83 (307) 7.48 -- --
--- ----- --- ----- --- -----
Outstanding at end of year.......... 646 $ 7.60 613 $ 6.39 584 $ 6.75
--- ----- --- ----- --- -----
--- ----- --- ----- --- -----
Options exercisable at year-end..... 305 $ 7.72 221 $ 7.73 262 $ 7.43
--- ----- --- ----- --- -----
--- ----- --- ----- --- -----
Weighted average fair value of
options granted................... N/A $ 2.62 $ 5.24
----- ----- -----
----- ----- -----
</TABLE>
A summary of the exercise prices for options outstanding under the Company's
stock-based compensation plans at November 30, 1997 is presented below (shares
in thousands):
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE
AVERAGE EXERCISE PRICE OF
SHARES UNDER EXERCISE WEIGHTED AVERAGE SHARES SHARES
EXERCISE PRICE RANGE OPTION PRICE REMAINING LIFE EXERCISABLE EXERCISABLE
- --------------------- ----------------- ----------- ------------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
$4.63 - $5.25........ 249 $ 4.87 8.2 29 $ 4.85
$7.50 - $9.50........ 330 7.99 6.5 233 7.76
$18.00............. 5 18.00 9.8 -- N/A
--
--- ----------- --- -----
Total.............. 584 $ 6.75 7.2 262 $ 7.43
--
--
--- ----------- --- -----
--- ----------- --- -----
</TABLE>
PREFERRED SHARES
The Company is authorized to issue up to 1,000,000 preferred shares in
series and with rights established by the board of directors. At November 30,
1996 and 1997, no shares of any series of preferred stock were issued and
outstanding.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective June 1, 1989, the Company established an Employee Stock Ownership
Plan providing for the issuance of up to 360,000 shares of the Company's common
stock. At November 30, 1997, no contributions had been made to the plan.
COMMON STOCK WARRANTS
As described in Note 5, the Company issued the Warrants at an assigned value
of $955. The Warrants are exercisable for five years. In the aggregate, 75,000
warrants were issued which, when exercised, would entitle the holders thereof to
acquire an aggregate of 417,182 shares of the Company's common stock. The
F-18
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
number of shares of common stock and the price per share at which a warrant is
exercisable are subject to adjustment upon the occurrence of certain events. A
warrant does not entitle the holder to receive any cash dividends paid on common
stock or to exercise any other rights as a shareholder of the Company.
During 1996, as a result of the issuance of 1,100,000 shares of common stock
(Note 9), the number of shares of common stock and the price per share at which
a warrant is exercisable were adjusted from 5.56242 shares and $7.15,
respectively, to 5.85733 shares and $6.79, respectively.
During 1997, 12,030 warrants were exercised to acquire 70,464 shares. At
November 30, 1997, 62,970 warrants were outstanding which, when exercised, would
entitle the holders thereof to acquire an aggregate of 368,836 shares of the
Company's common stock.
(10) CONTINGENCIES
Claims, suits and complaints arise in the ordinary course of the Company's
business involving such matters as patents and trademarks, product liability and
other alleged injuries or damage. The outcome of such litigation cannot be
predicted, but, in the opinion of management, based in part upon the opinion of
counsel, all such pending matters are without merit or are of such kind or
involve such amounts as would not have a material adverse effect on the
consolidated operating results or financial position of the Company if disposed
of unfavorably.
(11) SUPPLEMENTAL FINANCIAL INFORMATION
A--Inventories consisted of the following at November 30, 1996 and 1997:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Raw materials and work in process....................................... $ 5,365 $ 9,107
Finished goods.......................................................... 7,484 7,850
Excess of current cost over LIFO value.................................. (2,554) (2,464)
--------- ---------
Total inventories..................................................... $ 10,295 $ 14,493
--------- ---------
--------- ---------
</TABLE>
International inventories included above, valued on a lower of FIFO cost or
market at November 30, 1996 and 1997, were $2,039 and $2,546, respectively.
B--Property, plant and equipment consisted of the following at November 30,
1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land.................................................................. $ 208 $ 138
Buildings and improvements............................................ 3,014 3,150
Machinery and equipment............................................... 21,973 23,416
Construction in progress.............................................. 1,046 2,221
Less--accumulated depreciation........................................ (16,467) (17,937)
---------- ----------
Property, plant and equipment, net.................................. $ 9,774 $ 10,988
---------- ----------
---------- ----------
</TABLE>
F-19
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(11) SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
C--Accrued liabilities consisted of the following at November 30, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Accrued interest expense................................................ $ 3,996 $ 4,119
Salaries, wages and commissions......................................... 1,287 1,696
Promotion expense....................................................... 2,827 2,840
Product acquisitions.................................................... 614 1,489
Accrued pension benefits................................................ 2,076 435
Other................................................................... 3,331 3,619
--------- ---------
Total accrued liabilities............................................. $ 14,131 $ 14,198
--------- ---------
--------- ---------
</TABLE>
(12) ACQUISITION AND SALE OF BRANDS
On June 26, 1997, the Company purchased certain assets of Sunsource
International, Inc. and an affiliated company (SUNSOURCE) including the
exclusive worldwide rights to five leading branded dietary supplement products.
The purchase price for the trademarks, inventory and receivables was
approximately $32,000, net of certain assumed liabilities. Additional payments
may be earned by SUNSOURCE over a six year period from the date of closing if
sales exceed certain levels as defined in the purchase agreement, but such
additional payments are not to exceed $15,750 in the aggregate. Financing of the
SUNSOURCE acquisition was provided by an expansion of the Company's senior bank
credit agreement (Note 5) and the issuance of 300,000 shares of Chattem, Inc.
common stock to SUNSOURCE (Note 9).
On April 29, 1996, the Company purchased the worldwide rights for the GOLD
BOND line of medicated powders and anti-itch cream for approximately $40,000.
The assets acquired consisted of the trademarks ($38,000) and inventory.
Additionally, the Company assumed certain liabilities of approximately $500. The
Company financed the GOLD BOND acquisition with bank borrowings (Note 5) and
issuance of common stock (Note 9).
On June 6, 1996, the Company purchased the rights for the HERPECIN-L line of
medicated lip balm for $5,607 plus a royalty payment equal to the greater of
$214 or 5% of net sales. The royalty payment is payable annually for each of the
seven twelve-month periods beginning July 1, 1996 and ending June 30, 2003. The
assets acquired consisted primarily of the trademark ($5,159), receivables and
inventory. Additionally, the Company assumed certain liabilities of
approximately $500. The purchase was financed by the Company with additional
bank borrowings of $5,000 with the remaining $607 being funded by the Company
(Note 5).
During April 1996, the Company sold the trademarks and inventory of two of
its minor consumer products brands, SOLTICE and BLIS-TO-SOL, for $1,200
consisting of $1,000 cash received at closing and a $200 promissory note
requiring payments of $100 per year for the next two years contingent upon the
brands meeting specific future sales levels.
On June 17, 1994, the Company acquired a license to the PHISODERM trademark
in the United States, Canada and Puerto Rico ("the Territory"), together with
certain other assets from Sterling Winthrop Inc. (Sterling). If net sales of
PHISODERM products in the United States exceed $11,000 for either of the
12-month periods beginning July 1, 1995 and July 1, 1996 and ending June 30,
1996 and June 30, 1997, then the Company will pay Sterling an additional $1,000
per year. Net sales of
F-20
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) ACQUISITION AND SALE OF BRANDS (CONTINUED)
PHISODERM products exceeded $11,000 for each of the 12-month periods ended June
30, 1997 and 1996. As a result, an additional $2,000 was recorded to patents,
trademarks and other purchased product rights as of November 30, 1997.
(13) ACCRUED POSTRETIREMENT HEALTH CARE BENEFITS
The Company maintains certain postretirement health care benefits for
eligible employees. Employees become eligible for these benefits if they meet
certain age and service requirements. The Company pays a portion of the cost of
medical benefits for certain retired employees over the age of 65. Effective
January 1, 1993, the Company's contribution is a service-based percentage of the
full premium. The Company pays these benefits as claims are incurred.
Net periodic postretirement health care benefits cost for the years ended
November 30, 1995, 1996 and 1997, included the following components:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period)...................... $ 30 $ 36 $ 29
Interest cost on accumulated postretirement benefits obligation....... 102 101 115
Amortization of net loss.............................................. -- -- 2
--------- --------- ---------
Net periodic postretirement benefits cost............................. $ 132 $ 137 $ 146
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the funded status of the plan, reconciled to
the accrued postretirement health care benefits recognized in the Company's
balance sheets at November 30, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Accumulated postretirement benefits obligation:
Retirees................................................................. $ 912 $ 715
Fully eligible active plan participants.................................. 275 502
Other active participants................................................ 260 377
Unrecognized net loss...................................................... -- (160)
--------- ---------
Accrued postretirement health care benefits................................ $ 1,447 $ 1,434
--------- ---------
--------- ---------
</TABLE>
For measurement purposes, a 6.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed in 1996 and 1997. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at November 30, 1996 and 1997. A 1%
increase in the assumed health care cost trend rate would not affect the
accumulated postretirement benefit obligation as of November 30, 1997 or the
aggregate of the service and interest cost components of the net annual
postretirement benefit cost for the year ended November 30, 1997.
(14) DISCONTINUED OPERATIONS
On May 26, 1995, the Company completed the sale of its specialty chemicals
division to privately-held Elcat. The Company received $25,000 from the sale of
the specialty chemicals division consisting of $20,000 in cash and $5,000 of
13.125% cumulative, convertible preferred stock of Elcat. The net cash proceeds
were used to repay long-term debt of approximately $12,000. The Company
recognized a gain of
F-21
<PAGE>
CHATTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) DISCONTINUED OPERATIONS (CONTINUED)
$9,334 (after tax) from the sale and extraordinary charge (after tax) of $367
relating to the early extinguishment of the debt.
The results of operations and the gain on disposal of the specialty
chemicals division have been separately classified as discontinued operations in
the accompanying consolidated statements of income. Net sales of the specialty
chemicals division were $6,739 through May 26, 1995. Interest expense of $351
for 1995 was allocated to discontinued operations based upon the ratio of net
assets discontinued to the total net assets of the consolidated entity.
(15) SUBSEQUENT EVENT
On March 24, 1998, the Company acquired the BAN anti-perspirant and
deodorant brand from Bristol-Myers Squibb Company. Pursuant to the terms of the
acquisition agreement, the Company purchased all the assets, including
inventories, patents and trademarks of BAN (excluding the rights in Japan), for
$165,000 in cash, plus assumed liabilities. The purchase price was funded by the
issuance of $200,000 8 7/8% senior subordinated notes due 2008.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder and Board of Directors of
Signal Investment & Management Co.:
We have audited the accompanying balance sheets of Signal Investment &
Management Co. (a Delaware corporation and wholly owned subsidiary of Chattem,
Inc.) as of November 30, 1996 and 1997 and the related statements of income,
shareholder's equity (deficit) and cash flows for each of the three years in the
period ended November 30, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Signal Investment &
Management Co. as of November 30, 1996 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
November 30, 1997 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chattanooga, Tennessee
January 19, 1998 (EXCEPT WITH
RESPECT TO THE MATTER DISCUSSED IN
NOTE 6 AS TO WHICH THE DATE IS
MARCH 24, 1998)
F-23
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
NOVEMBER 30, FEBRUARY 28,
---------------------- ------------
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 2,911 $ 55 $ 42
Royalties receivable from Chattem, Inc.................................... 1,287 1,588 1,558
---------- ---------- ------------
Total current assets.................................................. 4,198 1,643 1,600
TRADEMARKS AND OTHER PURCHASED PRODUCT RIGHTS, net.......................... 74,086 101,426 100,656
---------- ---------- ------------
TOTAL ASSETS.......................................................... $ 78,284 $ 103,069 $ 102,256
---------- ---------- ------------
---------- ---------- ------------
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
PAYABLE TO CHATTEM, INC..................................................... $ 75,713 $ 102,573 $ 102,253
---------- ---------- ------------
DEFERRED INCOME TAXES....................................................... 1,556 2,628 2,628
---------- ---------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 1 and 4)
SHAREHOLDER'S EQUITY (DEFICIT):
Common shares, without par value, 500 shares authorized, 250 shares issued
and outstanding......................................................... 2 2 2
Retained earnings (deficit)............................................... 1,013 (2,134) (2,627)
---------- ---------- ------------
Total shareholder's equity (deficit).................................. 1,015 (2,132) (2,625)
---------- ---------- ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT).................. $ 78,284 $ 103,069 $ 102,256
---------- ---------- ------------
---------- ---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED FOR THE THREE MONTHS
NOVEMBER 30, ENDED FEBRUARY 28,
------------------------------- --------------------
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Royalties from Chattem, Inc.............................. $ 4,200 $ 5,044 $ 6,181 $ 1,263 $ 1,559
Investment income:
Interest............................................... 23 33 31 19 --
Interest from Chattem, Inc. note receivable............ 181 136 -- -- --
Gain on sale of investment............................... 0 323 -- -- --
Gain on product divestitures............................. 0 875 -- -- --
--------- --------- --------- --------- ---------
Total revenues....................................... 4,404 6,411 6,212 1,282 1,559
--------- --------- --------- --------- ---------
EXPENSES:
Amortization of trademarks and other purchased product
rights................................................. 1,162 1,779 2,627 571 770
Other.................................................... 11 18 27 1 2
--------- --------- --------- --------- ---------
Total expenses....................................... 1,173 1,797 2,654 572 772
--------- --------- --------- --------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES................... 3,231 4,614 3,558 710 787
PROVISION FOR INCOME TAXES................................. 1,091 1,575 1,205 240 280
--------- --------- --------- --------- ---------
NET INCOME................................................. $ 2,140 $ 3,039 $ 2,353 $ 470 $ 507
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING................. 250 250 250 250 250
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
NET INCOME PER COMMON SHARE:
Basic.................................................... $ 8,560 $ 12,156 $ 9,412 $ 1,880 $ 2,028
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Diluted.................................................. $ 8,560 $ 12,156 $ 9,412 $ 1,880 $ 2,028
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
RETAINED
EARNINGS
COMMON SHARES (DEFICIT)
------------- -----------
<S> <C> <C>
BALANCE, November 30, 1994................................................................... $ 2 $ 5,687
Net income................................................................................. -- 2,140
Dividends ($16,000 per share).............................................................. -- (4,000)
--- -----------
BALANCE, November 30, 1995................................................................... 2 3,827
Net income................................................................................. -- 3,039
Dividends ($23,412 per share).............................................................. -- (5,853)
--- -----------
BALANCE, November 30, 1996................................................................... 2 1,013
Net income................................................................................. -- 2,353
Dividends ($22,000 per share).............................................................. -- (5,500)
--- -----------
BALANCE, November 30, 1997................................................................... 2 (2,134)
Net income................................................................................... -- 507
Dividends ($4,000 per share)................................................................. -- (1,000)
--- -----------
Balance, February 28, 1998 (unaudited)....................................................... $ 2 $ (2,627)
--- -----------
--- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS
ENDED FEBRUARY
YEAR ENDED NOVEMBER 30, 28,
------------------------- ----------------
1995 1996 1997 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.......................... $ 2,140 $ 3,039 $ 2,353 $ 470 $ 507
Adjustments to reconcile net income
to net cash provided by operating
activities:
Amortization...................... 1,162 1,779 2,627 571 770
Deferred income tax provision..... 366 682 1,072 240 280
Gain on sale of investment........ -- (323) -- -- --
Gain on product divestitures...... -- (875) -- -- --
Changes in operating assets and
liabilities:
(Increase) decrease in royalties
receivable from Chattem,
Inc........................... 51 (266) (301) 24 30
(Increase) decrease in interest
receivable from Chattem,
Inc........................... (84) 121 -- -- --
------- ------- ------- ------- -------
Net cash provided by operating
activities.................. 3,635 4,157 5,751 1,305 1,587
------- ------- ------- ------- -------
INVESTING ACTIVITIES:
Payment of note receivable from
Chattem, Inc...................... -- 2500 -- -- --
Proceeds from sale of investment.... -- 323 -- -- --
------- ------- ------- ------- -------
Net cash provided by investing
activities.................. -- 2,823 -- -- --
------- ------- ------- ------- -------
FINANCING ACTIVITIES:
Increase (decrease) in payable to
Chattem, Inc...................... 740 933 (3,107) (2,750) (600)
Dividends paid to Chattem, Inc...... (4,000) (5,853) (5,500) (1,250) (1,000)
------- ------- ------- ------- -------
Net cash used in financing
activities.................. (3,260) (4,920) (8,607) (4,000) (1,600)
------- ------- ------- ------- -------
CASH AND CASH EQUIVALENTS:
Increase (decrease) for the year.... 375 2,060 (2,856) (2,695) (13)
At beginning of year................ 476 851 2,911 2,911 55
------- ------- ------- ------- -------
At end of year...................... $ 851 $ 2,911 $ 55 $ 216 $ 42
------- ------- ------- ------- -------
------- ------- ------- ------- -------
SUPPLEMENTAL SCHEDULE OF NON-CASH
TRANSACTIONS:
Decrease in payable to Chattem, Inc.
in connection with the sale of
trademarks and other product
rights............................ $ -- $ 875 $ -- $ -- $ --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Increase in payable to Chattem, Inc.
in connection with purchases of
trademarks and other product
rights............................ $ -- $45,810 $29,967 $ -- $ --
------- ------- ------- ------- -------
------- ------- ------- ------- -------
DIVIDENDS PER SHARE................... $ 16 $ 23 $ 22 $ 5 $ 4
------- ------- ------- ------- -------
------- ------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these statements.
F-27
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
NOTES TO FINANCIAL STATEMENTS
(ALL MONETARY AMOUNTS ARE EXPRESSED IN
THOUSANDS OF DOLLARS UNLESS CONTRARILY EVIDENT)
1. GENERAL
Signal Investment & Management Co. ("Signal" or the "Company") is a
wholly-owned subsidiary of Chattem, Inc. ("Chattem"). Signal was formed by
Chattem for the sole purpose of holding certain of Chattem's trademarks and
other purchased product rights and certain investments. The Company owns or
licenses substantially all of the trademarks and intangibles associated with
Chattem's domestic consumer products business and licenses Chattem's use
thereof. Signal has no active operations.
Signal is a guarantor of Chattem's $75,000 of 12.75% Senior Subordinated
Notes (the "Notes") due 2004, which guaranty and notes were registered under the
Securities Act of 1933 on a Form S-2 Registration Statement effective August 4,
1994.
Signal is also guarantor of Chattem's current bank credit facility which
consists of term loans and a working capital revolving loan maturing at various
dates from December 31, 1997 to February 14, 2004. The outstanding balances as
of November 30, 1997 were $63,683 for the term loans and $13,000 for the working
capital revolving loan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
TRADEMARKS AND OTHER PURCHASED PRODUCT RIGHTS
The costs of acquired trademarks and other purchased product rights are
capitalized and amortized over periods ranging from 20 to 40 years. Total
accumulated amortization of these assets at November 30, 1996 and 1997 was
$5,060 and $7,687, respectively. Amortization expense for 1995, 1996 and 1997
was $1,162, $1,779 and $2,627, respectively.
INCOME TAXES
The Company uses the asset and liability approach to accounting for deferred
income taxes based on currently enacted tax rates and differences in financial
reporting and income tax bases of assets and liabilities. The Company is
included in the consolidated tax returns filed by Chattem, Inc.
INVESTMENTS
In March 1996, the Company sold for $323, an investment which had been
written down to a carrying value of zero in 1993 due to uncertainty concerning
future realization.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all short-term deposits and investments with original
maturities of three months or less to be cash equivalents.
F-28
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL MONETARY AMOUNTS ARE EXPRESSED IN
THOUSANDS OF DOLLARS UNLESS CONTRARILY EVIDENT)
3. INCOME TAXES
The provision for income taxes includes the following components for the
years ended November 30:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Current........................................... $ 725 $ 893 $ 133
Deferred.......................................... 366 682 1,072
------ ------ ------
$ 1,091 $ 1,575 $ 1,205
------ ------ ------
------ ------ ------
</TABLE>
The temporary difference which gives rise to the deferred tax liability at
November 30, 1997 and 1996 consists primarily of the differences between
carrying values of trademarks and other purchased product rights for income tax
and financial statement reporting purposes.
The difference between the provision for income taxes and the amount
computed by multiplying income before income taxes by the U.S. statutory rate is
summarized as follows for the years ended November 30:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Expected tax provision............................ $ 1,098 $ 1,584 $ 1,210
Nontaxable interest income........................ (7) (9) (5)
------ ------ ------
$ 1,091 $ 1,575 $ 1,205
------ ------ ------
------ ------ ------
</TABLE>
4. ACQUISITION AND SALE OF TRADEMARKS
On June 26, 1997, the Company purchased the rights for the SUNSOURCE line of
dietary supplements and homeopathic medicines, and subsequently licensed the use
of the trademark to Chattem. The purchase price of the trademark was $26,650
which was financed with borrowings from Chattem. Additional payments may be
earned by SUNSOURCE over a six year period from the date of closing if sales
exceed certain levels as defined in the purchase agreement, but such additional
payments are not to exceed $15,750 in the aggregate.
On April 29, 1996, the Company purchased the worldwide rights for the GOLD
BOND line of medicated powders and anti-itch cream, and subsequently licensed
the use of the trademark to Chattem. The purchase price for the trademark was
$38,000 which was financed with borrowings from Chattem.
On June 6, 1996, the Company purchased the rights for the HERPECIN-L line of
medicated lip balm, and subsequently licensed the use of the trademark to
Chattem. The purchase price for the trademark was $5,159 plus a royalty payment
equal to the greater of $214 or 5% of net sales. The royalty payment is payable
annually for each of the seven twelve-month periods beginning July 1, 1996 and
ending June 30, 2003. The purchase of the HERPECIN-L trademark was financed with
borrowings from Chattem.
During April 1996, the Company sold the trademarks of two minor consumer
products brands, SOLTICE and BLIS-TO-SOL. The sales price of $1,200 consisted of
$1,000 of cash received at closing and a $200 promissory note requiring payments
of $100 per year for the next two years contingent upon the brands meeting
specific future sales levels.
F-29
<PAGE>
SIGNAL INVESTMENT & MANAGEMENT CO.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL MONETARY AMOUNTS ARE EXPRESSED IN
THOUSANDS OF DOLLARS UNLESS CONTRARILY EVIDENT)
5. RELATED PARTY TRANSACTIONS
In exchange for the licensed use of the Company's trademarks, the Company
receives royalties from Chattem of 5% of net sales of certain defined domestic
consumer products.
Note receivable from Chattem, Inc. results from borrowings by Chattem. The
note bears interest at 7 1/4% which is payable quarterly. The note and all
accrued interest were repaid by Chattem in fiscal 1996.
Payable to Chattem, Inc. represents net advances received from Chattem used
to fund the acquisitions of trademarks as discussed in Note 4. Such advances are
noninterest bearing and are not expected to be paid prior to November 30, 1998.
Certain general and administrative expenses of the Company are occasionally
paid by Chattem on behalf of the Company. Such amounts are not significant.
A summary analysis of the activity between the Company and Chattem, Inc. for
the two years ended November 30, 1997 is as follows:
<TABLE>
<S> <C>
Balance--November 30, 1995........................ $ 29,844
Gain on sale of trademarks................ (875)
Additions................................. 46,744
--------------
Balance--November 30, 1996........................ 75,713
Repayments................................ (3,250)
Additions................................. 30,110
--------------
Balance--November 30, 1997........................ $ 102,573
--------------
--------------
</TABLE>
The weighted average balance due Chattem, Inc. during the year ended
November 30, 1997, was $86,424.
6. SUBSEQUENT EVENT
On March 24, 1998, the Company and Chattem acquired the BAN anti-perspirant
and deodorant brand from Bristol-Myers Squibb Company. Pursuant to the terms of
the acquisition agreement, the Company and Chattem purchased all the assets,
including patents and trademarks of BAN (excluding the rights in Japan), for
$165,000 in cash, plus assumed liabilities. The purchase price was funded by the
issuance of $200,000 8 7/8% senior subordinated notes of Chattem due 2008.
F-30
<PAGE>
March 3, 1998
To the Board of Directors and Stockholders
of Bristol-Myers Squibb Company:
We have audited the accompanying statement of United States (U.S.) assets
and liabilities as of December 31, 1996 and 1997, and the statement of U.S. net
sales and product contribution for the years ended December 31, 1995, 1996 and
1997, of the Ban deodorant and antiperspirant product lines (the Product) of
Bristol-Myers Products (the Business), a division of Bristol-Myers Squibb
Company. These financial statements are the responsibility of the Business's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of U.S. assets and liabilities
and the statement of U.S. net sales and product contribution are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in these statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of these
statements. We believe that our audits provide a reasonable basis for our
opinion.
The accompanying financial statements reflect the U.S. assets and
liabilities and the U.S. net sales and product contribution attributable to the
Product as described in Note 2 and are not intended to be a complete
presentation of the Product's assets, liabilities, revenues or expenses.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the U.S. assets and liabilities of the Product as
described in Note 2 as of December 31, 1996 and 1997 and the U.S. net sales and
product contribution of the Product as described in Note 2 for the years ended
December 31, 1995, 1996 and 1997, in conformity with generally accepted
accounting principles.
[LOGO]
F-31
<PAGE>
U.S. BAN
STATEMENT OF U.S. ASSETS AND LIABILITIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
<S> <C> <C>
ASSETS
Inventories, net:
Raw materials...................................................................... $ 1,233 $ 1,089
Packaging.......................................................................... 1,161 860
Work in process.................................................................... 342 19
Finished goods..................................................................... 7,497 6,284
------------ ------------
Total inventories, net........................................................... 10,233 8,252
------------ ------------
Property, plant and equipment, net:
Machinery and equipment............................................................ 21,799 21,897
Less: Accumulated depreciation..................................................... 10,946 12,963
------------ ------------
Total property, plant and equipment, net......................................... 10,853 8,934
------------ ------------
Total assets..................................................................... $ 21,086 $ 17,186
LIABILITIES
Accrued expenses
Advertising........................................................................ $ 722 $ --
Consumer promotion................................................................. 1,127 1,003
Trade promotion.................................................................... 2,140 3,676
------------ ------------
Total accrued expenses........................................................... $ 3,989 $ 4,679
------------ ------------
Assets less liabilities.......................................................... $ 17,097 $ 12,507
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
U.S. BAN
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales............................................................. $ 94,705 $ 97,547 $ 96,152
Cost of goods sold.................................................... 30,630 32,340 32,780
------------ ------------ ------------
Gross margin........................................................ 64,075 65,207 63,372
Distribution.......................................................... 6,169 7,131 6,594
Promotion............................................................. 18,908 21,952 25,018
Advertising and other marketing....................................... 10,691 9,251 7,019
------------ ------------ ------------
Product contribution................................................ $ 28,307 $ 26,873 $ 24,741
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
U.S. BAN
NOTES TO THE STATEMENT OF U.S. ASSETS AND LIABILITIES AND THE
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
The Business manufactures and markets topical deodorants and
antiperspirants. The products are sold through distributors and directly to end
users primarily in the retail markets in the United States (U.S.), Thailand,
Canada, Latin America and certain other Asian countries.
2. BASIS OF PRESENTATION
The accompanying financial statements present only the U.S. assets and
liabilities and the U.S. net sales and product contribution of the Product.
These financial statements include all adjustments necessary for a fair
presentation of the assets and liabilities at December 31, 1997 and 1996 and of
U.S. net sales and product contribution for the years ended December 31, 1997,
1996 and 1995. These financial statements have been prepared in accordance with
Bristol-Myers Squibb Company accounting principles which are in accordance with
generally accepted accounting principles.
These financial statements set forth only the U.S. net sales and operational
expenses attributable to the Product and do not purport to represent all the
costs and expenses associated with a stand alone, separate company. Accordingly,
not included in operating expenses are the expenses associated with product
management, legal, cash management/treasury functions, and various tax services
provided by BMS.
The statement of U.S. net sales and product contribution includes amounts
attributable to the manufacture, sale, promotion and advertisement of the
Product. Net sales include allowances for sales returns and cash discounts.
Product contribution represents net sales less cost of goods sold, distribution,
promotion, advertising and other marketing expenses attributable to the Product.
Included in product contribution is an allocation of certain expenses
attributable to the Product. These expenses have been allocated to the Product
by the Business based upon various factors which management believes are
reasonable.
Net sales by the Business to one customer comprised approximately 24%, 24%
and 23% of total net sales for the years ended December 31, 1997, 1996 and 1995,
respectively.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of management's estimates.
INVENTORIES, NET
Inventories, net of reserves for obsolescence, are valued at average costs,
not in excess of market.
PROPERTY, PLANT AND EQUIPMENT, NET
Expenditures for additions, renewals and betterments are capitalized at
cost. Depreciation is generally computed by the straight-line method based on
the estimated useful lives of the related assets ranging from 5 to 20 years.
F-34
<PAGE>
U.S. BAN
NOTES TO THE STATEMENT OF U.S. ASSETS AND LIABILITIES AND THE
STATEMENT OF U.S. NET SALES AND PRODUCT CONTRIBUTION (CONTINUED)
(IN THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The machinery and equipment is primarily located in Morrisville, North
Carolina, and at a third party manufacturer in Quebec, Canada.
4. COMMITMENTS AND CONTINGENCIES
Various lawsuits, claims and proceedings of a nature considered normal to
the Business are pending through BMS. Management believes that these lawsuits,
claims and proceedings are without merit or will not have a material adverse
effect on the Business's operating results, liquidity or financial position.
F-35
<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 THE COMPANY
OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE 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 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 HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Special Cautionary Notice Regarding Forward-Looking Statements............ 2
Prospectus Summary........................................................ 3
Summary Pro Forma Combined Financial Information.......................... 12
Summary Historical Consolidated Financial Information..................... 14
Risk Factors.............................................................. 15
The Acquisition........................................................... 23
Recent Developments....................................................... 23
Use of Proceeds........................................................... 23
Capitalization............................................................ 24
Unaudited Pro Forma Financial Data........................................ 25
Selected Historical Consolidated Financial Data........................... 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 33
Business.................................................................. 41
Management................................................................ 54
Voting Securities and Principal Holders Thereof........................... 56
The Exchange Offer........................................................ 58
Description of Exchange Notes............................................. 67
Description of Other Indebtedness......................................... 94
Certain Federal Income Tax Considerations................................. 95
Plan of Distribution...................................................... 96
Legal Matters............................................................. 97
Experts................................................................... 97
Index to Financial Statements............................................. F-1
</TABLE>
$200,000,000
[LOGO]
OFFER TO EXCHANGE UP TO $200,000,000 OF ITS 8 7/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, FOR AN EQUAL AGGREGATE PRINCIPAL AMOUNT OF ITS 8 7/8% SERIES A SENIOR
SUBORDINATED NOTES DUE 2008
---------------------
PROSPECTUS
---------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 14(1) of the Company's Amended and Restated Charter provides that no
director of the Company shall be liable to the corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director, except for
liability: (1) 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 the Company's Amended and Restated Charter further provides
that each person who was or is made a party or is threatened to be made 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 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 enforce 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 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 the Company'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 or in any 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
II-1
<PAGE>
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 the Company'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, shall be indemnified by the Company to the maximum extend 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 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See Index to Exhibits.
ITEM 22. UNDERTAKINGS.
(a) 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
Securities Act of 1933;
(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. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(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;
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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-4 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 May 26, 1998.
CHATTEM, INC.
BY: /S/ A. ALEXANDER TAYLOR, II
-----------------------------------------
A. Alexander Taylor, II
PRESIDENT AND CHIEF OPERATING OFFICER
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-4 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.
II-3
<PAGE>
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.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board of
/s/ ZAN GUERRY Directors and Chief
- ------------------------------ Executive Officer May 26, 1998
Zan Guerry (principal executive
officer)
/s/ A. ALEXANDER TAYLOR, II President and Chief
- ------------------------------ Operating Officer, and May 26, 1998
A. Alexander Taylor, II Director
/s/ STEPHEN M. POWELL Controller (principal
- ------------------------------ financial officer) May 26, 1998
Stephen M. Powell
/s/ ROBERT E. BOSWORTH Director
- ------------------------------ May 26, 1998
Robert E. Bosworth
/s/ LOUIS H. BARNETT Director
- ------------------------------ May 26, 1998
Louis H. Barnett
/s/ RICHARD E. CHENEY Director
- ------------------------------ May 26, 1998
Richard E. Cheney
/s/ SCOTT L. PROBASCO, JR. Director
- ------------------------------ May 26, 1998
Scott L. Probasco, Jr.
/s/ SAMUEL E. ALLEN Director
- ------------------------------ May 26, 1998
Samuel E. Allen
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-4 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 May 26, 1998.
SIGNAL INVESTMENT & MANAGEMENT CO.
BY: /S/ A. ALEXANDER TAYLOR, II
-----------------------------------------
A. Alexander Taylor, II
PRESIDENT
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Signal Investment & Management
Co., hereby severally constitute and appoint A. Alexander Taylor, II and Stephen
M. Powell, 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-4 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 Signal Investment &
Management Co., 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.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ A. ALEXANDER TAYLOR, II President and Director
- ------------------------------ (principal executive May 26, 1998
A. Alexander Taylor, II officer)
/s/ STEPHEN M. POWELL Vice President, Treasurer
- ------------------------------ and Director (principal May 26, 1998
Stephen M. Powell financial officer)
/s/ ERIK L. SAVILLE Assistant Vice President
- ------------------------------ and Director May 26, 1998
Erik L. Saville
/s/ HUGH F. SHARBER Secretary and Director
- ------------------------------ May 26, 1998
Hugh F. Sharber
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCES
- ----------- ---------------
<C> <S> <C>
1.1 Purchase Agreement dated March 20, 1998 by and among that Chattem, Inc., Signal Investment &
Management Co. and NationsBanc Montgomery Securities LLC ...................................
2.1 Asset Purchase Agreement dated February 22, 1998 by and among Bristol-Meyers Squibb Company,
Signal Investment & Management Co. and Chattem, Inc. ....................................... (1)
3.1 Amended and Restated Charter of Chattem, Inc. .............................................. (2)
3.2 Amended and Restated Bylaws of Chattem, Inc. ............................................... (3)
4.1 Indenture dated March 24, 1998, by and among Chattem, Inc., Signal Investment & Management
Co. and SouthTrust Bank, National Association...............................................
4.2 Form of Exchange Note (included in Exhibit 4.1).............................................
4.3 Registration Rights Agreement dated March 24, 1998 by and among Chattem, Inc., Signal
Investment & Management Co. and NationsBanc Montgomery Securities, LLC......................
5.1* Opinion and Consent of Miller & Martin LLP regarding validity of the Exchange Notes.........
10.1 Amended and Restated Credit Agreement (New Credit Agreement) dated as of March 24, 1998
among Chattem, Inc., Signal Investment & Management Co. and NationsBank of Tennessee, N.A.,
as agent....................................................................................
10.2 Amended and Restated Credit Agreement (Supplemental Credit Agreement) dated as of March 24,
1998 by and among Chattem, Inc., Signal Investment & Management Co. and NationsBank of
Tennessee, N.A., as agent ..................................................................
10.3 Form of Indenture dated August 3, 1994 between Chattem, Inc. and SouthTrust Bank of Alabama,
N.A. relating to the 12.75% Series B Senior Subordinated Notes due 2004..................... (4)
10.4 Asset Purchase and Sale Agreement dated May 23, 1997 by and among Chattem, Inc., Signal
Investment & Management Co. and SunSource International, Inc. and Mindbody, Inc. ........... (5)
10.5 First Amended and Restated Master Trademark License Agreement between Signal Investment &
Management Co. and Chattem, Inc., effective June 30, 1992................................... (6)
21.1 Subsidiaries of the Company.................................................................
23.1 Consent of Arthur Andersen LLP..............................................................
23.2 Consent of Price Waterhouse LLP.............................................................
23.3 Consent of Miller & Martin LLP (included in Exhibit 5.1)....................................
24.1 Power of Attorney (included on signature page)..............................................
25.1* Statement of Eligibility of Trustee.........................................................
27.1** Financial Data Schedule.....................................................................
99.1 Form of Letter of Transmittal...............................................................
99.2 Form of Notice of Guaranteed Delivery.......................................................
99.3 Instruction to Registered Holders and DTC Participants......................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER REFERENCES
- ----------- ---------------
<C> <S> <C>
99.4* Form of Exchange Agent Agreement............................................................
</TABLE>
- ------------------------
* To be filed by Amendment.
** Submitted only with the electronic filing of this document with the
Commission pursuant to Regulation S-T.
Previously filed as an exhibit to and incorporated by reference from:
(1) Form 8-K dated April 8, 1998.
(2) Form 10-K for the year ended November 30, 1992.
(3) Form 10-K for the year ended November 30, 1995.
(4) Form S-2 Registration Statement (No. 33-80770).
(5) Form 8-K dated June 26, 1997.
(6) Form 10-K for the year ended November 30, 1997.
<PAGE>
EXHIBIT 1.1
CHATTEM, INC.
$200,000,000
8 7/8 SENIOR SUBORDINATED NOTES DUE 2008
PURCHASE AGREEMENT
March 20, 1998
NationsBanc Montgomery Securities LLC
100 North Tryon Street
Charlotte, North Carolina 28255
Ladies and Gentlemen:
Chattem, Inc., a Tennessee corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchaser") $200,000,000 in
aggregate principal amount of its 8 7/8% Senior Subordinated Notes due 2008
(the "Notes"). The Notes will be fully and unconditionally guaranteed (the
"Guarantee" and, collectively with the Notes, the "Securities") on a senior
subordinated basis, by Signal Investment & Management Co. (the "Guarantor"
and, together with the Company, the "Issuers"). The Securities are to be
issued pursuant to an indenture, dated as of March 20, 1998 (the
"Indenture"), by and among the Company, the Guarantor and SouthTrust Bank,
National Association (the "Trustee").
The sale of the Securities to the Initial Purchaser will
be made without registration of the Securities under the Securities Act of
1933, as amended (the "Securities Act"), in reliance upon exemptions from
the registration requirements of the Securities Act. You have advised the
Issuers that you will offer and sell the Securities purchased by you
hereunder in accordance with Section 3 hereof as soon as you deem advisable.
<PAGE>
In connection with the sale of the Securities, the Issuers
have prepared a preliminary offering memorandum, dated March 9, 1998 (the
"Preliminary Memorandum") and a final offering memorandum, dated March 20,
1998 (the "Final Memorandum"). Each of the Preliminary Memorandum and the
Final Memorandum sets forth certain information concerning the Issuers and
the Securities. The Issuers hereby confirm that they have authorized the use
of the Preliminary Memorandum and the Final Memorandum, and any amendment or
supplement thereto, in connection with the offer and sale of the Securities
by the Initial Purchaser. Unless stated to the contrary, all references
herein to the Final Memorandum are to the Final Memorandum at the time of
execution and delivery of this Agreement (the "Execution Time") and are not
meant to include any amendment or supplement, or any information
incorporated by reference therein, subsequent to the Execution Time.
The Initial Purchaser and its direct and indirect
transferees will be entitled to the benefits of the Registration Rights
Agreement, substantially in the form attached hereto as Exhibit A (the
"Registration Rights Agreement"), pursuant to which the Issuers will agree
to use their best efforts to commence an offer to exchange the Securities
for securities (the "Exchange Securities") that have been registered under
the Securities Act, and that otherwise are identical in all respects to the
Securities, or to cause a shelf registration statement to become effective
under the Securities Act and to remain effective for the period designated
in such Registration Rights Agreement.
The proceeds of the Securities will be used by the Company
to finance the acquisition by the Issuers of the Ban deodorant and
anti-perspirant product lines and certain related inventories and machinery,
plus the assumption of up to $5.0 million in liabilities of Bristol-Myers
Squibb Company ("BAN") as described in the Final Memorandum.
1. Representations and Warranties. The Issuers jointly and severally
represent and warrant to the Initial Purchaser as follows:
(a) The Preliminary Memorandum, at the date thereof, did not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Final Memorandum, at the date
hereof, does not, and at the Closing Date (as defined below) will not (and any
amendment or supplement thereto, at the date thereof and at the Closing Date,
will not), contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Issuers make no representation or warranty as to the information
relating to the Initial Purchaser contained in or omitted from the Preliminary
2
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Memorandum or the Final Memorandum, or any amendment or supplement thereto, in
reliance upon and in conformity with information furnished in writing to the
Issuers by or on behalf of the Initial Purchaser specifically for inclusion
therein.
(b) Neither the Issuers, nor to their knowledge any of their
"Affiliates" (as defined in Rule 501(b) of Regulation D under the Securities Act
("Regulation D")), nor any person acting on their behalf has, directly or
indirectly, made offers or sales of any security, or solicited offers to buy any
security, under circumstances that would require the registration of the
Securities under the Securities Act. Neither the Issuers, nor to their knowledge
any of their Affiliates, nor any person acting on their behalf has engaged in
any form of general solicitation or general advertising (within the meaning of
Regulation D) in connection with any offer or sale of the Securities, provided,
that the Issuers make no representation in this sentence regarding the Initial
Purchaser. The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act. The Final Memorandum and each amendment or
supplement thereto, as of its date, contains the information specified in Rule
144A(d)(4) under the Act. The Issuers have been advised by the National
Association of Securities Dealers, Inc. ("NASD") that the Securities have been
designated Private Offerings, Resales and Trading through the Automated Linkages
Market ("PORTAL") eligible securities in accordance with the rules and
regulations of the NASD.
(c) None of the Issuers, nor to their knowledge any of their
respective Affiliates, or any person acting on its or their behalf (other than
the Initial Purchaser, as to whom the Issuers make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Securities Act ("Regulation S") with respect to the
Securities. The Securities offered and sold in reliance on Regulation S have
been and will be offered and sold only in offshore transactions, assuming the
accuracy of, and compliance with, the Initial Purchaser's representations,
warranties and agreements set forth in this Agreement. The sale of the
Securities pursuant to Regulation S is not part of a plan or scheme to evade the
registration provisions of the Securities Act. No registration under the
Securities Act of the Securities is required for the sale of the Securities to
the Initial Purchaser as contemplated hereby or for the Exempt Resales (as
defined below), assuming the accuracy of, and compliance with, the Initial
Purchaser's representations, warranties and agreements set forth in this
Agreement. The Securities sold pursuant to Regulation S will initially be
represented by a temporary global security as required by Rule 903 of Regulation
S. Notwithstanding the foregoing, no representation is made as to the activities
of the Initial Purchaser or any Affiliates of the Initial Purchaser.
(d) Neither the Company nor any of its subsidiaries is, or
will be after giving effect to the offering and sale of the Securities and the
application of the proceeds therefrom as described in the Final Memorandum, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act").
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(e) Assuming (i) that the representations and warranties and
covenants of the Initial Purchaser contained in Section 3 hereof are true and
correct and (ii) that the Initial Purchaser complies with its agreements
contained in Section 3 hereof, (A) registration under the Securities Act of the
Securities or qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"), is not required in connection with
the offer and sale of the Securities to the Initial Purchaser in the manner
contemplated by the Final Memorandum or this Agreement and (B) initial resales
of the Securities by the Initial Purchaser on the terms and in the manner set
forth in the Final Memorandum and Section 3 hereof are exempt from the
registration requirements of the Securities Act.
(f) Since the respective dates as of which information is
given in the Preliminary Memorandum and the Final Memorandum, except as
otherwise stated therein, (i) there has been no material adverse change in the
condition (financial or otherwise), results of operations, affairs or business
prospects of the Company and its subsidiaries and BAN considered as a whole,
whether or not arising in the ordinary course of business and (ii) there have
been no material transactions entered into by the Company or any of its
subsidiaries (collectively, a "Material Adverse Change").
(g) The Company has received the consent of a majority of the
holders of its 12.75% Senior Subordinated Notes Due June 15, 2004 (the "Existing
Notes") not held by the Company or its affiliates to the amendment (the
"Proposed Amendment") of the indenture governing the Existing Notes (the
"Existing Indenture") described in the Company's Consent Solicitation Statement
dated March 16, 1998 (the "Consent Solicitation Statement"). Such consents are
sufficient under the Existing Indenture to permit the Issuers and the trustee
under the Existing Indenture to adopt a supplemental indenture giving effect to
the Proposed Amendment (the "Supplemental Indenture"). The Supplemental
Indenture, subject to the satisfaction of the conditions set forth therein, is
in full force and effect and each of the representations and warranties
contained in the Solicitation Agency Agreement between the Company and the
Initial Purchaser dated March 16, 1998 is true and correct.
(h) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the state of its
incorporation with corporate power and authority to own, lease and operate its
properties and conduct its business as described in the Preliminary Memorandum
and the Final Memorandum; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each jurisdiction in
which the conduct of its business requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not,
singly or in the aggregate, reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), results of operations, affairs
or business prospects of the Company and its subsidiaries considered as a whole
(a "Material Adverse Effect").
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(i) The shareholders' equity in the Company at November 30,
1997, was as set forth in the "Actual" column under the caption "Capitalization"
in the Preliminary Memorandum and the Final Memorandum. All of the outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. Attached as Schedule A hereto is a
complete and accurate list of each subsidiary of the Company. Each of the
subsidiaries of the Company has been duly organized and is validly existing and
in good standing under the laws of the jurisdiction of its organization, has the
requisite power and authority to own, lease and operate its properties and
conduct its business as described in the Preliminary Memorandum and the Final
Memorandum and is duly qualified as a foreign organization to transact business
and is in good standing in each jurisdiction in which the conduct of its
business requires such qualification, except to the extent that the failure to
be so qualified or be in good standing would not, singly or in the aggregate,
reasonably be expected to have a Material Adverse Effect. All of the issued and
outstanding capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable, and, except
as described in the Preliminary Memorandum and the Final Memorandum, all shares
of capital stock of each subsidiary of the Company are owned by the Company
(except for directors' qualifying shares issued for Chattem (U.K.) Ltd. and HBA
Insurance Ltd.), directly or through subsidiaries of the Company, free and clear
of any mortgage, pledge, lien, encumbrance, claim or equity.
(j) This Agreement has been duly authorized, executed and
delivered by the Issuers and constitutes the valid and binding agreement of the
Issuers, enforceable against the Issuers in accordance with its terms, except
that (i) enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law) and (ii) the enforceability of any
indemnification or contribution provisions thereof may be limited under
applicable securities laws or the public policies underlying such laws.
(k) The Notes have been duly authorized by the Company and,
when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchaser in accordance
with this Agreement, will constitute the valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms, and
will be entitled to the benefits of the Indenture, except that enforcement
thereof may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
(l) The Guarantees endorsed on the Notes have been duly
authorized by the Guarantor and when the Notes are executed and authenticated in
accordance with the
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provisions of the Indenture and delivered to the Initial Purchaser in accordance
with this Agreement, the Guarantees will constitute the valid and binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with their terms, and will be entitled to the benefits of the Indenture, except
that enforcement thereof may be subject to (A) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and (B)
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law).
(m) The Indenture has been duly authorized by the Issuers.
When the Securities are delivered and paid for pursuant to this Agreement on the
Closing Date, the Indenture will have been duly executed and delivered by the
Issuers and, assuming the due execution and delivery thereof by the Trustee,
will constitute the valid and binding agreement of the Issuers, enforceable
against the Issuers in accordance with its terms, except that enforcement
thereof may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
(n) The Exchange Securities have been duly authorized and,
when duly executed, authenticated, issued and delivered, will be validly issued
and outstanding, and will constitute the valid and binding obligations of the
Issuers, entitled to the benefits of the Indenture and enforceable against the
Issuers in accordance with their terms, except that enforcement thereof may be
subject to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
(o) The Registration Rights Agreement has been duly authorized
by the Company and the Guarantor and, when duly executed and delivered by the
Issuers (assuming the due execution and delivery by the Initial Purchaser), will
constitute the valid and binding agreement of the Issuers, enforceable against
the Issuers in accordance with its terms, except that (i) enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable securities laws
or the public policies underlying such laws.
(p) On the Closing Date, the Credit Agreements (as defined in
the Final Memorandum), the guarantee of the obligations by the Company's
existing and future domestic subsidiaries and the pledge thereunder of the
assets and capital stock of each of the
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Company's existing and future domestic subsidiaries thereunder (a) shall have
been duly authorized, executed and delivered by the Company and the existing
domestic subsidiaries, respectively, and will constitute the valid and binding
agreement of the Company and the existing domestic subsidiaries, respectively,
enforceable against the Company and the existing domestic subsidiaries, as
applicable, in accordance with their terms, except that (i) enforcement thereof
may be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B) general principles
of equity (regardless of whether enforceability is considered in a proceeding in
equity or at law) and (ii) the enforceability of any indemnification or
contribution provisions thereof may be limited under applicable securities laws
or public policies; and (b) shall be in full force and effect. On the Closing
Date, no event of default or event shall have occurred which, with the giving of
notice or passage of time or both, would constitute an event of default under
the Credit Agreements or the guarantees, or pledge agreements thereof by the
existing domestic subsidiaries, and all conditions to the extension of credit
thereunder shall have been satisfied without waiver.
(q) The asset purchase agreement, dated February 22, 1998,
between the Issuers and Bristol-Myers Squibb Company, as amended by letter
agreements dated March 13, 1998 and March 20, 1998 (the "Acquisition Agreement")
pursuant to which the Company will purchase BAN, has been duly authorized,
executed and delivered by the Company and constitutes the valid and binding
agreement of the Company, enforceable against Bristol-Myers Squibb Company in
accordance with its terms, except that (i) enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity (regardless of
whether enforceability is considered in a proceeding in equity or at law). The
Acquisition Agreement is in full force and effect and there exists no breach by
any of the Issuers (to the extent that each is a party thereto) or, to the
knowledge of the Issuers, any other party of any representations or covenant
thereunder and no facts have come to the attention of the Issuers (to the extent
that each is a party thereto) that have led such Issuers to believe that the
conditions to the consummation of the transactions contemplated thereby will not
be satisfied in accordance with the terms thereof.
(r) The execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement, the Supplemental Indenture,
the Acquisition Agreement and the Credit Agreements and the guarantees and
pledge agreements thereunder by the Issuers (to the extent each is a party
thereto), and the consummation of the Acquisition and the other transactions
contemplated hereby and thereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan or credit agreement or other
agreement or instrument to which either the Company or any of its
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<PAGE>
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the properties or assets of the Company or any of its
subsidiaries are subject, nor will such actions result in any violation of the
provisions of the charter or by-laws of the Company or any of its subsidiaries
or any statute to which they may be subject or any order, rule or regulation of
any court or governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties or assets (except to the
extent any such conflict, breach, violation or default singly or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect);
and except for such consents, approvals, authorizations, registrations or
qualifications as may be required under applicable state securities and Blue Sky
laws in connection with the purchase and distribution of the Securities by the
Initial Purchaser or as set forth in the Registration Rights Agreement or such
consents which have been obtained, no consent, approval, authorization or order
of, or filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this Agreement,
the Indenture, the Registration Rights Agreement, the Supplemental Indenture,
the Acquisition Agreement and the Credit Agreements and the Guarantees and
pledge agreements thereunder by the Issuers (to the extent each is a party
thereto), the consummation of the Acquisition and the other transactions
contemplated hereby and thereby, and the issuance and sale of the Notes and
Exchange Securities by the Issuers (except to the extent the failure to obtain
such consent would not reasonably be expected to have a Material Adverse
Effect).
(s) Neither the Company nor any of its subsidiaries is in
breach or violation of any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound or to which any of the properties or assets
of the Company or any of its subsidiaries are subject, nor is the Company or any
of its subsidiaries in violation of the provisions of its respective charter or
by-laws or any statute or any judgment, order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Company, any of its
subsidiaries or any of their properties or assets (except to the extent any such
conflict, breach, violation or default is cured at or prior to the Closing Date
and within the grace period applicable thereto or would not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect).
(t) As of the Closing Date, the Securities and the Indenture
will conform in all material respects to the descriptions thereof contained in
the Final Memorandum. As of the Closing Date, the provisions of the Registration
Rights Agreement and the Credit Agreements, to the extent that such provisions
are summarized in the Final Memorandum, will conform in all material respects to
the descriptions thereof contained in the Final Memorandum.
(u) Except as set forth in the Registration Rights Agreement,
there are no contracts, agreements or understandings between the Company or any
of its subsidiaries and any person granting such person the right to require the
Company or any of its subsidiaries to file a registration statement under the
Securities Act with respect to any securities owned or to be
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owned by such person or to require the Company or any of its subsidiaries to
include such securities in any securities being registered pursuant to any
registration statement filed by the Company or any of its subsidiaries under the
Securities Act.
(v) Except as set forth in the Preliminary Memorandum and the
Final Memorandum, there is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Issuers, threatened against or affecting the Company, any of
its subsidiaries or BAN which would reasonably be expected to result in a
Material Adverse Change or, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect or materially and adversely affect the
offering of the Securities.
(w) The Company and each of its subsidiaries has good and
indefeasible title in fee simple to all real property and good and indefeasible
title to all personal property owned by it and necessary in the conduct of the
business of the Company or such subsidiary, in each case free and clear of all
liens, encumbrances and defects except (i) such as are referred to in the Final
Memorandum or (ii) such as do not materially and adversely affect the value of
such property to the Company or such subsidiary, and do not interfere with the
use made and proposed to be made of such property by the Company or such
subsidiary to an extent that such interference would, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect. All leases
to which the Company or its subsidiaries is a party are valid and binding, and
no default has occurred or is continuing thereunder which could, singly or in
the aggregate, reasonably be expected to have a Material Adverse Effect or
materially and adversely affect the offering of the Securities, and the Company
and its subsidiaries enjoy peaceful and undisturbed possession under all such
leases to which any of them is a party as lessee (with such exceptions as do not
materially interfere with the use made by the Company or such subsidiary). The
Company and its subsidiaries possess adequate certificates, authorizations or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them, and except as
set forth in the Final Memorandum, neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such certificate, authority or permit which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or finding,
would, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(x) Arthur Andersen LLP, which has certified certain financial
statements of the Company and its subsidiaries included in the Final Memorandum,
and, to the Issuers' knowledge, Price Waterhouse LLP, which has certified
certain financial statements of BAN, are independent public accountants within
the meaning of the Securities Act and the rules and regulations thereunder. The
financial statements included in the Preliminary Memorandum and the Final
Memorandum present fairly in all material respects the consolidated financial
position of (i) the Company and its subsidiaries, on a consolidated basis, and
(ii) the U.S.
9
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business of BAN, in each case as at the dates indicated and the results of their
respective operations and the changes in their financial position for the
periods specified; said financial statements have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
during the periods involved, except as indicated therein, and comply as to form
in all material respects with the requirements applicable to such financial
statements included in registration statements under the Securities Act. The
Company and each of its subsidiaries maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
The pro forma financial statements included in the
Preliminary Memorandum and the Final Memorandum have been prepared on a
basis consistent with the historical financial statements of the Company and
its subsidiaries and the U.S. business of BAN, and give effect to
assumptions used in the preparation thereof on a reasonable basis and in
good faith and present fairly the historical and proposed transactions
contemplated by the Preliminary Memorandum and the Final Memorandum; and
such pro forma financial statements comply as to form in all material
respects with the requirements applicable to pro forma financial statements
included in registration statements on Form S-1 under the Act. The other pro
forma financial and statistical information and data included in the
Preliminary Memorandum and the Final Memorandum are, in all material
respects, accurately presented and prepared on a basis consistent with the
pro forma financial statements.
The historical and pro forma financial statements included
in the Preliminary Memorandum and the Final Memorandum constitute all of the
financial statements that would be required to be included in a registration
statement on Form S-1 under the Securities Act.
(y) Neither the Company nor any of its subsidiaries is now or,
after giving effect to the issuance of the Securities, and the application of
the proceeds thereof, will be (i) insolvent, (ii) left with unreasonably small
capital with which to engage in its anticipated businesses or (iii) incurring
debts beyond its ability to pay such debts as they become due.
(z) Except as would not reasonably be expected to have a
Material Adverse Effect, both before and immediately after giving effect to the
Acquisition, the Company
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and its subsidiaries own, or otherwise possess the right to use, all patents,
trademarks, service marks, trade names and copyrights, all applications and
registrations for each of the foregoing, and all other proprietary rights and
confidential information used in the conduct of their respective businesses as
currently conducted; and neither the Company nor any of its subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with the rights of any third party with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would reasonably be expected to have a Material Adverse Effect.
(aa) The Company and its subsidiaries, both before and
immediately after giving effect to the Acquisition, are (i) in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect. In the ordinary course of its
business, the Company conducts a periodic review of the effect of Environmental
Laws on the business, operations and properties of the Company and its
subsidiaries, in the course of which it identifies and evaluates associated
costs and liabilities (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties). On the
basis of such review, the Company has reasonably concluded that such associated
costs and liabilities would not, singly or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(bb) No labor problem or disturbance with the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Issuers,
is threatened which, singly or in the aggregate, would reasonably be expected to
have a Material Adverse Effect.
(cc) Neither the Company nor any of its subsidiaries, nor, to
any Issuers' knowledge, any director, officer, agent, employee, stockholder or
other person, in any such case, acting on behalf of the Company or any of its
subsidiaries, has used any corporate funds during the last five years for any
unlawful contribution, gift, entertainment or other unlawful expense relating to
political activity; made any unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or made any bribe, payoff,
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influence payment, kickback or other payment that is unlawful.
(dd) Neither the Company nor any of its subsidiaries has
taken, and none of them will take, any action that would cause this Agreement or
the issuance or sale of the Securities and Exchange Securities to violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System
or analogous foreign laws and regulations.
(ee) The Company and its subsidiaries have complied with all
provisions of Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida) relating to doing business with the Government of Cuba or with persons
or affiliates located in Cuba.
(ff) Other than as set forth on Schedule B hereto, neither the
Company nor any subsidiary is a party to any contract or agreement that would be
required to be filed with the Commission as an exhibit to a registration
statement on Form S-1 pursuant to entries (2), (4) and (10) of the Exhibit Table
of Item 601 of Regulation S-K under the Securities Act.
(gg) Neither Issuer nor, to the Issuers' knowledge, any
Affiliate of either Issuer has sold, offered for sale or solicited offers to buy
or otherwise negotiated in respect of any security (as defined in the Securities
Act) in a transaction would require the registration under the Securities Act of
the Securities.
(hh) Neither the Company nor any subsidiary is a "public
utility" or a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
2. Purchase and Sale. On the basis of the representations and
warranties contained in, and subject to the terms and conditions of, this
Agreement, the Issuers agree to sell to the Initial Purchaser and the Initial
Purchaser agrees to purchase $200,000,000 in aggregate principal amount of
Securities, at a purchase price equal to 97% of the principal amount thereof.
The Issuers shall not be obligated to deliver any of the
Securities to be delivered except upon payment for all the Securities to be
purchased as provided herein.
3. Sale and Resale of the Securities by the Initial Purchaser. The
Initial Purchaser represents and warrants to the Issuers that:
(a) It will offer the Securities to be purchased hereunder
for resale only upon the terms and conditions set forth in this Agreement and
in the Final Memorandum.
(b) It (i) will not solicit offers for, or offer or sell,
the Securities by means of any form of general solicitation or general
advertising within the meaning of Regulation D or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act, and
(ii) will solicit offers for the Securities only from, and will offer, sell or
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deliver (the "Exempt Resales") the Securities, as part of its initial
offering, only to the following persons (each an "Eligible Purchaser"): (A)
persons whom the Initial Purchaser reasonably believes to be qualified
institutional buyers ("QIBs") as defined in Rule 144A under the Securities
Act, as such rule may be amended from time to time ("Rule 144A") or, if any
such person is buying for one or more institutional accounts for which such
person is acting as fiduciary or agent, only when such person has represented
to the Initial Purchaser that each such account is a QIB, to whom notice has
been given that such sale or delivery is being made in reliance on Rule 144A,
(B) to a limited number of institutional accredited investors as defined in
Rule 501(a) (1), (2), (3) or (7) under Regulation D ("Accredited Investors")
that, prior to their purchase of the Securities, execute and deliver a letter
containing certain representations and agreements in the form attached as
Annex A to the Final Memorandum and (C) outside the United States in offshore
transactions in reliance on Regulation S.
(c) With respect to Securities sold in reliance on
Regulation S, (i) neither the Initial Purchaser nor any of its Affiliates nor
anyone acting on its behalf has offered or sold, or will offer or sell, any
Securities by means of any directed selling efforts (as defined in Rule 902
of Regulation S) in the United States and (ii) at or prior to confirmation of
all sales of Securities made in reliance on Regulation S, it will have sent
to each distributor, dealer or person receiving a selling concession, fee or
other remuneration that purchases the Securities from it during the
restricted period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered or
sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of a distribution thereof at any time or (ii)
otherwise until 40 days after the later of the date of the commencement
of the offering and the closing date, except in either case in
accordance with an exemption from or in a transaction not subject to
the Securities Act. Terms used above have the meanings given them by
Regulation S."
The sale of the Securities to non-U.S. persons in offshore transactions is
not part of a plan or scheme to avoid the registration requirements of the
Securities Act.
(d) (i) It has not solicited, and will not solicit, offers
to purchase any of the Securities from, (ii) it has not sold, and will not
sell, any of the Securities to and (iii) it has not distributed, and will not
distribute, the Preliminary Memorandum or the Final Memorandum to, any person
or entity in any jurisdiction outside of the United States except, in each
case, in compliance in all material respects with all applicable laws of such
jurisdiction. For purposes of this Agreement, "United States" means the
United States of America, its territories, its possessions (including the
Commonwealth of Puerto Rico) and other areas subject to its jurisdiction.
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(e) Unless prohibited by applicable law, (i) it will
furnish to each person to whom it offers any Securities a copy of the
Preliminary Memorandum (as amended or supplemented) or Final Memorandum or
(unless delivery of such Preliminary Memorandum is required by applicable
law) shall inform each such person that a copy of such Preliminary Memorandum
or the Final Memorandum will be available upon request and (ii) it will
furnish to each person to whom it sells Securities a copy of the Final
Memorandum (as then amended or supplemented by applicable law) and shall
inform each such person that a copy of such Final Memorandum will be
available upon request.
4. Delivery of and Payment for the Notes. Delivery of and
payment for the Securities shall be made at the office of Latham & Watkins, 885
Third Avenue, New York, New York at 9:00 A.M., New York City time, on March 24,
1998, or at such other date or place as shall be determined by agreement between
the Initial Purchaser and the Company. This date and time are sometimes referred
to as the "Closing Date." On the Closing Date, the Issuers shall deliver or
cause to be delivered the Securities to the Initial Purchaser for the account of
the Initial Purchaser against payment to or upon the order of the Company of the
purchase price by wire transfer in federal (same-day) funds. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of the Initial Purchaser
hereunder. Upon delivery, the Securities shall be in definitive fully registered
form and registered in the name of Cede & Co., as nominee of the Depository
Trust Company ("DTC"), or such other name or names and in such denominations as
the Initial Purchaser shall request in writing not less than one business day
prior to the Closing Date. For the purpose of expediting the checking and
packaging of the Securities, the Issuers shall make the Securities available for
inspection by the Initial Purchaser in New York, New York, not later than 2:00
P.M., New York City time, on the business day prior to the Closing Date.
5. Further Agreements of the Issuers. The Issuers jointly and
severally agree with the Initial Purchaser as set forth below in this Section
5:
(a) The Issuers will furnish to the Initial Purchaser,
without charge, as many copies of the Final Memorandum and any supplements
and amendments thereto as they may reasonably request.
(b) Prior to making any amendment or supplement to the
Preliminary Memorandum or the Final Memorandum, the Issuers shall furnish a
copy thereof to the Initial Purchaser and counsel to the Initial Purchaser
and will not effect any such amendment or supplement to which the Initial
Purchaser shall reasonably object by notice to the Company after a reasonable
period to review.
(c) If, at any time prior to completion of the distribution
of the Securities by the Initial Purchaser, any event shall occur or
condition exist as a result of which it
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is necessary, in the opinion of counsel for the Initial Purchaser or counsel
for the Issuers, to amend or supplement the Final Memorandum in order that
the Final Memorandum will not include an untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein not misleading in the light of the circumstances existing at the time
it is delivered to a purchaser, or if it is necessary to amend or supplement
the Final Memorandum to comply with applicable law, the Issuers will promptly
prepare such amendment or supplement as may be necessary to correct such
untrue statement or omission or so that the Final Memorandum, as so amended
or supplemented, will comply with applicable law and furnish to the Initial
Purchaser such number of copies of such amendment or supplement as they may
reasonably request.
(d) So long as any Securities are outstanding and are
"Restricted Securities" within the meaning of Rule 144(a)(3) under the
Securities Act and during any period in which the Issuers are not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Issuers will furnish to holders of the Securities and
prospective purchasers of Securities designated by such holders, upon request
of such holders or such prospective purchasers, the information, if any,
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(e) So long as the Securities and Exchange Securities are
outstanding, the Issuers will furnish to the Initial Purchaser copies of any
annual reports, quarterly reports and current reports filed with the
Securities and Exchange Commission ("SEC") on Forms 10-K, 10-Q and 8-K, or
such other similar forms as may be designated by the SEC, and such other
documents, reports and information as shall be furnished by the Issuers to
the Trustee or to the holders of the Securities and Exchange Securities
pursuant to the Indenture.
(f) The Issuers will use their best efforts to qualify the
Securities for sale under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchaser reasonably designates and to continue
such qualifications in effect so long as reasonably required for the
distribution of the Securities. The Issuers will also arrange for the
determination of the eligibility for investment of the Securities under the
laws of such jurisdictions as the Initial Purchaser reasonably requests.
Notwithstanding the foregoing, the Issuers shall not be obligated to qualify
as a foreign corporation in any jurisdiction in which they are not so
qualified or to file a general consent to service of process or to subject
themselves to taxation in respect of doing business in any jurisdiction in
which it is not otherwise subject.
(g) The Issuers will use their best efforts to permit the
Securities to be designated PORTAL securities in accordance with the rules
and regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL market and to permit the Securities to
be eligible for clearance and settlement through DTC.
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(h) Except following the effectiveness of any Registration
Statement (as defined in the Registration Rights Agreement) and except for
such offers as may be made as a result of, or subsequent to, filing such
Registration Statement or amendments thereto prior to the effectiveness
thereof, the Issuers will not, and will cause their Affiliates not to,
solicit any offer to buy or offer to sell the Securities by means of any form
of general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act.
(i) The Company will apply the net proceeds from the sale
of the Securities as set forth in the Final Memorandum.
(j) The Issuers will take such steps as shall be necessary
to ensure that neither the Company nor any of its subsidiaries shall become
(i) an "investment company" within the meaning of the Investment Company Act
or (ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company Act
of 1935, as amended.
(k) The Company and its subsidiaries will not, and will
cause their Affiliates not to, take any action that would require the
registration under the Securities Act of the Securities (other than pursuant
to the Registration Rights Agreement) including, without limitation, (i)
engaging in any directed selling efforts (within the meaning of Regulation S)
during any applicable restricted period or (ii) offering any other securities
in a manner that would be integrated with the transactions contemplated
hereby.
(l) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable shelf registration statement, if, in the
reasonable judgment of the Initial Purchaser, the Initial Purchaser or any of
its affiliates are required to deliver an offering memorandum in connection
with sales of, or market-making activities with respect to, the Securities,
(A) the Issuers will periodically amend or supplement the Final Memorandum so
that the information contained in the Final Memorandum complies with the
requirements of Rule 144A of the Securities Act, (B) the Issuers will amend
or supplement the Final Memorandum when necessary to reflect any material
changes in the information provided therein so that the Final Memorandum will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light
of the circumstances existing as of the date the Final Memorandum is so
delivered, not misleading and (C) the Issuers will provide the Initial
Purchaser with copies of each such amended or supplemented Final Memorandum,
as the Initial Purchaser may reasonably request.
The Issuers hereby expressly acknowledge that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each offering memorandum, registration
statement, prospectus, amendment or supplement
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referred to in this Section 5(l).
(m) The Issuers will not terminate the consent solicitation
made pursuant to the Consent Solicitation Statement prior to 5:00 P.M. (New
York City time) on March 27, 1998 and from and after such date shall
consummate such consent solicitation as promptly as possible in accordance
with the terms of the Consent Solicitation Statement as in effect on the date
hereof.
(n) The Issuers will do all things reasonably necessary to
satisfy the closing conditions set forth in Section 7 hereof.
6. Expenses. The Issuers, jointly and severally, agree to pay (a)
the costs incident to the authorization, issuance, sale and delivery of the
Securities and Exchange Securities and any issue or stamp taxes payable in
that connection, (b) the costs incident to the preparation and printing of
the Preliminary Memorandum, the Final Memorandum and any amendments,
supplements and exhibits thereto, (c) the costs of distributing the
Preliminary Memorandum, the Final Memorandum and any amendment or supplement
thereto, (d) the fees and expenses of qualifying the Securities and Exchange
Securities under the securities laws of the several jurisdictions as provided
in Section 5(f) and of preparing, printing and distributing a Blue Sky
Memorandum (including reasonable related fees and expenses of counsel to the
Initial Purchaser), (e) the cost of printing the Securities and the Exchange
Securities, (f) the fees and expenses of the Trustee and any agent of the
Trustee and the fees and disbursements of any counsel for the Trustee in
connection with the Indenture and the Securities and Exchange Securities, (g)
any fees paid to rating agencies in connection with the rating of the
Securities and Exchange Securities, (h) the costs and expenses of DTC and its
nominee, including its book-entry system, (i) all expenses and listing fees
incurred in connection with the application for quotation of the Securities
on the PORTAL market and (j) all other costs and expenses incident to the
performance of the obligations of the Issuers under this Agreement, including
the fees and expenses of Latham & Watkins, counsel to the Initial Purchaser.
7. Conditions of Initial Purchaser's Obligations. The obligations of
the Initial Purchaser to purchase the Securities shall be subject to the
accuracy of the representations and warranties on the part of the Issuers
contained herein at the Execution Time and the Closing Date, to the accuracy
of the statements of the Issuers made in any certificates pursuant to the
provisions hereof, to the performance by the Issuers of their obligations
hereunder in all material respects and to the following additional conditions:
(a) The Initial Purchaser shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the Final
Memorandum or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Latham & Watkins, counsel for
the Initial Purchaser, is material or omits to state a fact which, in the
17
<PAGE>
opinion of such counsel, is material and is necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The Final Memorandum shall have been printed and copies
distributed to the Initial Purchaser as soon as practicable but in no event
later than on the Business Day following the date of this Agreement or at
such later date and time as to which the Initial Purchaser may agree, and no
stop order suspending the qualification or exemption from qualification of
the Securities in any jurisdiction referred to in Section 5(f) shall have
been issued and no proceeding for that purpose shall have been commenced or
shall be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect; no
action, suit or proceeding shall have been commenced and be pending against
or affecting or, to the knowledge of the Company, threatened against, the
Company or any of its subsidiaries or BAN before any court or arbitrator or
any governmental body, agency or official that, singly or in the aggregate,
if adversely determined, would reasonably be expected to result in a Material
Adverse Effect; and no stop order shall have been issued by the SEC or any
governmental agency of any jurisdiction referred to in Section 5(f)
preventing the use of the Final Memorandum, or any amendment or supplement
thereto, or which would reasonably be expected to have a Material Adverse
Effect.
(d) Since the dates as of which information is given in the
Final Memorandum and other than as set forth in the Final Memorandum, (i)
there shall not have been any Material Adverse Change, or any development
that is reasonably likely to result in a Material Adverse Change, or any
material change in the long-term debt, or material increase in the short-term
debt, from that set forth in the Final Memorandum, (ii) no dividend or
distribution of any kind shall have been declared, paid or made by the
Company on any class of its capital stock and (iii) neither the Company and
its subsidiaries nor BAN shall have incurred any liabilities or obligations,
direct or contingent, that are material, individually or in the aggregate, to
the Company and its subsidiaries and BAN, taken as a whole, and that are
required to be disclosed on a balance sheet or notes thereto in accordance
with generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Final Memorandum.
(e) The Initial Purchaser shall have received a
certificate, dated the Closing Date, signed on behalf of the Company by (i)
the chief executive or chief operating officer and (ii) a principal financial
or accounting officer of the Company and the Guarantor, confirming that (A)
such officers have participated in conferences with other officers and
representatives of the Issuers, representatives of the independent public
accountants of the Issuers
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<PAGE>
and representatives of counsel to the Issuers, at which the contents of the
Final Memorandum and related matters were discussed and (B) the matters set
forth in paragraphs (b), (c), (d) and (e) of this Section 7 are true and
correct as of the Closing Date.
(f) All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Securities, the Exchange Securities, the Indenture, the Registration Rights
Agreement, the Final Memorandum, the Credit Agreements, the Acquisition
Agreement and all other legal matters relating to this Agreement and the
transactions contemplated hereby and thereby, shall be reasonably satisfactory
in all material respects to counsel for the Initial Purchaser, and the Issuers
shall have furnished to such counsel all documents and information that they may
reasonably request to enable them to pass upon such matters.
(g) Miller & Martin, LLP, counsel for the Issuers, shall
have furnished to the Initial Purchaser its written opinion (containing
customary limitations and approvals that shall be reasonably satisfactory in
all material respects to the Initial Purchaser's counsel), addressed to the
Initial Purchaser and dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchaser, to the effect that:
(i) The Company and the Guarantor are validly
existing as a corporation and is in good standing under the laws of its
jurisdiction of incorporation. The Company and the Guarantor are duly
qualified to do business and in good standing as foreign organization in each
jurisdiction with respect to which it has certified to us that they own
property, maintain business or have employees (except where failure to so
qualify would not, singly or in the aggregate, reasonably be expected to have
a Material Adverse Effect).
(ii) Assuming (i) the accuracy of and compliance
with the representations, warranties and covenants of the Issuers set forth
in Section 1 of this Agreement and (ii) the accuracy of and compliance with
the Initial Purchaser's representations, warranties and covenants set forth
in this Agreement, the offer, issuance, sale and delivery of the Securities
to the Initial Purchaser, and the initial reoffer, resale and delivery of the
Securities by the Initial Purchaser, as contemplated by this Agreement and
the Final Memorandum, do not require registration under the Securities Act,
or qualification of the Indenture under the Trust Indenture Act, it being
understood that no opinion is expressed as to any subsequent resale of
Securities or any resale of Securities by any person other than the Initial
Purchaser.
(iii) Each of the Company and the Guarantor has the
corporate power and authority to execute and deliver, and to consummate the
transactions contemplated by, this Agreement; the Company has the corporate
power and authority to issue and deliver the Notes as contemplated by this
Agreement; and the Guarantor has the corporate power and
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<PAGE>
authority to issue and deliver the Guarantee as contemplated by this Agreement.
(iv) The execution and delivery of this Agreement
have been duly authorized by all requisite corporate action of the Company
and the Guarantor; and this Agreement has been duly executed and delivered by
the Company and the Guarantor.
(v) The execution and delivery of the Indenture
have been duly authorized by all requisite corporate action of the Company
and the Guarantor; and the Indenture has been duly executed and delivered by
the Company and the Guarantor, and assuming due authorization, execution and
delivery by the Trustee, is a valid and binding agreement of the Company and
the Guarantor, enforceable against the Company and the Guarantor in
accordance with its terms, except that enforcement thereof may be subject to
(A) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law)
and the exercise of discretionary authority of any court before which a
proceeding may be brought.
(vi) The execution and delivery of the Securities
have been duly authorized by all requisite corporate action of the Company
and the Guarantor; the Notes have been duly executed and delivered by the
Company and the Guarantees have been duly executed and delivered by the
Guarantor and, assuming due authentication by the Trustee, the Notes and the
Guarantees are valid and binding obligations of the Company and the Guarantor
respectively, entitled to the benefits of the Indenture, enforceable against
the Company and the Guarantor in accordance with their terms, except that
enforcement thereof may be subject to (A) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws now or
hereafter in effect relating to or affecting creditors' rights generally and
(B) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law) and the exercise of
discretionary authority of any court before which a proceeding may be brought.
(vii) The execution and delivery of the Exchange
Securities have been duly authorized by all requisite corporate action of the
Company and the Guarantor; and, when duly executed and delivered by the
Company and the Guarantor and duly authenticated by the Trustee, will be
valid and binding obligations of the Company and the Guarantor entitled to
the benefits of the Indenture, enforceable against the Company and the
Guarantor in accordance with their terms, except that enforcement thereof may
be subject to (A) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law) and the exercise of discretionary authority
of any court before which a proceeding may be brought.
(viii) The execution and delivery of the
Registration Rights
20
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Agreement have been duly authorized by all requisite corporate action of the
Company and the Guarantor; the Registration Rights Agreement has been duly
executed and delivered by the Company and the Guarantor and, assuming due
authorization, execution and delivery by the Initial Purchaser, the
Registration Rights Agreement is a valid and binding agreement of the Company
and the Guarantor enforceable against the Company and the Guarantor in
accordance with its terms, except that (i) enforcement thereof may be subject
to (A) bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors' rights generally and (B) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law) and the exercise of discretionary authority of any court before
which a proceeding may be brought and (ii) the validity and enforceability of
any indemnification or contribution provisions thereof may be limited under
applicable securities laws or public policies.
(ix) The execution and delivery of the Credit
Agreements have been duly authorized by all requisite corporate action of the
Company and the Guarantor (to the extent each is a party thereto); and the
Credit Agreements have been duly executed and delivered by the Company and
the Guarantor (to the extent each is a party thereto) and, assuming the due
authorization, execution and delivery by the other parties thereto, are the
valid and binding agreements of the Company and the Guarantor (to the extent
each is a party thereto), enforceable against each of the Company and the
Guarantor (to the extent each is a party thereto) in accordance with their
terms, except that enforcement thereof may be subject to (A) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (B) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law) and the
exercise of discretionary authority of any court before which a proceeding
may be brought.
(x) All of the capital stock of the Company's
subsidiaries is owned of record by the Company except for directors'
qualifying shares in the case of Chattem (U.K.) Ltd. and HBA Insurance Ltd.
All shares of capital stock of the Company's subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable and except as
disclosed in the Final Memorandum, to the knowledge of such counsel, all such
shares are owned by the Company free and clear of any security interests,
liens, pledges or encumbrances.
(xi) To the knowledge of such counsel, neither the
Company nor any of its subsidiaries is in violation of its corporate charter
or bylaws, or in default under any material agreement (including loan and
credit agreements), indenture or instrument known to such counsel, which
default could, singly or in the aggregate, reasonably be expected to have a
Material Adverse Effect; to the best knowledge of such counsel, the Company
and each of its subsidiaries is not in violation of any material law,
ordinance, governmental rule or regulation or court decree to which it may be
subject which violation, singly or in the aggregate, would not
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reasonably be expected to have a Material Adverse Effect.
(xii) The execution and delivery by the Company and
the Guarantor of this Agreement, the Indenture, the Registration Rights
Agreement, the Supplemental Indenture, the Acquisition Agreement and the
Credit Agreements, the consummation by the Company and the Guarantor of the
Acquisition and the other transactions contemplated hereby and thereby and by
the Final Memorandum will not (A) to the knowledge of such counsel, result in
a breach or violation of any of the terms or provisions of, or constitute a
default under, any material agreement or instrument of the Company or any of
its subsidiaries or (B) result in any violation of the provisions of the
charter or bylaws of the Company or any of its subsidiaries, or, to the
knowledge of such counsel, any applicable law, rule or regulation (other than
Securities Laws (as defined below) as to which an opinion is given in
paragraph (ii) above) with respect to the Company or any of its subsidiaries
or, to the knowledge of such counsel, any rule or regulation (other than
Securities Laws (as defined below) as to which an opinion is given in
paragraph (ii) above) or order of any court or governmental agency having
jurisdiction over the Company or any of its subsidiaries, except for such
violations that would not, singly or in the aggregate, reasonably be expected
to have a Material Adverse Effect; and, to the knowledge of such counsel,
except for such consents, approvals or authorizations of, or filings,
registrations or qualifications with, governmental authorities as may be
required under the Securities Act and the rules and regulations thereunder,
the Trust Indenture Act and the rules and regulations thereunder or
applicable states securities or Blue Sky laws, rules or regulations (all of
such laws, rules and regulations are collectively referred to herein as
"Securities Laws") in connection with the purchase and distribution of the
Notes by the Initial Purchaser and as set forth in, and in order to
consummate the transactions contemplated by, the Registration Rights
Agreement (it being understood that no opinion is expressed as to any
subsequent resale of the Securities or any resale of Securities by any person
other than the Initial Purchaser), no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required in connection with the execution and delivery by
the Company and the Guarantor of this Agreement, the Indenture, the
Registration Rights Agreement, the Supplemental Indenture, the Acquisition
Agreement or the Credit Agreements, the consummation by the Company and the
Guarantor of the Acquisition and the other transactions contemplated hereby
and thereby and the issuance and sale of the Securities and Exchange
Securities by the Company and the Guarantor.
(xiii) The descriptions in the Final Memorandum of
the Indenture, the Securities, the Registration Rights Agreement and the
Credit Agreements are accurate summaries of such documents in all material
respects.
(xiv) To the knowledge of such counsel, the Company
and its subsidiaries, both before and immediately after giving effect to the
Acquisition, own or otherwise possess the right to use all patents,
trademarks, service marks, trade names and copyrights, all applications and
registrations for each of the foregoing, used in the conduct of their
respective
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businesses as currently conducted; and, to the knowledge of such counsel neither
the Company nor any of its subsidiaries has received any notice, of any
infringement of or conflict with the rights of any third party with respect to
any of the foregoing which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect on the Company.
(xv) To the knowledge of such counsel, the
statements made in the Final Memorandum under the headings
"Business--Government Regulation," "Business--Environmental Matters" and
"Business--Legal Proceedings," to the extent they constitute matters of law
or legal conclusions, have been reviewed by such counsel and fairly present
in all material respects the information disclosed therein.
(xvi) To such counsel's knowledge, no legal or
governmental proceedings are pending to which the Company or any of its
subsidiaries is a party that would be required under the Securities Act to be
described in a registration statement on Form S-1 or a prospectus contained
therein delivered at the time of the confirmation of the sale of an offering
of securities registered under the Securities Act that are not described in
the Final Memorandum or, to such counsel's knowledge, that seek to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance or
sale of the Securities to the Initial Purchaser or the consummation of the
transactions described in the Final Memorandum under the caption "Use of
Proceeds."
(xvii) Neither the Company nor any of its
subsidiaries is (i) subject to registration and regulation as an "investment
company" within the meaning of the Investment Company Act or (ii) a "holding
company" or a "subsidiary company" or an "affiliate" of a holding company
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
(xviii) When the Securities are issued and delivered
pursuant to this Agreement, such Securities will not be of the same class
(within the meaning of Rule 144A(d)(3) under the Securities Act) as
securities of the Company or any of its subsidiaries that are listed on a
national securities exchange registered under Section 6 of the Exchange Act
or quoted on an automated inter-dealer quotation system.
(xix) Assuming the Initial Purchaser purchases the
Securities in accordance with Rule 144A under the Securities Act, neither the
issuance or sale of the Securities nor the application by the Company of the
net proceeds thereof as set forth in the Final Memorandum will violate
Regulation G, T, U or X of the Board of Governors of the Federal Reserve
System.
In addition, such counsel shall also state that such
counsel has participated
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in conferences with officers and representatives of the Issuers,
representatives of the independent public accountants for the Issuers and
the Initial Purchaser and its counsel at which the contents of the Final
Memorandum and related matters were discussed and, although such counsel is
not passing upon and does not assume any responsibility for and has not
verified the accuracy, completeness or fairness of the statements contained
in the Final Memorandum, and has not made any independent check or
verification thereof, on the basis of the foregoing (relying as to
materiality to the extent they deemed appropriate upon facts provided by
officers and other representatives of the Issuers), no facts have come to
the attention of such counsel that lead such counsel to believe that the
Final Memorandum, as of its date or the Closing Date, contained an untrue
statement of a material fact or omitted to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which there were made, not misleading (it being understood that such counsel
need express no belief or opinion with respect to the financial statements
and notes thereto and other financial and statistical data included
therein).
(h) You shall have received on the Closing Date an opinion
of Latham & Watkins, counsel for the Initial Purchaser, dated the Closing
Date and addressed to you, in form and substance reasonably satisfactory to
you.
(i) The Issuers and the Trustee shall have entered into the
Indenture and the Initial Purchaser shall have received counterparts,
conformed as executed, thereof.
(j) The Issuers and the Initial Purchaser shall have
entered into the Registration Rights Agreement and the Initial Purchaser
shall have received counterparts, conformed as executed, thereof.
(k) The Issuers and the domestic subsidiaries of the
Company shall have entered into the Credit Agreements (the form and substance
of which shall be reasonably acceptable to the Initial Purchaser) and the
Initial Purchaser shall have received counterparts, conformed as executed,
thereof and of all other documents and agreements entered into in connection
therewith. There shall exist at the Execution Time and at the Closing Date no
conditions that would constitute a default (or an event that with notice or
the lapse of time, or both, would constitute a default) under the Credit
Agreements. At the time of Closing on the Closing Date, the Credit Agreements
shall be in full force and effect and shall not have been modified.
(l) At the Execution Time and at the Closing Date, Arthur
Andersen LLP and Price Waterhouse LLP shall have furnished to the Initial
Purchaser customary "comfort" letters, dated respectively as of the Execution
Time and as of the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser and counsel for the Initial Purchaser,
with respect to the financial statements and certain financial information of
the
24
<PAGE>
Company, its subsidiaries and BAN, and confirming that they are independent
accountants within the meaning of the Securities Act and the Exchange Act and
the applicable rules and regulations thereunder and Rule 101 of the Code of
Professional Conduct of the American Institute of Certified Public Accountants
(the "AICPA"), and otherwise reasonably satisfactory in form and substance to
the Initial Purchaser and its counsel.
(m) (i) None of the Company, its subsidiaries or BAN shall
have sustained since the date of the latest financial statements included in
the Final Memorandum losses or interferences with their businesses, taken as
a whole, from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Final Memorandum and (ii) since such date there shall not have been any
change in the capital stock or long-term debt of the Company, any of its
subsidiaries or BAN or any change, or any development involving a prospective
change, in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company, its
subsidiaries and BAN, taken as a whole, otherwise than as set forth or
contemplated in the Final Memorandum, the effect of which, in any such case
described in clause (i) or (ii), is, in the reasonable judgment of the
Initial Purchaser, so material and adverse as to make it impracticable or
inadvisable to proceed with the offering or the delivery of the Securities
being delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
(n) Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange or The NASDAQ Stock
Market's National Market or in the over-the-counter market shall have been
suspended or materially limited, or minimum prices shall have been
established on such exchange by the SEC, or by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a banking
moratorium shall have been declared by Federal or state authorities, (iii)
the United States shall have become engaged in hostilities, there shall have
been an escalation in hostilities involving the United States or there shall
have been a declaration of a national emergency or war by the United States
or (iv) there shall have occurred such a material adverse change in general
economic, political or financial conditions (or the effect of international
conditions on the financial markets in the United States shall be such) as to
make it, in the reasonable judgment of the Initial Purchaser, impracticable
or inadvisable to proceed with the offering or delivery of the Securities
being delivered on the Closing Date on the terms and in the manner
contemplated herein and in the Final Memorandum.
(o) As of the Closing Date, no "nationally recognized
statistical rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Securities Act (i) will have imposed (or will have
informed the Company or the Guarantor that it is considering imposing) any
condition (financial or otherwise) on the Company's or the Guarantor's
retaining any rating assigned to the Company or the Guarantor, any securities
of the Company or the
25
<PAGE>
Guarantor or (ii) will have indicated to the Company or the Guarantor that it is
considering (a) the downgrading, suspension, or withdrawal of, or any review for
a possible change that does not indicate the direction of the possible change
in, any rating so assigned or (b) any negative change in the outlook for any
rating of the Company, the Guarantor or any securities of the Company or the
Guarantor.
(p) Concurrently with the Closing hereunder, the Issuers
shall have consummated the Acquisition in accordance with the Acquisition
Agreement, as in effect on the date hereof (without amendment or waiver).
(q) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the matters
referred to in this Section 7 and in order to evidence the accuracy,
completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(r) Prior to the Closing Date, the Issuers shall have
furnished to the Initial Purchaser such further information, certificates and
documents as the Initial Purchaser may reasonably request.
All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance
with the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchaser.
8. Indemnification and Contribution. (a) The Issuers jointly and
severally agree to indemnify and hold harmless the Initial Purchaser, the
directors, officers, employees and agents (including, without limitation,
attorneys) of the Initial Purchaser and each person who controls the Initial
Purchaser within the meaning of either the Securities Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several,
to which they or any of them may become subject under the Securities Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Preliminary Memorandum, the Final Memorandum or any information provided by
the Issuers to any holder or prospective purchaser of Notes pursuant to
Section 5(e), or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agree to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action: provided,
26
<PAGE>
however, that the Issuers will not be liable in any such case to the Initial
Purchaser to the extent that any such loss, claim, damage, liability or action
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission relating to the Initial Purchaser made
in the Preliminary Memorandum or the Final Memorandum, or in any amendment
thereof or supplement thereto, in reliance upon and in conformity with written
information furnished to the Issuers by or on behalf of the Initial Purchaser
specifically for inclusion therein.
(b) The Initial Purchaser agrees to indemnify and hold
harmless the Issuers, their directors, officers, employees and agents
(including, without limitation, attorneys), and each person who controls the
Issuers within the meaning of either the Securities Act or the Exchange Act,
to the same extent as the foregoing indemnity from the Issuers to the Initial
Purchaser, but only with reference to written information relating to the
Initial Purchaser furnished to the Issuers by or on behalf of the Initial
Purchaser specifically for inclusion in the Preliminary Memorandum or the
Final Memorandum (or in any amendment or supplement thereto). This indemnity
agreement will be in addition to any liability which any Initial Purchaser
may otherwise have. The Issuers and the Initial Purchaser acknowledge that
the statements set forth in the last paragraph of the cover page and under
the heading "Plan of Distribution" in the Preliminary Memorandum and the
Final Memorandum constitute the only information furnished in writing by or
on behalf of the Initial Purchaser for inclusion in the Preliminary
Memorandum or the Final Memorandum (or any amendment or supplement thereto).
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph (a)
or (b) above unless and to the extent it did not otherwise learn of such
action and such failure results in the forfeiture by the indemnifying party
of substantial rights and defenses and (ii) will not, in any event, relieve
the indemnifying party from any obligations to any indemnified party other
than the indemnification obligation provided in paragraph (a) or (b) above.
The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent
the indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by the indemnified party
or parties except as set forth below); provided, however that such counsel
shall be reasonably satisfactory to the indemnified party. Notwithstanding
the indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the right to
employ separate counsel (including local counsel) and the indemnifying party
shall bear the reasonable fees, costs and expenses of such separate counsel
if (i) the use of counsel chosen by the indemnifying party to represent the
indemnified party would, in the opinion of legal counsel to the indemnified
27
<PAGE>
party, present such counsel with a conflict of interest, (ii) the actual or
potential defendants in, or targets of, any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have been informed in writing by legal counsel that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph
(a) or (b) of this Section 8 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Issuers and the Initial
Purchaser agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Issuers and the Initial Purchaser may be subject in such proportion
as is appropriate to reflect the relative benefits received by the Issuers
and by the Initial Purchaser from the offering of the Securities; provided,
however, that in no case shall the Initial Purchaser be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by the Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Issuers and the Initial Purchaser shall contribute in such proportion as
is appropriate to reflect not only such relative benefits but also the
relative fault of the Issuers and of the Initial Purchaser in connection with
the statements or omissions which resulted in such Losses as well as any
other relevant equitable considerations. Benefits received by the Issuers
shall be deemed to be equal to the total net proceeds from the offering
(before deducting expenses) and benefits received by the Initial Purchaser
shall be deemed to be equal to the total purchase discounts and commissions
received by the Initial Purchaser from the Issuers in connection with the
purchase of the Securities hereunder. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by the Issuers or the Initial Purchaser. The Issuers and
the Initial Purchaser agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For
28
<PAGE>
purposes of this Section 8, each person who controls the Initial Purchaser
within the meaning of either the Securities Act or the Exchange Act and each
director, officer, employee and agent of the Initial Purchaser shall have the
same rights to contribution as the Initial Purchaser, and each person who
controls the Issuers within the meaning of either the Securities Act or the
Exchange Act and each partner, officer, director, employee and agent of the
Issuers shall have the same rights to contribution as the Issuers, subject in
each case to the applicable terms and conditions of this paragraph (d).
9. Termination. The obligations of the Initial Purchaser hereunder
may be terminated by the Initial Purchaser by notice given to and received by
the Company prior to delivery of and payment for the Securities if, prior to
that time, any of the events described in Sections 7(n) or 7(o) shall have
occurred or if the Initial Purchaser shall decline to purchase the Securities
for any reason permitted under this Agreement.
10. Reimbursement of Initial Purchaser's Expenses. If (a) the Issuers
shall fail to tender the Securities for delivery to the Initial Purchaser
otherwise than for any reason permitted under this Agreement or (b) the
Initial Purchaser shall decline to purchase the Securities for any reason
permitted under this Agreement, the Issuers shall reimburse the Initial
Purchaser for the reasonable fees and expenses of its counsel and for such
other reasonable out-of-pocket expenses as shall have been incurred by them
in connection with this Agreement and the proposed purchase of the
Securities, and upon demand the Issuers shall pay the full amount thereof to
the Initial Purchaser.
11. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the Initial Purchaser, shall be delivered
or sent by mail, telex or facsimile transmission to NationsBanc Montgomery
Securities LLC, 100 North Tryon Street, Charlotte, North Carolina 28255,
telecopier no.: (704) 388-0830, Attention: William Casperson, with a copy to
Latham & Watkins, 885 Third Avenue, New York, New York 10022, Attention: Kirk A.
Davenport III;
(b) if to the Company, shall be delivered or sent by
mail, telex or facsimile transmission to Chattem, Inc., 1715 West 38th Street,
Chattanooga, Tennessee 37409, telecopier no.: (423) 821-6423, Attention: A.
Alexander Taylor, President and Chief Operating Officer, with a copy to Miller &
Martin, LLP, 1000 Volunteer Building, 832 Georgia Avenue, Chattanooga, Tennessee
37402, Telecopier No.:(423) 785-8480, Attention: Hugh F. Sharber, Esq.
Any such statements, requests, notices or agreements shall
take effect at the time of receipt thereof. The Issuers shall be entitled to
act and rely upon any request,
29
<PAGE>
consent, notice or agreement given or made on behalf of the Initial
Purchaser.
12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Initial Purchaser, the
Issuers and their respective successors. This Agreement and the terms and
provisions hereof are for the sole benefit of only those persons, except that
(A) the representations, warranties, indemnities and agreements of the
Issuers contained in this Agreement shall also be deemed to be for the
benefit of directors, officers, employees and agents (including, without
limitation, attorneys) of the Initial Purchaser and the person or persons, if
any, who control the Initial Purchaser within the meaning of Section 15 of
the Securities Act and (B) the indemnity agreement of the Initial Purchaser
contained in Section 8(b) of this Agreement shall be deemed to be for the
benefit of directors of the Issuers, officers, employees and agents
(including, without limitation, attorneys) of the Issuers and any person
controlling any of the Issuers within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed
to give any person, other than the persons referred to in this Section 12,
any legal or equitable right, remedy or claim under or in respect of this
Agreement or any provision contained herein.
13. Survival. The respective indemnities, representations, warranties
and agreements of the Issuers and the Initial Purchaser contained in this
Agreement or made by or on behalf on them, respectively, pursuant to this
Agreement, shall survive the delivery of and payment for the Securities and
shall remain in full force and effect, regardless of any investigation made
by or on behalf of any of them or any person controlling any of them.
14. Definition of "Business Day." For purposes of this Agreement,
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which banking institutions in The City of New York, New
York are authorized or obligated by law, executive order or regulation to
close.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
16. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
17. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Agreement.
30
<PAGE>
[Signature page follows]
31
<PAGE>
If the foregoing correctly sets forth the agreement
between the Issuers and the Initial Purchaser, please indicate your
acceptance in the space provided for that purpose below.
Very truly yours,
CHATTEM, INC.
By:
-----------------------------------------
Name: A. Alexander Taylor
Title: President and Chief Operating
Officer
THE GUARANTOR:
SIGNAL INVESTMENT & MANAGEMENT CO.
By:
-----------------------------------------
Name: A. Alexander Taylor
Title: President
<PAGE>
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written.
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
Registration Rights Agreement
<PAGE>
SCHEDULE A
SUBSIDIARIES
Name Jurisdiction of Incorporation
---- -----------------------------
Signal Investment & Management Co. Delaware
Chattem (Canada) Inc. Canada
Chattem (U.K.) Limited United Kingdom
HBA Insurance, Ltd. Bermuda
<PAGE>
Internet Financial Network
Smart Doc
SPRINT CORP
-----------
Document SC14D1
Filing Date: 02/18/1998
Exhibit List
------------
EX-1.(A)(1)
EX-1.(A)(2)
EX-1.(A)(3)
EX-1.(A)(4)
EX-1.(A)(5)
EX-1.(A)(6)
EX-1.(A)(7)
EX-1.(A)(8)
EX-1.(C)(1)
EX-1.(C)(2)
EX-1.(C)(3)
EX-1.(C)(4)
EX-1.(C)(5)
EX-1.(C)(6)
EX-1.(C)(7)
EX-1.(C)(8)
<PAGE>
EXHIBIT 4.1
CHATTEM, INC.
$200,000,000
8 7/8% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
DATED AS OF MARCH 24, 1998
SOUTHTRUST BANK, NATIONAL ASSOCIATION
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310(a)(1)............................................................................ 7.10
(a)(2) .............................................................................. 7.10
(a)(3)............................................................................... N.A.
(a)(4)............................................................................... N.A.
(a)(5)............................................................................... 7.10
(b) ................................................................................ 7.10
(c) ................................................................................ N.A.
311(a)............................................................................... 7.11
(b) ................................................................................ 7.11
(c) ................................................................................ N.A.
312(a)............................................................................... 2.05
(b) ................................................................................ 11.03
(c) ................................................................................ 11.03
313(a)............................................................................... 7.06
(b)(1)............................................................................... 10.03
(b)(2)............................................................................... 7.07
(c) ................................................................................ 7.06;
................................................................................ 11.02
(d) ................................................................................ 7.06
314(a)............................................................................... 4.03;
................................................................................ 11.02
(b) ................................................................................ 10.02
(c)(1)............................................................................... 11.04
(c)(2)............................................................................... 11.04
(c)(3)............................................................................... N.A.
(e) ................................................................................ 11.05
(f) ................................................................................ NA
315 (a).............................................................................. 7.01
(b) ................................................................................ 7.05,
................................................................................ 11.02
(c) ................................................................................ 7.01
(d) ................................................................................ 7.01
(e) ................................................................................ 6.11
316 (a)(last sentence)............................................................... 2.09
(a)(1)(A)............................................................................ 6.05
(a)(1)(B)............................................................................ 6.04
(a)(2)............................................................................... N.A.
(b) ................................................................................ 6.07
(c) ................................................................................ 2.12
317(a)(1)............................................................................ 6.08
(a)(2)............................................................................... 6.09
(b) ................................................................................ 2.04
318(a)............................................................................... 11.01
(b) ................................................................................ N.A.
(c) ................................................................................ 11.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE................................ 1
Section 1.01. Definitions......................................................... 1
Section 1.02. Other Definitions................................................... 15
Section 1.03. Trust Indenture Act Provisions...................................... 15
Section 1.04. Rules of Construction............................................... 16
ARTICLE 2. THE NOTES................................................................. 16
Section 2.01. Form and Dating...................................................... 16
Section 2.02. Execution and Authentication........................................ 18
Section 2.03. Registrar and Paying Agent.......................................... 18
Section 2.04. Paying Agent to Hold Money in Trust............................... 19
Section 2.05. Holder Lists...................................................... 19
Section 2.06. Transfer and Exchange............................................. 19
Section 2.07. Replacement Notes................................................. 31
Section 2.08. Outstanding Notes................................................. 31
Section 2.09. Treasury Notes.................................................... 32
Section 2.10. Temporary Notes................................................... 32
Section 2.11. Cancellation...................................................... 32
Section 2.12. Defaulted Interest................................................ 32
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................... 33
Section 3.01. Notices to Trustee................................................ 33
Section 3.02. Selection of Notes to Be Redeemed................................. 33
Section 3.03. Notice of Redemption.............................................. 33
Section 3.04. Effect of Notice of Redemption.................................... 34
</TABLE>
i
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<TABLE>
<S> <C>
Section 3.05. Deposit of Redemption Price....................................... 34
Section 3.06. Notes Redeemed in Part............................................ 34
Section 3.07. Optional Redemption............................................... 35
Section 3.08. Mandatory Redemption.............................................. 35
Section 3.09. Offer to Purchase by Application of Excess Proceeds............... 35
ARTICLE 4. COVENANTS............................................................... 37
Section 4.01. Payment of Notes.................................................. 37
Section 4.02. Maintenance of Office or Agency................................... 37
Section 4.03. Reports........................................................... 38
Section 4.04. Compliance Certificate............................................ 38
Section 4.05. Taxes............................................................. 39
Section 4.06. Stay, Extension and Usury Laws.................................... 39
Section 4.07. Restricted Payments............................................... 39
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.... 41
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock........ 42
Section 4.10. Asset Sales....................................................... 44
Section 4.11. Transactions with Affiliates...................................... 45
Section 4.12. Liens............................................................. 45
Section 4.13. Additional Subsidiary Guarantees.................................. 45
Section 4.14. Corporate Existence............................................... 46
Section 4.15. Offer to Repurchase Upon Change of Control........................ 46
Section 4.16. No Senior Subordinated Debt....................................... 47
Section 4.17. Limitation on Issuances and Sales of Equity
Interests in Restricted Subsidiaries............................. 47
Section 4.18. Payments for Consent.............................................. 47
ARTICLE 5. SUCCESSORS.............................................................. 47
Section 5.01. Merger, Consolidation, or Sale of Assets.......................... 47
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 5.02. Successor Corporation Substituted................................. 48
ARTICLE 6. DEFAULTS AND REMEDIES................................................... 48
Section 6.01. Events of Default................................................. 48
Section 6.02. Acceleration...................................................... 50
Section 6.03. Other Remedies.................................................... 50
Section 6.04. Waiver of Past Defaults........................................... 51
Section 6.05. Control by Majority............................................... 51
Section 6.06. Limitation on Suits............................................... 51
Section 6.07. Rights of Holders of Notes to Receive Payment..................... 52
Section 6.08. Collection Suit by Trustee........................................ 52
Section 6.09. Trustee May File Proofs of Claim.................................. 52
Section 6.10. Priorities........................................................ 52
Section 6.11. Undertaking for Costs............................................. 53
ARTICLE 7. TRUSTEE................................................................. 53
Section 7.01. Duties of Trustee................................................. 53
Section 7.02. Rights of Trustee................................................. 54
Section 7.03. Individual Rights of Trustee...................................... 55
Section 7.04. Trustee's Disclaimer.............................................. 55
Section 7.05. Notice of Defaults................................................ 55
Section 7.06. Reports by Trustee to Holders of the Notes........................ 55
Section 7.07. Compensation and Indemnity........................................ 56
Section 7.08. Replacement of Trustee............................................ 56
Section 7.09. Successor Trustee by Merger, etc.................................. 57
Section 7.10. Eligibility; Disqualification..................................... 57
Section 7.11. Preferential Collection of Claims Against Company................. 58
Section 7.12. Default Rate of Interest.......................................... 58
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Section 7.13. Receipt of Documents.............................................. 58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................ 58
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.......... 58
Section 8.02. Legal Defeasance and Discharge.................................... 58
Section 8.03. Covenant Defeasance............................................... 59
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 59
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions................................... 60
Section 8.06. Repayment to Company.............................................. 61
Section 8.07. Reinstatement..................................................... 61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER........................................ 61
Section 9.01. Without Consent of Holders of Notes............................... 61
Section 9.02. With Consent of Holders of Notes.................................. 62
Section 9.03. Compliance with Trust Indenture Act............................... 64
Section 9.04. Revocation and Effect of Consents................................. 64
Section 9.05. Notation on or Exchange of Notes.................................. 64
Section 9.06. Trustee to Sign Amendments, etc................................... 64
ARTICLE 10. SUBORDINATION.......................................................... 65
Section 10.01. Agreement to Subordinate......................................... 65
Section 10.02. Liquidation; Dissolution; Bankruptcy............................. 65
Section 10.03. Default on Designated Senior Indebtedness........................ 65
Section 10.04. Acceleration of Securities....................................... 66
Section 10.05. When Distribution Must Be Paid Over.............................. 66
Section 10.06. Notice by Company................................................ 66
Section 10.07. Subrogation...................................................... 67
Section 10.08. Relative Rights.................................................. 67
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Section 10.09. Subordination May Not Be Impaired by Company..................... 67
Section 10.10. Distribution or Notice to Representative......................... 67
Section 10.11. Rights of Trustee and Paying Agent............................... 68
Section 10.12. Authorization to Effect Subordination............................ 68
Section 10.13. Amendments....................................................... 68
ARTICLE 11. SUBSIDIARY GUARANTEES................................................. 68
Section 11.01. Guarantee........................................................ 68
Section 11.02. Subordination of Subsidiary Guarantee............................ 69
Section 11.03. Limitation on Guarantor Liability................................ 69
Section 11.04. Execution and Delivery of Subsidiary Guarantee................... 70
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms............... 70
Section 11.06. Releases Following Sale of Assets................................ 71
ARTICLE 12. MISCELLANEOUS.......................................................... 71
Section 12.01. Trust Indenture Act Controls..................................... 71
Section 12.02. Notices.......................................................... 72
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.... 73
Section 12.04. Certificate and Opinion as to Conditions Precedent............... 73
Section 12.05. Statements Required in Certificate or Opinion.................... 73
Section 12.06. Rules by Trustee and Agents...................................... 74
Section 12.07. No Personal Liability of Directors, Officers,
Employees and Stockholders.................................... 74
Section 12.08. Governing Law.................................................... 74
Section 12.09. No Adverse Interpretation of Other Agreements.................... 74
Section 12.10. Successors....................................................... 74
Section 12.11. Severability..................................................... 75
Section 12.12. Counterpart Originals............................................ 75
Section 12.13. Table of Contents, Headings, etc................................. 75
</TABLE>
v
<PAGE>
EXHIBITS
Exhibit A: FORM OF NOTE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E: FORM OF NOTE GUARANTEE
Exhibit F: FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of March 24, 1998 between Chattem, Inc., a
Tennessee corporation (the "Company"), and SouthTrust Bank, National
Association, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 87/8%
Series A Senior Subordinated Notes due 2008 (the "Series A Notes") and the 87/8%
Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that shall be issued in a denomination equal to the
outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified
Person, (i) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured
by a Lien encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $75.0 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided that beneficial ownership of 10% or more of the Voting
Stock of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer
or exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer
or exchange.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of
a sale and leaseback) other than sales of inventory in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole shall be governed by the provisions of Sections
4.15 and 5.01 hereof and not by the provisions of Section 4.10 hereof), and
(ii) the issue by any Restricted Subsidiaries of the Company of any Equity
Interests of such
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Restricted Subsidiary and the sale by the Company or any of its Restricted
Subsidiaries of Equity Interest of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$1.0 million or (b) for net proceeds in excess of $1.0 million.
Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of
Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that
is permitted by Section 4.07 hereof, (iv) the issuance by the Company of
shares of its Capital Stock, (v) the sale or other disposition of cash or
Cash Equivalents, (vi) the sale or disposition of damaged, worn out or other
obsolete personal property in the ordinary course of business, (vii) the
surrender or waiver of contract rights or the settlement, release or
surrender of contract, tort or other claims of any kind, (viii) the granting
of Liens not prohibited by Section 4.12 hereof or (ix) the execution and
performance of contracts to provide manufacturing and other services,
including in connection with Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect
of a capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
corporate stock, (ii) in the case of an association or business entity, any
and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock, (iii) in the case of a partnership
or limited liability company, partnership or membership interests (whether
general or limited) and (iv) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof)
having maturities of not more than six months from the date of acquisition,
(iii) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any lender party to the Senior Credit Facility or with any domestic
commercial bank having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with
a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing
within six months after the date of acquisition and (vi) money market funds
the assets of which constitute Cash Equivalents of the kinds described in
clauses (i)-(v) of this definition.
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"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term is
used in Section 13(d)(3) of the Exchange Act); (ii) the adoption of a plan
relating to the liquidation or dissolution of the Company; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above)
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right
to acquire, whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition), directly or indirectly,
of more than 50% of the Voting Stock of the Company (measured by voting power
rather than number of shares); (iv) the first day on which a majority of the
members of the Board of Directors of the Company are not Continuing
Directors; or (iv) the Company consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, the Company,
in any such event pursuant to a transaction in which any of the outstanding
Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of the
outstanding shares of such Voting Stock of such surviving or transferee
Person (immediately after giving effect to such issuance).
"Company" means Chattem, Inc., a Tennessee corporation, and
any and all permitted successors thereto.
"Consolidated Cash Flow" means, with respect to any Person
for any period, the Consolidated Net Income of such Person for such period
plus (i) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale (to the extent such losses were deducted in
computing such Consolidated Net Income), plus (ii) provision for taxes based
on income or profits of such Person and its Restricted Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) consolidated interest expense of
such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if any)
pursuant to Hedging Obligations but excluding amortization of debt issuance
costs), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of
such Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (v) non-cash items
increasing such Consolidated Net Income for such period, in each case, on a
consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash expenses of, a Restricted
Subsidiary of the referent Person shall be added to Consolidated Net Income
to
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compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Restricted Subsidiary was included in
calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP; provided that (i) the Net Income (but not loss) of
any Person that is not a Restricted Subsidiary or that is accounted for by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the referent Person or a
Wholly Owned Restricted Subsidiary thereof that is a Guarantor, (ii) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded and (v) the Net Income (but not loss) of any
Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person
as of any date, the sum of (i) the consolidated equity of the common
stockholders of such Person and its consolidated Subsidiaries as of such date
plus (ii) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by such Person upon issuance of such
preferred stock, less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such
business) subsequent to the date hereof in the book value of any asset owned
by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and
(z) all unamortized debt discount and expense and unamortized deferred
charges as of such date, all of the foregoing determined in accordance with
GAAP.
"Continuing Directors" means, as of any date of
determination, any member of the Board of Directors of the Company who (i)
was a member of such Board of Directors on the date hereof or (ii) was
nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of such
Board at the time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 11.02 hereof or such other
address as to which the Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
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"Default" means any event that is or with the passage of
time or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in
the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole or
in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Indebtedness" means (i) so long as the
Senior Credit Facility is outstanding, any Obligations outstanding under the
Senior Credit Facility and (ii) thereafter, any other Senior Indebtedness
permitted under this Indenture the aggregate principal amount of which is
$25.0 million or more and that has been designated by the Company as
"Designated Senior Indebtedness."
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
Holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature; provided, however, that any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with Section
4.07 hereof.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Exchange Notes" means the Notes issued in the Exchange
Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company
and its Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the date hereof, until such amounts are repaid.
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"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) the consolidated interest
expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued (including, without limitation, original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments (if any) pursuant to Hedging Obligations but excluding the
amortization of debt issuance costs) and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that
is Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries and
(iv) the product of (a) all dividend payments, whether or not in cash, on any
series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely
in Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in
accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any
Person for any period, the ratio of the Consolidated Cash Flow of such Person
and its Restricted Subsidiaries for such period to the Fixed Charges of such
Person and its Restricted Subsidiaries for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit
borrowings) or issues or redeems preferred stock subsequent to the
commencement of the period for which the Fixed Charge Coverage Ratio is being
calculated but prior to the date on which the event for which the calculation
of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the
Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to
such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that
have been made by the Company or any of its Restricted Subsidiaries,
including through mergers or consolidations and including any related
financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall
be calculated without giving effect to clause (iii) of the proviso set forth
in the definition of Consolidated Net Income, and (ii) the Consolidated Cash
Flow attributable to discontinued operations, as determined in accordance
with GAAP, and operations or businesses disposed of prior to the Calculation
Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such
Fixed Charges shall not be obligations of the referent Person or any of its
Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
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"Global Notes" means, individually and collectively, each
of the Restricted Global Notes and the Unrestricted Global Notes, in the form
of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantors" means (i) each domestic Subsidiary of the
Company on the Issue Date and (ii) any other subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of this Indenture, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person,
the obligations of such Person under (i) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (ii)
other agreements or arrangements designed to protect such Person against
fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of
Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement
Legend and deposited with or on behalf of and registered in the name of the
Depositary or its nominee that shall be issued in a denomination equal to the
outstanding principal amount of the Notes sold to Institutional Accredited
Investors.
"Indebtedness" means, with respect to any Person, any
Indebtedness of such Person, whether or not contingent, in respect of
borrowed money or evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or representing Capital Lease Obligations or
the balance deferred and unpaid of the purchase price of any property or
representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of
the foregoing (other than letters of credit and Hedging Obligations) would
appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all Indebtedness of others secured by a Lien
on any asset of such Person (whether or not such Indebtedness is assumed by
such Person) and, to the extent not otherwise included, the Guarantee by such
Person of any Indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or
supplemented from time to time.
"Indirect Participant" means a Person who holds a
beneficial interest in a Global Note through a Participant.
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"Institutional Accredited Investor" means an institution
that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in Section 4.07 hereof.
"Issue Date" means the closing date for the sale and original
issuance of the Notes under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed, or a day on
which the payment system of the Federal Reserve is not operational. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however, (i) any
gain or loss, together with any related provision for taxes on such gain or
loss, realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain or
loss, together with any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
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"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than debt under the Senior Credit Facility)
secured by a Lien on the asset or assets that were the subject of such Asset
Sale and any reserve for adjustment in respect of the sale price of such asset
or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither
the Company nor any of its Restricted Subsidiaries (a) provides credit support
of any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
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"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the business conducted by the
Company and its Restricted Subsidiaries on the Issue Date and businesses
reasonably related thereto.
"Permitted Investments" means (a) any Investment in the
Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company or (ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (d)
any Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with Sections 3.09 and
4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of the Company; (f) the
conversion of preferred stock of Elcat, Inc. owned by the Company on the Issue
Date into common stock of Elcat, Inc. in accordance with the terms of such
preferred stock; and (g) other Investments in any Person having an aggregate
fair market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $12.5 million.
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Senior Indebtedness (and
any debt securities issued in exchange for Senior Indebtedness) to substantially
the same extent as, or to a greater extent than, the Notes are subordinated to
Senior Indebtedness pursuant to this Indenture.
"Permitted Liens" means (i) Liens on assets of the Company or
any of the Guarantors securing Senior Indebtedness under the Senior Credit
Facility that were permitted by the terms of this Indenture to be incurred; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (iv) of the second paragraph Section 4.09 hereof covering
only the assets acquired with such Indebtedness; (vi) Liens existing on the date
hereof; (vii) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (viii) Liens incurred in the
ordinary course of business of the Company or any Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Subsidiary; (ix) Liens on any
insurance policies arising out of borrowings against the cash surrender value of
such insurance policies held by the Company, provided that such Liens
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do not exceed the amount of Indebtedness and are secured only by the cash
surrender value of such insurance policies; (x) Liens on assets of Unrestricted
Subsidiaries that secure Non-Recourse Debt of Unrestricted Subsidiaries; (xi)
Liens on assets of the Company securing Senior Indebtedness of the Company that
was permitted to be incurred by the terms of this Indenture and Liens on assets
of a Guarantor securing Senior Indebtedness of such Guarantor that was permitted
to be incurred by the terms of this Indenture; and (xii) other than a deferred
payment obligation of a purchase price for the purchase of assets or a business
or by means of a royalty or otherwise based on sales of an acquired asset or
business.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of premium and reasonable
expenses incurred in connection therewith); (ii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof (including
any subdivision or ongoing business of any such entity or substantially all of
the assets of any such entity, subdivision or business).
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"Public Offering" means an underwritten public offering of
common stock (other than Disqualified Stock) of the Company, pursuant to an
effective registration statement filed with the Commission in accordance with
the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Qualified Proceeds" means any of the following or any
combination of the following: (i) long-term assets that are used or useful in a
Permitted Business or (ii) the Capital Stock of any Person engaged primarily in
a Permitted Business if, in connection with the receipt by the Company or any
Restricted Subsidiary of the Company of such Capital Stock, (a) such Person
becomes a Wholly-Owned Subsidiary and a Guarantor or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or any Wholly-Owned
Subsidiary of the Company that is a Guarantor.
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<PAGE>
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 24, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
12
<PAGE>
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means those certain Credit
Agreements, dated as of March 24, 1998, as amended, by and among the Company,
the Subsidiaries of the Company organized under the laws of any state of the
United States or the District of Columbia, NationsBank of Tennessee, N.A., as
agent and the other lenders party thereto, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Senior Indebtedness" means (i) all Indebtedness and
Obligations of the Company or any of its Subsidiaries outstanding under the
Senior Credit Facility and all Hedging Obligations with respect thereto, (ii)
any other Indebtedness permitted to be incurred by the Company or any of its
Subsidiaries under the terms of this Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes or any Guarantor's
Subsidiary Guarantee of the Notes and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness shall not include (w) any liability for federal, state, local or
other taxes owed or owing by the Company or any of its Subsidiaries, (x) any
Indebtedness of the Company or any of its Subsidiaries to any Subsidiary or
other Affiliate, (y) any trade payables or (z) any Indebtedness that is incurred
in violation of this Indenture.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Restricted Subsidiary" means any Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in effect
on the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C.
sections 77aaa-77bbbb) as in effect on the date on which this Indenture is
qualified under the TIA.
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"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in
the form of Exhibit A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.09 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under Section 4.09 hereof, calculated on a pro forma
basis as if such designation had occurred at the beginning of the four-quarter
reference period and (ii) no Default or Event of Default would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest
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<PAGE>
one-twelfth) that will elapse between such date and the making of such payment,
by (ii) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"..................................4.11
"Asset Sale".............................................4.10
"Asset Sale Offer".......................................3.09
"Authentication Order"...................................2.02
"Change of Control Offer"................................4.15
"Change of Control Payment"..............................4.15
"Change of Control Payment Date" ........................4.15
"Covenant Defeasance"....................................8.03
"Event of Default".......................................6.01
"Excess Proceeds"........................................4.10
"incur"..................................................4.09
"Legal Defeasance" ......................................8.02
"Offer Amount"...........................................3.09
"Offer Period"...........................................3.09
"Paying Agent"...........................................2.03
"Permitted Debt".........................................4.09
"Purchase Date"..........................................3.09
"Registrar"..............................................2.03
"Restricted Payments"....................................4.07
</TABLE>
SECTION 1.03. TRUST INDENTURE ACT PROVISIONS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
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<PAGE>
"obligor" on the Notes and the Subsidiary Guarantees means the
Company and the Subsidiary Guarantors, respectively, and any successor obligor
upon the Notes and the Note Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01.FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantor and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of
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Interests in the Global Note" attached thereto). Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and each
shall provide that it shall represent the aggregate principal amount of
outstanding Notes from time to time endorsed thereon and that the aggregate
principal amount of outstanding Notes represented thereby may from time to time
be reduced or increased, as appropriate, to reflect exchanges and redemptions.
Any endorsement of a Global Note to reflect the amount of any increase or
decrease in the aggregate principal amount of outstanding Notes represented
thereby shall be made by the Trustee or the Note Custodian, at the direction of
the Trustee, in accordance with instructions given by the Holder thereof as
required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its Birmingham, Alabama office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
shall be terminated upon the receipt by the Trustee of (i) a written certificate
from the Depositary, together with copies of certificates from Euroclear and
Cedel Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a 144A Global Note or an IAI
Global Note bearing a Private Placement Legend, all as contemplated by Section
2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
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<PAGE>
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes,
plus up to $75.0 million of Additional Notes issued pursuant to this Section
2.02 and Section 4.09 hereof. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount except as provided in Section
2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the
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<PAGE>
Trustee. The Company at any time may require a Paying Agent to pay all money
held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent
(if other than the Company or a Subsidiary) shall have no further liability for
the money. If the Company or a Subsidiary acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Company, the Trustee shall serve as Paying Agent for
the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times as
the Trustee may request in writing, a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Notes will be
exchanged by the Company for Definitive Notes if (i) the Company delivers to the
Trustee notice from the Depositary that it is unwilling or unable to continue to
act as Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the
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Applicable Procedures. Beneficial interests in the Restricted Global Notes shall
be subject to restrictions on transfer comparable to those set forth herein to
the extent required by the Securities Act. Transfers of beneficial interests in
the Global Notes also shall require compliance with either subparagraph (i) or
(ii) below, as applicable, as well as one or more of the other following
subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon consummation of an Exchange Offer by the Company in accordance with
Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the Holder
of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Note(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
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(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications and certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the
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Registrar to the effect that such exchange or transfer is in compliance
with the Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c)Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
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(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c)(i) shall bear
the Private Placement Legend and shall be subject to all restrictions
on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (c) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if
the Registrar so requests or if the Applicable Procedures so
require, an Opinion of Counsel in form reasonably acceptable
to the Registrar to the effect that such exchange or transfer
is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit
C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
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(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in
accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
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(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
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(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
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(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal that (x) they are not broker-dealers, (y) they
are not participating in a distribution of the Exchange Notes and (z) they are
not affiliates (as defined in Rule 144) of the Company, and accepted for
exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate
principal amount equal to the principal amount of the Restricted Definitive
Notes accepted for exchange in the Exchange Offer. Concurrently with the
issuance of such Notes, the Trustee shall cause the aggregate principal amount
of the applicable Restricted Global Notes to be reduced accordingly, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS
NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH
AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (SUBJECT TO THE DELIVERY OF SUCH EVIDENCE, IF ANY,
REQUIRED UNDER THE INDENTURE PURSUANT TO WHICH THIS NOTE IS USED) AND
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON
THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR
THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR
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OTHERWISE TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144(A), (b) AN INSTITUTIONAL "ACCREDITED INVESTOR"
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT (AN "ACCREDITED INVESTOR"), (c) OUTSIDE THE UNITED
STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT
TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR
AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A)
ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
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REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT
OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
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(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on such Notes
and for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company and the Trustee may charge for their
respective expenses in replacing a Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
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SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee actually knows are so
owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
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ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
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<PAGE>
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
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<PAGE>
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Company shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to April 1, 2003. Thereafter, the Company shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003........................................104.4375%
2004........................................102.9583%
2005........................................101.4791%
2006 and thereafter.........................100.0000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to April 1, 2001, the Company may redeem up to 35% of
the aggregate principal amount of Notes originally issued under this Indenture
at a redemption price of 108.875% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages thereon, if any, to the redemption
date, with the net cash proceeds to the Company of one or more Public Offerings;
provided that at least $100.0 million of the aggregate principal amount of Notes
originally issued remain outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company or any of its Subsidiaries); and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of such Public Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08 MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09 OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an offer to all Holders to purchase Notes
(an "Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
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If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
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On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01 PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in
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any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, the City of New York for such purposes. The Company
shall give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03 REPORTS.
(a) Whether or not required by the rules and regulations of the
SEC, so long as any Notes are outstanding, the Company shall furnish to the
Holders of Notes (i) all quarterly and annual financial information that would
be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if
the Company were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by the Company's
certified independent accountants and (ii) all current reports that would be
required to be filed with the SEC on Form 8-K if the Company were required to
file such reports, in each case, within the time periods specified in the SEC's
rules and regulations. In addition, following consummation of the Exchange
Offer, whether or not required by the rules and regulations of the SEC, the
Company shall file a copy of all such information and reports with the SEC for
public availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall at all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company and
the Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04 COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such
Guarantor is so required under the TIA) shall deliver to the Trustee, within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his or her knowledge the Company has kept, observed, performed and fulfilled
each and every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company is taking or proposes to
take with respect thereto.
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(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05 TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each of the Guarantors (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.07 RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
other distributions payable to the Company or a Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or
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<PAGE>
otherwise acquire or retire for value any Indebtedness that is pari passu with
or subordinated to the Notes (other than Notes), except a payment of interest or
principal at Stated Maturity; or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in Section
4.09; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of this Indenture (excluding
Restricted Payments permitted by clauses (ii), (iii) and (iv) of the
next succeeding paragraph), is less than the sum, without duplication,
of (i) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from the beginning of the first fiscal
quarter commencing after the date of this Indenture to the end of the
Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate
net cash proceeds received by the Company since the date of this
Indenture as a contribution to its common equity capital or from the
issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus
(iii) to the extent that any Restricted Investment that was made after
the date of this Indenture is sold for cash or otherwise liquidated or
repaid for cash, the lesser of (A) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (B) the initial amount of such Restricted Investment plus (iv)
$7.5 million.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; and (v) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $500,000 in any twelve-month
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period and no Default or Event of Default shall have occurred and be continuing
immediately after such transaction.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of this covenant. All such outstanding
Investments shall be deemed to constitute Investments in an amount equal to the
fair market value of such Investments at the time of such designation. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $10.0 million. Not later than the
date of making any Restricted Payment, the Company shall deliver to the Trustee
an Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any Indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions shall not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of this
Indenture, (b) this Indenture and the Notes, (c) applicable law, (d) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness is permitted by
the terms of this Indenture to be incurred, (e) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (f) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (g) any
agreement for the sale of a Restricted Subsidiary that restricts distributions
by that Restricted Subsidiary pending its sale, (h) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive, taken
as a whole, than those contained in the agreements governing the Indebtedness
being refinanced, (i) Liens
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securing Indebtedness otherwise permitted to be incurred pursuant to the
provisions of Section 4.12 herein that limits the right of the debtor to dispose
of the assets securing such Indebtedness, (j) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(k) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business, and (l) the
Senior Credit Facility, provided that such restrictions are no more restrictive
than those contained in the Senior Credit Facility as in effect on the Issue
Date.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company (i) shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), (ii) shall
not issue any Disqualified Stock and shall not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and the Guarantors may incur Indebtedness (including Guarantees) or issue
preferred stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock or preferred stock is issued
would have been at least 2.0 to 1.0, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock or preferred stock had
been issued, as the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness (including letters of
credit, with letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company and its Restricted Subsidiaries
thereunder) under the Senior Credit Facility; provided that the aggregate
principal amount of all Indebtedness (including letters of credit) outstanding
under the Senior Credit Facility after giving effect to such incurrence does not
exceed an amount equal to $92.5 million less the aggregate amount of all Net
Proceeds of Asset Sales applied to permanently repay any such Indebtedness
pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes (other than any Additional Notes) and the Exchange Notes (other than any
Additional Notes) and the incurrence by the Guarantors of Indebtedness
represented by the Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of the Company
or such Subsidiary, in an aggregate principal amount not to exceed $10.0 million
at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace
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Indebtedness (other than intercompany Indebtedness) that is either the Existing
Indebtedness or was permitted by this Indenture to be incurred under the first
paragraph hereof or clauses (iii), (iv) or (v) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Wholly Owned Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company or
a Wholly Owned Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of this Indenture to be outstanding;
(viii) the Guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that is
permitted to be incurred by another provision of this Section 4.09;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness or Guarantees
permitted by any other clause of this paragraph) in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (ix), not to exceed $15.0 million;
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (x); and
(xi) the incurrence of Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price or similar obligations,
incurred in connection with the disposition of any business, assets or
Subsidiary of the Company (other than Guarantees of Indebtedness incurred by any
Person acquiring all or any portion of such business, assets or Subsidiary for
the purpose of financing such acquisition), provided that none of the foregoing
results in Indebtedness required to be reflected as Indebtedness on the balance
sheet of the Company or any such Subsidiary in accordance with GAAP and the
maximum aggregate liability in respect of all such Indebtedness shall at no time
exceed 100% of the gross proceeds actually received by the Company and its
Subsidiaries in connection with such disposition.
For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xi) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.09. Accrual of interest, accretion
or amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of
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dividends on Disqualified Stock in the form of additional shares of the same
class of Disqualified Stock shall not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or
the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash or
Qualified Proceeds, provided, that the aggregate fair market value of Qualified
Proceeds which may be received in consideration for Asset Sales pursuant to this
clause (ii) shall not exceed $5.0 million since the Issue Date; provided,
further that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Company or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 365 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay (and reduce the commitments under) Senior Indebtedness of the
Company or a Guarantor or (b) to the acquisition of a Permitted Business, or a
majority of the Voting Stock of, a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in a Permitted Business. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
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SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any issuance of securities, or other payments,
awards or grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans approved by
the Board of Directors or the payment of fees and indemnities of directors of
the Company and its Subsidiaries, in each case, in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (ii) loans or advances to employees in the ordinary course of
business and consistent with past practice, (iii) transactions between or among
the Company and/or its Restricted Subsidiaries, (iv) payment of reasonable
directors fees to Persons who are not otherwise Affiliates of the Company, and
(v) transactions permitted under Section 4.07 hereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness or trade payables on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens, unless all payments
due under this Indenture and the Notes are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such is no longer secured by
a Lien; provided that if such Indebtedness is by its terms expressly
subordinated to the Notes or any Subsidiary Guarantee, the Lien securing such
Indebtedness shall be subordinate and junior to the Lien securing the Notes and
the Subsidiary Guarantees with the same relative priority as such subordinate or
junior Indebtedness shall have with respect to the Notes and the Subsidiary
Guarantees.
SECTION 4.13. ADDITIONAL SUBSIDIARY GUARANTEES
The Company (i) shall not permit any of its Restricted
Subsidiaries that is not a Subsidiary Guarantor to Guarantee or secure through
the granting of Liens the payment of any Indebtedness of the Company or any
Subsidiary Guarantor and (ii) shall not and shall not permit any of its
Restricted Subsidiaries to pledge any intercompany notes representing
obligations of any of its Restricted Subsidiaries, to secure the payment of any
Indebtedness of the Company or any Subsidiary Guarantor, in each case unless
such Subsidiary, the Company and the Trustee execute and deliver a supplemental
indenture evidencing such Subsidiary's Subsidiary Guarantee (providing for the
unconditional guarantee by such Restricted Subsidiary, on a senior subordinated
basis, of the Notes).
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SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in this Section 4.15 (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 20 days following any
Change of Control, the Company shall mail a notice to each Holder and the
Trustee describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes from Holders on the date specified
in such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by this Indenture and described in such
notice. The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by this covenant. The Company shall publicly announce the results
of the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
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(c) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall 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 set forth
in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Indebtedness and senior in any respect in right
of payment to the Notes and no Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness of such Guarantor that
is subordinate or junior in right of payment to any Indebtedness of such
Guarantor and senior in any respect in right of payment to the Subsidiary
Guarantee of such Guarantor.
SECTION 4.17. LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN
RESTRICTED SUBSIDIARIES.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary of the Company to, transfer, convey, sell, lease or otherwise dispose
of any Equity Interests in any Restricted Subsidiary of the Company to any
Person (other than the Company or a Restricted Subsidiary of the Company),
unless (a) such transfer, conveyance, sale, lease or other disposition is of all
the Equity Interests in such Restricted Subsidiary and (b) the cash Net Proceeds
from such transfer, conveyance, sale, lease or other disposition are applied in
accordance with Section 4.10 hereof and (ii) shall not permit any Restricted
Subsidiary of the Company to issue any of its Equity Interests (other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares) to any Person other than to the Company or a Restricted Subsidiary of
the Company.
SECTION 4.18. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
(whether or not the Company is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws
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of the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Registration Rights Agreement, the
Notes and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) shall have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) shall, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.09.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by the
subordination provisions of this Indenture) and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or otherwise
(whether or not permitted by the subordination provisions of this Indenture);
(c) the Company or any of its Restricted Subsidiaries fails to comply
with any of the provisions of Section 4.07, 4.09, 4.10 or 4.15 hereof;
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(d) the Company or any of its Restricted Subsidiaries fails to observe
or perform any other covenant, representation, warranty or other agreement in
this Indenture or the Notes for 60 days after notice to the Company by the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $7.5 million;
(g) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case;
(ii) appoints a Custodian of the Company or any of its
Restricted Subsidiaries or for all or substantially all of the property
of the Company or any of its Restricted Subsidiaries or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
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(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
such Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (g) or (h) of Section 6.01 hereof with respect to the
Company, any Significant Subsidiary or any group of Significant Subsidiaries
that, taken as a whole, would constitute a Significant Subsidiary) occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable
immediately. Upon any such declaration, the Notes shall become due and payable
immediately. Notwithstanding the foregoing, if an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any
of its Significant Restricted Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would constitute a Significant Restricted
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
If an Event of Default occurs on or after April 1, 2003 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to April 1, 2003
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on April 1 of the years
set forth below, as set forth below (expressed as a percentage of the principal
amount of the Notes to the date of payment that would otherwise be due but for
the provisions of this sentence):
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1998...............................108.8750%
1999...............................107.9875%
2000...............................107.1000%
2001...............................106.2125%
2002...............................105.3250%
2003...............................104.4375%
</TABLE>
SECTION 6.03 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
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The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal amount
of the then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06 LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
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SECTION 6.07 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium, and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties
that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02 RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
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(g) In no event shall the Trustee be required to take notice of
any default or breach hereof or any Event of Default hereunder, except for
Events of Default specified in Sections 6.01(a) and (b) hereof, unless and until
the Trustee shall have received from a Holder or from the Company express
written notice of the circumstances constituting the breach, default or Event of
Default and stating that said circumstances constitute an Event of Default
hereunder.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, or if appropriate notice is provided in writing
in accordance with Section 7.02(g), as applicable, the Trustee shall mail to
Holders of Notes a notice of the Default or Event of Default within 90 days
after it occurs. Except in the case of a Default or Event of Default in payment
of principal of, premium, if any, or interest on any Note, the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of the
Holders of the Notes.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date hereof, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of
such reporting date that complies with TIA Section 313(a) (but if no event
described in TIA Section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee
also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit
by mail all reports as required by TIA Section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and
each stock exchange on which the Notes are listed in
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accordance with TIA Section 313(d). The Company shall promptly notify the
Trustee when the Notes are listed on any stock exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse
the Trustee promptly upon request for all reasonable disbursements, advances
and expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture
against the Company (including this Section 7.07) and defending itself
against any claim (whether asserted by the Company or any Holder or any other
person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or bad faith. The Trustee
shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07
shall survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.08 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then
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outstanding Notes may remove the Trustee by so notifying the Trustee and the
Company in writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
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This Indenture shall always have a Trustee who satisfies
the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is
subject to TIA Section 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
SECTION 7.12 DEFAULT RATE OF INTEREST
All sums of money owed to the Trustee shall bear interest from
the date on which the same are due and payable until the date of payment at a
rate equal to the "Base Rate" of SouthTrust Bank, National Association, as such
rate is announced from time to time, plus two percent (2%), said rate to change
when and as the said Base Rate changes.
SECTION 7.13 RECEIPT OF DOCUMENTS
In no event shall receipt by the Trustee of financial and
other reports from the Company as provided in this Indenture, review of which
could lead to the conclusion that an Event of Default exists hereunder, result,
without further action, in the occurrence of an Event of Default, or impose upon
the Trustee the obligation to review and examine the same, it being understood
that all such information shall be received by the Trustee as repository for
said information and documents with no obligation on the part of the Trustee to
review the same.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02 LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments are
due from the trust referred to below, (b) the Company's obligations with respect
to the Notes
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concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (c) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
SECTION 8.03 COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.07, 4.08, 4.09,
4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18 and 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under Section
8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(d) through 6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and Liquidated
Damages, if any, and interest on the outstanding Notes on the stated date for
payment thereof or on the applicable redemption date, as the case may be, and
the Company must specify whether the Notes are being defeased to maturity or to
a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize
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income, gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the incurrence of Indebtedness all or a portion of the proceeds
of which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN
TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
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The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06 REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of the Company as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
SECTION 8.07 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture, the
Subsidiary Guarantees or the Notes without the consent of any Holder of a Note:
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(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
(c) to provide for the assumption of the Company's or a
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Guarantor pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance
with the limitations set forth in this Indenture as of the date hereof; or
(g) to allow any Guarantor to execute a supplemental indenture
and/or a Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental Indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and
the Trustee may amend or supplement this Indenture (including Sections 3.09,
4.10 and 4.15 hereof), the Subsidiary Guarantees and the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes (including Additional Notes, if any) then outstanding voting
as a single class (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, the Notes), and, subject to Sections 6.04
and 6.07 hereof, any existing Default or Event of Default (other than a Default
or Event of Default in the payment of the principal of, premium, if any, or
interest on the Notes, except a payment default resulting from an acceleration
that has been rescinded) or compliance with any provision of this Indenture, the
Subsidiary Guarantees or the Notes may be waived with the consent of the Holders
of a majority in principal amount of the then outstanding Notes (including
Additional Notes, if any) voting as a single class (including consents obtained
in connection with a tender offer or exchange offer for, or purchase of, the
Notes). Without the consent of at least 75% in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange offer for, or purchase of, such Notes), no waiver or amendment to
this Indenture may make any change in the provisions of Article 10 hereof that
adversely affects the rights of any Holder of Notes.
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Section 2.08 hereof shall determine which Notes are considered to be
"outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental Indenture unless such amended or supplemental Indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption of
the Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the then outstanding Notes and a waiver of the payment
default that resulted from such;
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of, interest, or premium, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Section 3.07 hereof);
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(h) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions;
(i) release any Guarantor from any of its obligations under its
Subsidiary Guarantee or this Indenture, except in accordance with the terms of
this Indenture; or
(j) amend this Section 9.02.
(k) In addition, any amendment to the provisions of Article 10
hereof (which relate to subordination) will require the consent of the Holders
of at least 75% in aggregate principal amount of the Notes then outstanding if
such amendment would adversely affect the rights of Holders of Notes.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with the
TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
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ARTICLE 10.
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note
agrees, that the Indebtedness evidenced by the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Senior Indebtedness (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Indebtedness shall be entitled to receive payment in
full of all Obligations due in respect of such Senior Indebtedness
(including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Indebtedness) before
Holders of the Notes shall be entitled to receive any payment with
respect to the Notes (except that Holders may receive (i) Permitted
Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Indebtedness (as provided
in subsection (1) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to
holders of Senior Indebtedness (except that Holders of Notes may
receive (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to
Section 8.01 hereof), as their interests may appear.
SECTION 10.03 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (i) Permitted Junior Securities and (ii) payments and other
distributions made from any defeasance trust created pursuant to Section 8.01
hereof) until all principal and other Obligations with respect to the Senior
Indebtedness have been paid in full if:
(i) a default in the payment of any principal or other Obligations with
respect to Designated Senior Indebtedness occurs and is continuing beyond
any applicable grace period in the agreement, indenture or other document
governing such Designated Senior Indebtedness; or
(ii) a default, other than a payment default, on Designated Senior
Indebtedness occurs and is continuing that then permits holders of the
Designated Senior Indebtedness to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from the
holders (or a Representative of the holders) of the Designated Senior
Indebtedness. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (i) at least 360 days shall
have elapsed since the
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effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the
Securities that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for
a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii) hereof, 179
days pass after notice is received if the maturity of such Designated
Senior Indebtedness has not been accelerated, if this Article 10
otherwise permits the payment, distribution or acquisition at the time
of such payment or acquisition.
SECTION 10.04 ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an
Event of Default, the Company shall promptly notify holders of Senior
Indebtedness of the acceleration.
SECTION 10.05 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge (provided by formal notice
in accordance with Section 10.05 hereof in the case of the Trustee) that such
payment is prohibited by Section 10.04 hereof, such payment shall be held by the
Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith
over and delivered, upon written request, to, the holders of Senior Indebtedness
as their interests may appear or their Representative under the indenture or
other agreement (if any) pursuant to which Senior Indebtedness may have been
issued, as their respective interests may appear, for application to the payment
of all Obligations with respect to Senior Indebtedness remaining unpaid to the
extent necessary to pay such Obligations in full in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the
Trustee undertakes to perform only such obligations on the part of the Trustee
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 10.06 NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 10.
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SECTION 10.07 SUBROGATION.
After all Senior Indebtedness is paid in full and until the
Notes are paid in full, Holders of Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the Holders
of Notes have been applied to the payment of Senior Indebtedness. A distribution
made under this Article 10 to holders of Senior Indebtedness that otherwise
would have been made to Holders of Notes is not, as between the Company and
Holders, a payment by the Company on the Notes.
SECTION 10.08 RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the obligation of
the Company, which is absolute and unconditional, to pay principal of
and interest on the Notes in accordance with their terms;
(2) affect the relative rights of Holders of Notes and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure is still a
Default or Event of Default.
SECTION 10.09 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Indebtedness, the distribution may be made and the notice
given to their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior
Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 10.
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SECTION 10.11 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold
Senior Indebtedness with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights.
SECTION 10.12 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Credit Agents are hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.13 AMENDMENTS.
Neither the provisions of this Article 10 nor of Section 11.02
shall be amended or modified without the written consent of the holders of all
Senior Indebtedness. In addition, the provisions of Section 8.04(e) shall not be
amended without the consent of the holders (or a Representative of the holders)
of Designated Senior Indebtedness in a manner which would permit the defeasance
of the Notes in violation of such Designated Senior Indebtedness.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01 GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes shall be promptly paid in full when
due, whether at maturity, by acceleration, redemption or otherwise, and interest
on the overdue principal of and interest on the Notes, if any, if lawful, and
all other obligations of the Company to the Holders or the Trustee hereunder or
thereunder shall be promptly paid in full or performed, all in accordance with
the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that same
shall be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise. Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, the Guarantors shall be jointly
and
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severally obligated to pay the same immediately. Each Guarantor agrees that this
is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this Note Guarantee shall not be
discharged except by complete performance of the obligations contained in the
Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, this
Note Guarantee, to the extent theretofore discharged, shall be reinstated in
full force and effect.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.02 SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
Senior Indebtedness of such Guarantor on the same basis as the Notes are junior
and subordinated to Senior Indebtedness of the Company. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 11 hereof.
SECTION 11.03 LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary
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Guarantee and this Article 11 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other contingent and fixed
liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 11, result in the
obligations of such Guarantor under its Subsidiary Guarantee not constituting a
fraudulent transfer or conveyance.
SECTION 11.04 EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section
11.01 hereof, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form included in Exhibit E shall be endorsed by
an Officer of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 hereof shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.24 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Subsidiary Guarantees in accordance with
Section 4.24 hereof and this Article 11, to the extent applicable.
SECTION 11.05 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor unless:
(1) subject to Section 10.05 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant
to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, this Indenture and the
Subsidiary Guarantee on the terms set forth herein or therein; and
(2) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Subsidiary Guarantee endorsed upon the Notes and the due and
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punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and
notwithstanding clauses (a) and (b) above, nothing contained in this Indenture
or in any of the Notes shall prevent any consolidation or merger of a Guarantor
with or into the Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
SECTION 11.06 RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents reasonably required in order to evidence
the release of any Guarantor from its obligations under its Subsidiary
Guarantee.
Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA Section 318(c), the imposed duties
shall control.
SECTION 12.02 NOTICES.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or
71
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certified, return receipt requested), telex, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address
If to the Company and/or any Guarantor:
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Telecopier No.: (423) 821-6423
Attention: President and Chief Operating Officer
With a copy to:
Miller & Martin LLP
1000 Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37402
Telecopier No.:(423) 785-8480
Attention: Hugh F. Sharber, Esq.
If to the Trustee:
SouthTrust Bank, National Association
Corporate Trust Department
Post Office Box 2554
Birmingham, Alabama 35290
100 Office Park Drive
Birmingham, Alabama 35223
Telecopier No.: (205) 254-4180
With a copy to:
Burr & Forman LLP
Post Office Box 830710
420 20th Street North, Suite 3100
Birmingham, Alabama 35283 (35203)
Telecopier No.: (205) 458-5100
Attention: George M. Taylor, III
The Company, any Guarantor or the Trustee, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
72
<PAGE>
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA Section 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other
Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 12.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section
12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section
12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 12.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture (other than a
certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the
provisions of TIA Section 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
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(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 12.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 12.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall
have any liability for any obligations of the Company or such Guarantor under
the Notes, the Subsidiary Guarantees, this Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder by accepting a Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Notes.
SECTION 12.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or Indebtedness agreement of the Company or its Subsidiaries or
of any other Person. Any such indenture, loan or Indebtedness agreement may not
be used to interpret this Indenture.
SECTION 12.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
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SECTION 12.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE>
SIGNATURES
Dated as of March 24, 1998
CHATTEM, INC.
BY:
-------------------------
Name: A. Alexander Taylor II
Title: President and Chief Operating Officer
SIGNAL INVESTMENT & MANAGEMENT CO.
BY:
-------------------------
Name: A. Alexander Taylor II
Title: President
SOUTHTRUST BANK, NATIONAL ASSOCIATION
BY:
-------------------------
Name: Judy B. Miller
Title:
Attest:
- --------------------
Authorized Signatory
Date:
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<PAGE>
A1-11
EXHIBIT A-1
(Face of Global Note)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CUSIP/CINS
-------------
8 7/8% [Series A] [Series B] Senior Subordinated Notes due 2008
No. $
--- ------------
CHATTEM, INC.
promises to pay to , or registered assigns,
-----------
the principal sum of ,
-----------
Dollars on , 2008.
---------
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
DATED:
CHATTEM, INC.
BY:
---------------------
Name:
Title:
This is one of the Global Notes referred to
in the within-mentioned Indenture:
SouthTrust Bank, National Association,
as Trustee
By:
-------------------
Name:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A1-1
<PAGE>
(Back of Note)
8 7/8% [Series A] [Series B] Senior Subordinated Notes due 2008
[Insert the Global Note legend, if applicable, pursuant to the provisions of the
Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1 INTEREST. Chattem, Inc., a Tennessee corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
87/8% per annum from April 1, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on April 1 and October 1 of each year (each an "Interest
Payment Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be October 1, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2 METHOD OF PAYMENT. The Company will pay interest on
the Notes (except defaulted interest) and Liquidated Damages to the Persons who
are registered Holders of Notes at the close of business on the March 15 or
September 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private indebtedness.
3 PAYING AGENT AND REGISTRAR. Initially, SouthTrust
Bank, National Association, the Trustee under the Indenture, will act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
A1-1
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4 INDENTURE. The Company issued the Notes under an
Indenture dated as of March 24, 1998 ("Indenture") among the Company, the
Guarantors on the signature pages thereto (the "Guarantors") and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are general, unsecured obligations of the Company limited
to $200.0 million in aggregate principal amount, plus amounts, if any, issued to
pay Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5 OPTIONAL REDEMPTION.
(l) Except as set forth in paragraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003...........................................104.4375%
2004...........................................102.9583%
2005...........................................101.4791%
2006 and thereafter............................100.000%
</TABLE>
(m) Notwithstanding the provisions of subparagraph (a) of this
paragraph 5, at any time prior to April 1, 2001, the Company may redeem up to
35% of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 108.875% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds to the Company of one or more Public
Offerings; provided that at least $100.0 million of the aggregate principal
amount of Notes originally issued remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company or any of its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of such Public Offering.
(n) Any redemption pursuant to this subparagraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in
paragraph 7 below, the Company shall not be required to make mandatory
redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in Section 4.15 of the Indenture (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus
A1-2
<PAGE>
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 20 days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase the Notes on the date specified in such notice, which date shall
be no earlier than 30 days and no later than 60 days from the date such notice
is mailed (the "Change of Control Payment Date"), pursuant to the procedures
required by the Indenture and described in such notice.
(b) Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay (and reduce the commitments under) Senior Indebtedness of the
Company or a Guarantor or (b) to the acquisition of a Permitted Business, or a
majority of the Voting Stock of, a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in a Permitted Business. Pending the final application of any such Net Proceeds,
the Company may temporarily reduce revolving credit borrowings or otherwise
invest such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Holders of Notes
that are the subject of an offer to purchase may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
A1-3
<PAGE>
10. SUBORDINATION. Each Holder by accepting a Note agrees that
the payment of principal of and premium, interest and Liquidated Damages, if
any, on each Note is subordinated in right of payment, to the extent and in the
manner provided in Article 10 of the Indenture, prior to the payment in full of
all Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes and any existing default or
compliance with any provision of the Indenture, the Subsidiary Guarantees or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the then outstanding Notes. Without the consent of any Holder of a
Note, the Indenture, the Subsidiary Guarantees or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's or Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Subsidiary Guarantee with
respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
defaults in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not permitted by the subordination provisions
of the Indenture) and such default continues for a period of 30 days; (ii)
defaults in the payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise (whether or not
permitted by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with any of the
provisions of Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by
the Company or any of its
A1-4
<PAGE>
Restricted Subsidiaries to observe or perform any other covenant,
representation, warranty or other agreement in the Indenture or the Notes for 60
days after notice to the Company by the Trustee or the Holders of at least 25%
in aggregate principal amount of the Notes then outstanding voting as a single
class; (v) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the date hereof, which default (a) is caused by a failure to pay principal
of or premium, if any, or interest on such Indebtedness prior to the expiration
of the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $7.5 million or more; (vi) a final judgment or final
judgments for the payment of money are entered by a court or courts of competent
jurisdiction against the Company or any of its Restricted Subsidiaries and such
judgment or judgments remain undischarged for a period (during which execution
shall not be effectively stayed) of 60 days, provided that the aggregate of all
such undischarged judgments exceeds $7.5 million; (vii) certain events of
bankruptcy or insolvency as described in the Indenture; (viii) and except as
permitted by the Indenture, any Subsidiary Guarantee shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on its
behalf shall deny or disaffirm its obligations under such Guarantor's Subsidiary
Guarantee. If any Event of Default (other than certain events of bankruptcy or
insolvency) occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately. Upon any such declaration, the Notes shall
become due and payable immediately. Notwithstanding the foregoing, in the case
of an Event of Default arising from certain events of bankruptcy or insolvency,
all outstanding Notes shall be due and payable immediately without further
action or notice. The Holders of a majority in aggregate principal amount of the
then outstanding Notes by written notice to the Trustee may on behalf of all of
the Holders rescind an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 24, 1998, between the Company and the parties named
on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
A1-5
<PAGE>
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Attention: President
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
---------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
----------------------------------------
(Sign exactly as your name appears on the
Note)
Tax Identification No:
---------------------------------
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $
--------
Date: Your Signature:
-----------------------------------------
(Sign exactly as your name appears on the
Note)
Tax Identification No:
----------------------------------
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE1
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of decrease in Amount of increase in Principal Amount
Principal Amount Principal Amount of this Global Signature of
of this of this Note following such authorized officer
Global Note Global Note decrease (or increase) of Trustee or Note
Date of Exchange Custodian
---------------- --------------------- --------------------- ---------------------- ------------------
</TABLE>
- -----------
1 This should be included only if the Note is issued in global form.
A1-9
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
--------------------------------------------
--------------------------------------------
CUSIP/CINS
-----------
8 7/8% [Series A] [Series B] Senior Subordinated Notes due 2008
No. $
--- ----------
CHATTEM, INC.
promises to pay to , or registered assigns, the principal sum of
------- --------
Dollars on , 2008.
-----------------
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
DATED:
CHATTEM, INC.
BY:
--------------------------------
Name:
Title:
This is one of the Global Notes referred to
in the within-mentioned Indenture:
SouthTrust Bank, National Association,
as Trustee
By:
------------------------------
Name:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
8 7/8% [Series A] [Series B] Senior Subordinated Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
THIS NOTE AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT
BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO THE
DELIVERY OF SUCH EVIDENCE, IF ANY, REQUIRED UNDER THE INDENTURE PURSUANT TO
WHICH THIS NOTE IS USED) AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING
ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED
BY RULE 144A THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)
(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144(A), (b) AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER
THE SECURITIES ACT (AN "ACCREDITED INVESTOR"), (c) OUTSIDE THE UNITED STATES TO
A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT BY THE REGISTRAR OF A CERTIFICATION
OF THE TRANSFEROR AND AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTION SET FORTH IN (A) ABOVE.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Chattem, Inc., a Tennessee corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
87/8% per annum from April 1, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights
A2-1
<PAGE>
Agreement referred to below. The Company shall pay interest and Liquidated
Damages, if any, semi-annually on April 1 and October 1 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Notes will accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of issuance; provided that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be October
1, 1998. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the March 15 or
September 15 next preceding the Interest Payment Date, even if such Notes are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Notes will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Notes and all other Notes the Holders
of which shall have provided wire transfer instructions to the Company or the
Paying Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private Indebtedness.
3. PAYING AGENT AND REGISTRAR. Initially, SouthTrust Bank,
National Association, the Trustee under the Indenture, will act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
4. INDENTURE. The Company issued the Notes under an Indenture
dated as of March 24, 1998 ("Indenture") among the Company, the Guarantors on
the signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code
sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders
are referred to the Indenture and such Act for a statement of such terms. To
the extent any provision of this Note conflicts with the express provisions of
the Indenture, the provisions of the Indenture shall govern and be controlling.
The Notes are general, unsecured obligations of the Company limited to $200.0
million in aggregate principal amount, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
A2-2
<PAGE>
(a) Except as set forth in paragraph (b) of this paragraph 5, the
Company shall not have the option to redeem the Notes prior to April 1, 2003.
Thereafter, the Company shall have the option to redeem the Notes, in whole or
in part, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
<S> <C>
2003.............................................104.4375%
2004.............................................102.9583%
2005.............................................101.4791%
2006 and thereafter..............................100.000%
</TABLE>
(b) Notwithstanding the provisions of subparagraph (a) of this
paragraph 5, at any time prior to April 1, 2001, the Company may redeem up to
35% of the aggregate principal amount of Notes originally issued under the
Indenture at a redemption price of 108.875% of the principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the
redemption date, with the net cash proceeds to the Company of one or more Public
Offerings; provided that at least $100.0 million of the aggregate principal
amount of Notes originally issued remain outstanding immediately after the
occurrence of such redemption (excluding Notes held by the Company or any of its
Subsidiaries); and provided, further, that such redemption shall occur within 60
days of the date of the closing of such Public Offering.
(c) Any redemption pursuant to this subparagraph 5 shall
be made pursuant to the provisions of Section 3.01 through 3.06 of the
Indenture.
6. MANDATORY REDEMPTION. Except as set forth in
paragraph 7 below, the Company shall not be required to make mandatory
redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes will have the right to require the Company to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described in Section 4.15 of the Indenture (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 20 days following any Change of Control, the Company shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase the Notes on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Indenture and described in such
notice.
(b) Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay (and reduce the commitments under) Senior Indebtedness of the
Company or a Guarantor or (b) to the acquisition of a Permitted Business, or a
majority of the Voting Stock of, a Permitted Business, the making of a capital
expenditure or the acquisition of other long-term assets that are used or useful
in a Permitted Business.
A2-3
<PAGE>
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph shall be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in this Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Holders of Notes
that are the subject of an offer to purchase may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that
the payment of principal of and premium, interest and Liquidated Damages, if
any, on each Note is subordinated in right of payment, to the extent and in the
manner provided in Article 10 of the Indenture, prior to the payment in full of
all Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may
be treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Subsidiary Guarantees or the Notes may be amended
or supplemented with the consent of
A2-4
<PAGE>
the Holders of at least a majority in principal amount of the then outstanding
Notes and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Subsidiary
Guarantees or the Notes may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Subsidiary Guarantee with respect to the Notes.
13. DEFAULTS AND REMEDIES. Events of Default include: (i)
defaults in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not permitted by the subordination provisions
of the Indenture) and such default continues for a period of 30 days; (ii)
defaults in the payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise (whether or not
permitted by the subordination provisions of the Indenture); (iii) failure by
the Company or any of its Restricted Subsidiaries to comply with any of the
provisions of Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by
the Company or any of its Restricted Subsidiaries to observe or perform any
other covenant, representation, warranty or other agreement in the Indenture or
the Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $7.5 million;
(vii) certain events of bankruptcy or insolvency as described in the Indenture;
(viii) and except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor or any Person
acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee. If any Event of Default (other than certain
events of bankruptcy or insolvency) occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
A2-5
<PAGE>
aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived. The Company is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Company is required
upon becoming aware of any Default or Event of Default to deliver to the Trustee
a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES
AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders
of Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 24, 1998, between the Company and the parties named
on the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Attention: President
A2-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
-------------------------------------------------------
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:
----------------------------------------
(Sign exactly as your name appears on the
Note)
Tax Identification No:
--------------------------------
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A2-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
/ / Section 4.10 / / Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $
--------
Date: Your Signature:
----------------------------------------
(Sign exactly as your name appears on the
Note)
Tax Identification No:
--------------------------------
Signature Guarantee.
Medallion No.:
Notice: Signature must be guaranteed by a member firm of
the STAMP, SEMP OR MSP signature guaranty medallion program.
A2-8
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Amount of decrease in Amount of increase in Principal Amount Signature of
Principal Amount Principal Amount of this Global authorized officer
of this of this Note following such of Trustee or Note
Date of Exchange Global Note Global Note decrease (or increase) Custodian
<S> <C> <C> <C> <C>
</TABLE>
A2-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
SouthTrust Bank, National Association
Corporate Trust Department
Post Office Box 2554 35290
100 Office Park Drive
Birmingham, Alabama 35223
Re: 8 7/8% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of March
24, 1998 (the "Indenture"), among Chattem, Inc. (the "Company"), as issuer,
Signal Investment & Management Co. (the "Guarantor"), as guarantor, and
SouthTrust Bank, National Association, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
, (the "Transferor") owns and proposes to
--------------
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $ in such Note[s] or interests (the
-----------
"Transfer"), to (the "Transferee"), as further specified in Annex A
----------
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. / / Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the
Transferor reasonably believed and believes is purchasing the beneficial
interest or Definitive Note for its own account, or for one or more accounts
with respect to which such Person exercises sole investment discretion, and
such Person and each such account is a "qualified institutional buyer" within
the meaning of Rule 144A in a transaction meeting the requirements of Rule
144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed
on the 144A Global Note and/or the Definitive Note and in the Indenture and
the Securities Act.
B-1
<PAGE>
2. / / Check if Transferee will take delivery of a beneficial interest in the
Temporary Regulation S Global Note, the Regulation S Global Note or a
Definitive Note pursuant to Regulation S. The Transfer is being effected
pursuant to and in accordance with Rule 903 or Rule 904 under the Securities
Act and, accordingly, the Transferor hereby further certifies that (i) the
Transfer is not being made to a person in the United States and (x) at the
time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or
(y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any
Person acting on its behalf knows that the transaction was prearranged with a
buyer in the United States, (ii) no directed selling efforts have been made
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act and (iii) the transaction is not part
of a plan or scheme to evade the registration requirements of the Securities
Act and (iv) if the proposed transfer is being made prior to the expiration
of the Restricted Period, the transfer is not being made to a U.S. Person or
for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on Transfer enumerated in the
Private Placement Legend printed on the Regulation S Global Note , the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. / / Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Notes and Restricted
Definitive Notes and pursuant to and in accordance with the Securities Act
and any applicable blue sky securities laws of any state of the United
States, and accordingly the Transferor hereby further certifies that (check
one):
(a) / / such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) / / such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) / / such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with
the prospectus delivery requirements of the Securities Act;
or
(d) / / such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D
under the
B-2
<PAGE>
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption
claimed, which certification is supported by (1) a certificate executed
by the Transferee in the form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time
of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is in
compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the IAI Global Note and/or the Definitive Notes and in the
Indenture and the Securities Act.
4. / / Check if Transferee will take delivery of a beneficial interest
in an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) / / Check if Transfer is pursuant to Rule 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state of
the United States and (ii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(b) / / Check if Transfer is Pursuant to Regulation S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no
longer be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(c) / / Check if Transfer is Pursuant to Other Exemption.
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any State of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are
not required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.
B-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
BY:
------------------------------------
Name:
Title:
Dated: ,
----------
B-4
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
-----
(ii) / / Regulation S Global Note (CUSIP ), or
-----
(iii) / / IAI Global Note (CUSIP ); or
-----
(b) / / a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) / / a beneficial interest in the:
(i) / / 144A Global Note (CUSIP ), or
-----
(ii) / / Regulation S Global Note (CUSIP ), or
-----
(iii) / / IAI Global Note (CUSIP ); or
-----
(iv) / / Unrestricted Global Note (CUSIP ); or
-----
(b) / / a Restricted Definitive Note; or
(c) / / an Unrestricted Definitive Note, in accordance with the terms of
the Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
SouthTrust Bank, National Association
Corporate Trust Department
Post Office Box 2554 35290
100 Office Park Drive
Birmingham, Alabama 35223
Re: 8 7/8% Senior Subordinated Notes Due 2008
(CUSIP )
--------------
Reference is hereby made to the Indenture, dated as of March
24, 1998 (the "Indenture"), among Chattem, Inc. (the "Company"), as issuer,
Signal Investment & Management Co. (the "Guarantor"), as guarantor, and
SouthTrust Bank, National Association, as trustee. Capitalized terms used but
not defined herein shall have the meanings given to them in the Indenture.
, (the "Owner") owns and proposes to exchange the
------------
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$ in such Note[s] or interests (the "Exchange"). In connection with
------------
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) / / Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global
Note in an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Global Notes and pursuant to and in
accordance with the United States Securities Act of 1933, as amended (the
"Securities Act"), (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest
in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
(b) / / Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note
for an Unrestricted Definitive Note, the Owner hereby certifies (i) the
Definitive Note is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant
to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) / / Check if Exchange is from Restricted Definitive
Note to beneficial interest in an Unrestricted Global Note. In connection
with the Owner's Exchange of a Restricted Definitive Note for a beneficial
interest in an Unrestricted Global Note, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to Restricted Definitive Notes and pursuant
to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest is being acquired in compliance with any applicable blue
sky securities laws of any state of the United States.
(d) / / Check if Exchange is from Restricted Definitive
Note to Unrestricted Definitive Note. In connection with the Owner's Exchange
of a Restricted Definitive Note for an Unrestricted Definitive Note, the
Owner hereby certifies (i) the Unrestricted Definitive Note is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note
is being acquired in compliance with any applicable blue sky securities laws
of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) / / Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the
Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Note issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Note and in the Indenture and the Securities Act.
(b) / / Check if Exchange is from Restricted Definitive
Note to beneficial interest in a Restricted Global Note. In connection with
the Exchange of the Owner's Restricted Definitive Note for a beneficial
interest in the [CHECK ONE] "144A Global Note", "Regulation S Global Note",
"IAI Global Note" with an equal principal amount, the Owner hereby certifies
(i) the
C-2
<PAGE>
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act
.
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------------
[Insert Name of Owner]
BY:
---------------------------------
Name:
Title:
Dated: ,
---------- ----
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
SouthTrust Bank, National Association
Corporate Trust Department
Post Office Box 2554 35290
100 Office Park Drive
Birmingham, Alabama 35223
Re: 8 7/8% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of March 24, 1998
(the "Indenture"), among Chattem, Inc. (the "Company"), as issuer, Signal
Investment & Management Co. (the "Guarantor"), as guarantor, and SouthTrust
Bank, National Association, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $ aggregate
------------
principal amount of:
(a) / / a beneficial interest in a Global Note, or
(b) / / a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set
forth in the Indenture and the undersigned agrees to be bound by, and
not to resell, pledge or otherwise transfer the Notes or any interest
therein except in compliance with, such restrictions and conditions
and the United States Securities Act of 1933, as amended (the
"Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we
should sell the Notes or any interest therein, we will do so only (A)
to the Company or any subsidiary thereof, (B) in accordance with Rule
144A under the Securities Act to a
D-1
<PAGE>
"qualified institutional buyer" (as defined therein), (c) to an
institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a U.S.
broker-dealer) to you and to the Company a signed letter substantially
in the form of this letter and, if such transfer is in respect of a
principal amount of Notes, at the time of transfer of less than
$250,000, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule
904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to
an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Note
or beneficial interest in a Global Note from us in a transaction
meeting the requirements of clauses (A) through (E) of this paragraph a
notice advising such purchaser that resales thereof are restricted as
stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the
proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the
foregoing effect. We further understand that any subsequent transfer
by us of the Notes or beneficial interest therein acquired by us must
be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is
an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
------------------------------------
[Insert Name of Accredited Investor]
By:
-------------------------------
Name:
Title:
Dated: ,
------------------ ----
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of March 24, 1998 (the "Indenture")
among Chattem, Inc., Signal Investment & Management Co. and SouthTrust Bank,
National Association as trustee (the "Trustee"), (a) the due and punctual
payment of the principal of, premium, if any, and interest on the Notes (as
defined in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be
so subordinated and subject in right of payment upon any defeasance of this Note
in accordance with the provisions of the Indenture.
[Name of Guarantor(s)]
By:
-----------------------------------
Name:
Title:
E-1
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of , among (the "Guarantor"), Chattem,
---------------- ------------------
Inc., (the "Company"), the other Guarantors (as defined in the Indenture
referred to herein) and SouthTrust Bank, National Association, as trustee under
the indenture referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of March 24, 1998 providing
for the issuance of an aggregate principal amount of up to $200.0 million of
8 7/8% Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guarantor shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guarantor shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guarantor and the Trustee mutually covenant and agree for the equal and
ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly and
severally Guarantee to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and
assigns, irrespective of the validity and enforceability of the
Indenture, the Notes or the obligations of the Company hereunder
or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the
F-1
<PAGE>
Company to the Holders or the Trustee
hereunder or thereunder will be promptly
paid in full or performed, all in accordance
with the terms hereof and thereof; and
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional, irrespective of
the validity, regularity or enforceability of the Notes or the
Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any
provisions hereof or thereof, the recovery of any judgment against
the Company, any action to enforce the same or any other
circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency
or bankruptcy of the Company, any right to require a proceeding
first against the Company, protest, notice and all demands
whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and
the Indenture.
(e) If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar official acting in relation
to either the Company or the Guarantors, any amount paid by either
to the Trustee or such Holder, this Subsidiary Guarantee, to the
extent theretofore discharged, shall be reinstated in full force
and effect.
(f) The Guarantor shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders and
the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in
Article 6 of the Indenture for the purposes of this Subsidiary
Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not due
and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
F-2
<PAGE>
(h) The Guarantors shall have the right to seek contribution from any
non-paying Guarantor so long as the exercise of such right does
not impair the rights of the Holders under the Guarantee.
(i) Pursuant to Section 11.03 of the Indenture, after giving effect to
any maximum amount and any other contingent and fixed liabilities
that are relevant under any applicable Bankruptcy or fraudulent
conveyance laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of
such other Guarantor under Article 11 of the Indenture shall
result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.
3 EXECUTION AND DELIVERY. Each Guarantor agrees that the Subsidiary
Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary
Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guarantor may not consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such
Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person formed
by or surviving any such consolidation or merger (if other
than a Guarantor or the Company) unconditionally assumes all
the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory
in form to the Trustee, of the Subsidiary Guarantee endorsed upon
the Notes and the due and punctual performance of all of the
covenants and conditions of the Indenture to be performed by the
Guarantor, such successor corporation shall succeed to and be
substituted for the Guarantor with the same effect as if it had
been named herein as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all of the Subsidiary
Guarantees to be endorsed upon all of the Notes issuable
hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Subsidiary
Guarantees so issued shall in all respects have the same legal
rank and benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in
F-3
<PAGE>
accordance with the terms of the Indenture as though all of such
Subsidiary Guarantees had been issued at the date of the
execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained in
the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company
or another Guarantor, or shall prevent any sale or conveyance of
the property of a Guarantor as an entirety or substantially as an
entirety to the Company or another Guarantor.
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets
of any Guarantor, by way of merger, consolidation or otherwise,
or a sale or other disposition of all to the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other
disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under
its Subsidiary Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an Opinion
of Counsel to the effect that such sale or other disposition was
made by the Company in accordance with the provisions of the
Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably
required in order to evidence the release of any Guarantor from
its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of
principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided in
Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the
Guarantor, as such, shall have any liability for any obligations of
the Company or any Guarantor under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any
claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public
policy.
F-4
<PAGE>
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO
THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION
WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all
of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained
herein, all of which recitals are made solely by the Guarantor and the
Company.
F-5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all
as of the date first above written.
Dated: ,
--------------- ----
[GUARANTOR]
By:
---------------------------------
Name:
Title:
Chattem, Inc.
By:
---------------------------------
Name:
Title:
[EXISTING GUARANTORS]
By:
---------------------------------
Name:
Title
SouthTrust Bank, National Association
as Trustee
By:
---------------------------------
Name:
Title:
F-6
<PAGE>
EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
Dated as of March 24, 1998
by and among
Chattem, Inc.
Signal Investment & Management Co.
and
NationsBanc Montgomery Securities LLC
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 24, 1998, by and among Chattem, Inc., a Tennessee
corporation (the "Company"), Signal Investment & Management Co., a Delaware
corporation (the "Guarantor" and, together with any Restricted Subsidiary of the
Company that guarantees any other indebtedness of the Company or any other
guarantors of the Notes (as defined below), the "Guarantors"), and NationsBanc
Montgomery Securities LLC (the "Initial Purchaser"), which has agreed to
purchase the Company's 8 7/8% Senior Subordinated Notes due 2008 (the "Series A
Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to that certain Purchase Agreement,
dated March 20, 1998 (the "Purchase Agreement"), by and among the Company, the
Guarantors and the Initial Purchaser. In order to induce the Initial Purchaser
to purchase the Series A Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchaser set
forth in Section 2 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them in the Indenture,
dated March 24, 1998, between the Company, the Guarantors and SouthTrust Bank,
National Association, as Trustee, relating to the Series A Notes (the
"Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized or ordered to close.
Certificated Securities: Definitive Notes, as defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
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<PAGE>
Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement to be continuously
effective and the keeping of the Exchange Offer open for a period not less than
the period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Registrar under the Indenture of Series B Notes in the same
aggregate principal amount as the aggregate principal amount of Series A Notes
tendered by Holders thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the Prospectus contained therein.
Exempt Resales: The transactions in which the Initial Purchaser
proposes to sell the Series A Notes to certain "qualified institutional buyers,"
as such term is defined in Rule 144A under the Act, to certain "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of
Regulation D under the Act and pursuant to Regulation S under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indemnified Party: As defined in Section 8(c) hereof.
Indemnifying Party: As defined in Section 8(c) hereof.
Indenture: The Indenture, dated as of the Closing Date, between the
Company, the Guarantors and SouthTrust Bank, National Association, as trustee
(the "Trustee"), pursuant to
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<PAGE>
which the Notes are to be issued, as such Indenture is amended or supplemented
from time to time in accordance with the terms therein.
Liquidated Damages: As defined in Section 5 hereof.
Notes: Series A and Series B Notes.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
the Guarantors relating to (a) an offering of Series B Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Restricted Broker-Dealer: Any Broker-Dealer that holds Series B Notes
that were acquired in the Exchange Offer in exchange for Series A Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its affiliates).
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 8 7/8% Series B Senior Subordinated
Notes due 2008 to be issued pursuant to the Indenture in the Exchange Offer
or as contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
3
<PAGE>
Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Note is exchanged in the Exchange Offer for a
Series B Note and entitled to be resold to the public by the Holder thereof
without complying with the prospectus delivery requirements of the Act, (b) the
date on which such Note has been disposed of in accordance with a Shelf
Registration Statement, (c) the date on which such Series A Note is disposed of
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Series A Note is distributed to
the public pursuant to Rule 144 under the Act.
Trustee: As set forth in the Indenture and shall also include any of
its successors.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (a
"Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 60 days after the
Closing Date (such 60th day being the "Filing Deadline"), (ii) use its best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "Effectiveness Deadline"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A Notes that such Broker-Dealer acquired for its own account as a
result of market making activities or other trading activities (other than
Series A Notes acquired directly from the Company or any of its Affiliates) as
contemplated by Section 3(c) below.
4
<PAGE>
(b) The Company and the Guarantors shall use their respective best
efforts to cause the Exchange Offer Registration Statement to be effective
continuously, and shall keep the Exchange Offer open for a period of not less
than the minimum period required under applicable federal and state securities
laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 30 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes and the guarantee
thereof shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their respective best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "Consummation
Deadline").
(c)(1) The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds Transfer Restricted Securities
that were acquired for the account of such Broker-Dealer as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company) may exchange such Transfer Restricted Securities pursuant to the
Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter"
within the meaning of the Act and must, therefore, deliver a prospectus meeting
the requirements of the Act in connection with its initial resale of any Series
B Notes received by such Broker-Dealer in the Exchange Offer, and that the
Prospectus contained in the Exchange Offer Registration Statement may be used to
satisfy such prospectus delivery requirement. Such "Plan of Distribution"
section shall also contain all other information with respect to such sales by
such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
(2) To the extent necessary to ensure that the Exchange Offer
Registration Statement is available for sales of Series B Notes by
Broker-Dealers, upon the reasonable request of any Broker-Dealer who certifies
in writing to the Company that it anticipates it will be a Restricted-Broker
Dealer, the Company and the Guarantors agree to use their respective best
efforts to keep the Exchange Offer Registration Statement continuously
effective, supplemented and amended as required by the provisions of Section
6(c) hereof and in conformity with the requirements of this Agreement, the Act
and the policies, rules and regulations of the Commission as announced from time
to time, for a period of one year from the date on which the Exchange Offer is
Consummated, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto. The Company and the
5
<PAGE>
Guarantors shall promptly provide sufficient copies of the latest version of
such Prospectus to such Broker-Dealers promptly upon request, and in no event
later than one Business Day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 60 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 150 days after the
earlier of (i) the date on which the Company determines that the Exchange Offer
Registration Statement cannot be filed as a result of clause (a)(i) above and
(ii) the date on which the Company receives the notice specified in clause
(a)(ii) above (such 150th day the "Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company and the Guarantors are required to file and make effective a Shelf
Registration Statement solely because the Exchange Offer is not permitted under
applicable federal law (i.e., clause (a)(i) above), then the filing of the
Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided that, in such event, the Company and
the Guarantors shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
6
<PAGE>
The Company and the Guarantors shall use their respective best efforts
to keep any Shelf Registration Statement required by this Section 4(a)
continuously effective, supplemented and amended as required by and subject to
the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure
that it is available for sales of Transfer Restricted Securities by the Holders
thereof entitled to the benefit of this Section 4(a), and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the date on which such Shelf Registration Statement first becomes effective
under the Act, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been sold
pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the applicable Filing Deadline, (ii)
any such Registration Statement has not been declared effective by the
Commission on or prior to the applicable Effectiveness Deadline, (iii) the
Exchange Offer has not been Consummated on or prior to the Consummation Deadline
or (iv) any Registration Statement required by this Agreement is filed and
declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself declared effective immediately (each such event referred to
in clauses (i) through (iv), a "Registration Default"), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby Liquidated Damages in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for the first 90-day period immediately following the
occurrence of such Registration Default ("Liquidated Damages"). The amount of
the Liquidated Damages shall increase by an additional $.05 per week per $1,000
in principal
7
<PAGE>
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.50 per week per $1,000 in principal amount of
Transfer Restricted Securities; provided that the Company and the Guarantors
shall in no event be required to pay Liquidated Damages for more than one
Registration Default at any given time. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (i)
above, (2) upon the effectiveness of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of (ii)
above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable in the case of (iv) above, the
Liquidated Damages payable with respect to the Transfer Restricted Securities as
a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. All obligations of the Company and the Guarantors set forth in the
preceding paragraph that are outstanding with respect to any Transfer Restricted
Security at the time such security ceases to be a Transfer Restricted Security
shall survive until such time as all such obligations with respect to such
Transfer Restricted Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and the Guarantors shall (x) comply with all
applicable provisions of Section 6(c) below, (y) use their respective best
efforts to effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof and (z) comply with
all of the following provisions:
(i) If, following the Closing Date, there has been announced a
change in Commission policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision
from the Commission allowing the Company and the Guarantors to
Consummate an Exchange
8
<PAGE>
Offer for such Transfer Restricted Securities. The Company and the
Guarantors hereby agree to pursue the issuance of such a decision to
the Commission staff level. In connection with the foregoing, the
Company and the Guarantors hereby agree to take all such other actions
as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared
by counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursuing a resolution (which need not be
favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange
Offer, each Holder of Transfer Restricted Securities (including,
without limitation, any Holder who is a Broker Dealer) shall furnish,
upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the
Guarantors (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Series B Notes to be issued in the Exchange Offer and (C) it is
acquiring the Series B Notes in its ordinary course of business. As a
condition to its participation in the Exchange Offer, each Holder using
the Exchange Offer to participate in a distribution of the Series B
Notes shall acknowledge and agree that, if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired
directly from the Company or an Affiliate thereof, it (1) could not,
under Commission policy as in effect on the date of this Agreement,
rely on the position of the Commission enunciated in Morgan Stanley and
Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action
letter obtained pursuant to clause (i) above) and (2) must comply with
the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a
secondary resale transaction must be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508 of Regulation S-K, as
applicable.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and the Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
the Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5,
9
<PAGE>
1991), as interpreted in the Commission's letter to Shearman & Sterling
(available July 2, 1993) and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation
that neither the Company nor any Guarantor has entered into any
arrangement or understanding with any Person to distribute the Series B
Notes to be received in the Exchange Offer and that, to the best of the
Company's and each Guarantor's information and belief, each Holder
participating in the Exchange Offer is acquiring the Series B Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the Series B
Notes received in the Exchange Offer and (C) any other undertaking or
representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors shall prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would
cause any such Registration Statement or the Prospectus contained
therein (A) to contain a material misstatement or omission or (B) not
to be effective and usable for resale of Transfer Restricted Securities
during the period required by this Agreement, the Company and the
Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect and, if Commission review is
required, use their respective best efforts to cause such amendment to
be declared effective as soon as practicable;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to such Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4
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hereof, as the case may be; cause the Prospectus contained in such
Registration Statement to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the
provisions of the Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement
to the Prospectus contained in such Registration Statement;
(iii) advise the selling Holders promptly and, if requested by
such Persons, confirm such advice in writing, (A) when the related
Prospectus or any Prospectus supplement or post-effective amendment has
been filed and, with respect to any such Registration Statement or any
post-effective amendment thereto, when the same has become effective,
(B) of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for
additional information relating thereto, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement under the Act or of the suspension by any state
securities commission of the qualification of the Transfer Restricted
Securities for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes and (D) of the
existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
related Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making
of any additions to or changes in the Registration Statement in order
to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. If at any time the Commission
issues any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory
authority issues an order suspending the qualification or exemption
from qualification of the Transfer Restricted Securities under state
securities or Blue Sky laws, then the Company and the Guarantors shall
use their respective best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(iv) subject to Section 6(c)(i) hereof, if any fact or event
contemplated by Section 6(c)(iii)(D) hereof shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain any untrue
statement of a material fact or omit to state any material fact
necessary
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to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(v) furnish to the Initial Purchaser and each selling Holder
named in any Registration Statement or related Prospectus in connection
with such sale, if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents shall
be subject to the review and comment of such Holders in connection with
such sale, if any, for a period of at least five Business Days, and the
Company and the Guarantors shall not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which the selling Holders of the Transfer
Restricted Securities covered by such Registration Statement in
connection with such sale, if any, shall reasonably object within five
Business Days after the receipt thereof. A selling Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as
proposed to be filed, contains a material misstatement or omission or
fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to
be incorporated by reference into a Registration Statement or
Prospectus, provide upon request copies of such document to the selling
Holders in connection with such sale, if any, make the Company's and
the Guarantors' representatives available for discussion of such
document and other customary due diligence matters, and include such
information in such document prior to the filing thereof as such
selling Holders may reasonably request;
(vii) make available at reasonable times for inspection by the
selling Holders participating in any disposition pursuant to such
Registration Statement and any attorney or accountant retained by such
selling Holders all financial and other records and pertinent corporate
documents of the Company and the Guarantors and cause the Company's and
the Guarantors' officers, directors and employees to supply all
information reasonably requested by any such selling Holder, attorney
or accountant in connection with such Registration Statement or any
post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness, subject to each Holder and its
representative agreeing to maintain confidentiality with respect to
such information on customary terms;
(viii) if requested by any selling Holders in connection with
such sale, if any, promptly include in any Registration Statement or
related Prospectus, pursuant to a
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supplement or post-effective amendment if necessary, such information
as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the
"Plan of Distribution" of the Transfer Restricted Securities; and make
all required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company and the Guarantors
are notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(ix) furnish upon request to each selling Holder in connection
with such sale, if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder, without charge, as many
copies of the Prospectus (including each preliminary prospectus) and
any amendment or supplement thereto as such Persons reasonably may
request; the Company and the Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any amendment or supplement
thereto by each of the selling Holders in connection with the offering
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition
of the Transfer Restricted Securities pursuant to any applicable
Registration Statement contemplated by this Agreement as may be
reasonably requested by any Holder of Transfer Restricted Securities in
connection with any sale or resale pursuant to any applicable
Registration Statement, and in such connection the Company and the
Guarantors shall:
(A) upon the request of any selling Holder, furnish (or in the
case of paragraphs (2) and (3) below, use their respective best
efforts to cause to be furnished) to each selling Holder, upon the
effectiveness of the Shelf Registration Statement or upon
Consummation of the Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of
the Company and the Guarantors by (x) a principal operating or
executive officer of the Company and the Guarantors and (y) a
principal financial or accounting officer of the Company and
the Guarantors, confirming, as of the date thereof, the
matters set forth in paragraphs (b) through (e) of Section 7
of
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the Purchase Agreement and such other similar matters as the
selling Holders may reasonably request;
(2) an opinion, dated such date, of counsel for the
Company and the Guarantors covering matters similar to those
set forth in Section 7(g) of the Purchase Agreement and such
other matters as the selling Holders may reasonably request,
and in any event including a statement to the effect that such
counsel has participated in conferences with officers and
other representatives of the Company and the Guarantors and
representatives of the independent public accountants for the
Company and the Guarantors and has considered the matters
required to be stated therein and the statements contained
therein, although such counsel has not independently verified
the accuracy, completeness or fairness of such statements; and
that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without
independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that
the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the
opinion dated the date of Consummation of the Exchange Offer,
as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules
and other financial data included in any Registration
Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type
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customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the
matters set forth in its comfort letter delivered pursuant to
Section 7(l) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with clause (A) above and with any customary conditions contained
in the any agreement entered into by the Company and the
Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all
other acts or things necessary or advisable to enable the disposition
in such jurisdictions of the Transfer Restricted Securities covered by
the applicable Registration Statement; provided, however, that neither
the Company nor any Guarantors shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take
any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Notes surrendered to the
Company by such Holder in exchange therefor or being sold by such
Holder; such Series B Notes to be registered in the name of such Holder
or in the name of the purchaser(s) of such Series B Notes, as the case
may be; in return, the Series A Notes held by such Holder shall be
surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted
Securities that will result in such securities no longer being Transfer
Restricted Securities, cooperate with the selling Holders to facilitate
the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any
restrictive legends; and to register such Transfer Restricted
Securities in such denominations and such names as the selling Holders
may request at least two Business Days prior to such sale of Transfer
Restricted Securities;
(xv) use their respective best efforts to cause the
disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to
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<PAGE>
enable the seller or sellers thereof to consummate the disposition of
such Transfer Restricted Securities, subject to the proviso contained
in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of a Registration
Statement covering such Transfer Restricted Securities and provide the
Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with The
Depository Trust Company;
(xvii) otherwise use their respective best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to their security holders with regard to any
applicable Registration Statement, as soon as practicable, a
consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) covering a twelve-month period beginning
after the effective date of the Registration Statement (as such term is
defined in paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company available to
the selling Holders for meetings with prospective purchasers of the
Transfer Restricted Securities and prepare and present to potential
investors customary "road show" material in a manner consistent with
other new issuances of other securities similar to the Transfer
Restricted Securities;
(xix) upon request cause the Indenture to be qualified under
the TIA not later than the effective date of the first Registration
Statement required by this Agreement and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for such Indenture to be so qualified
in accordance with the terms of the TIA; and execute, and use best
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of
Section 13 or Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has
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received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving
a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the
Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors'
performance of or compliance with this Agreement shall be borne by the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses, (ii) all
fees and expenses of compliance with federal securities and state Blue Sky or
securities laws, (iii) all expenses of printing (including printing certificates
for the Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses, messenger and delivery services and telephone, (iv) all fees and
disbursements of counsel for the Company, the Guarantors and the Holders of
Transfer Restricted Securities and fees and disbursements of the Trustee and
counsel, (v) all application and filing fees in connection with listing the
Series B Notes on a national securities exchange or automated quotation system
pursuant to the requirements hereof and (vi) all fees and disbursements of
independent certified public accountants of the Company and the Guarantors
(including the expenses of any special audit and comfort letters required by or
incident to such performance) and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of the Series B
Notes by a Holder.
The Company shall, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
shall reimburse the Holders of
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Transfer Restricted Securities being tendered in the Exchange Offer and/or
resold pursuant to the "Plan of Distribution" contained in the Exchange Offer
Registration Statement or registered pursuant to the Shelf Registration
Statement, as applicable, for the reasonable fees and disbursements of not more
than one counsel, who shall be Latham & Watkins, unless another firm shall be
chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless (i) each Holder, (ii) each person, if any, who
controls (within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act) any Holder (any of the persons referred to in this clause (ii)
being hereinafter referred to as a "controlling person") and (iii) the
respective officers, directors, partners, employees, representatives and agents
of any Holder or any controlling person (any person referred to in clause (i),
(ii) or (iii) may hereinafter be referred to as an "Indemnified Holder") from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any holder
or any prospective purchaser of Series B Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company or the Guarantors, to the same extent as the foregoing indemnity
from the Company and the Guarantors to each of the Indemnified Holders, but only
with reference to information relating to such Indemnified Holder furnished in
writing to the Company by such Indemnified Holder expressly for use in any
Registration Statement. In no event shall any Indemnified Holder be liable or
responsible for any amount in excess of the amount by which the total amount
received by such Indemnified Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Indemnified Holder for such Transfer Restricted Securities
and (ii) the amount of any
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damages that such Indemnified Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying party") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), an Indemnified Holder shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Indemnified Holder). Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Indemnified Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of
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judgment with respect to, any pending or threatened action in respect of which
the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Indemnified Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and of the Indemnified Holder, on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or such Guarantors, on the one
hand, or by the Indemnified Holder, on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and judgments referred to above shall
be deemed to include, subject to the limitations set forth in the second
paragraph of Section 8(a), any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such
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<PAGE>
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Holder or its related Indemnified Holders shall
be required to contribute, in the aggregate, any amount in excess of the amount
by which the total received by such Holder with respect to the sale of its
Transfer Restricted Securities pursuant to a Registration Statement exceeds the
sum of (A) the amount paid by such Holder for such Transfer Restricted
Securities plus (B) the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations to contribute pursuant to this
Section 8(c) are several in proportion to the respective principal amount of
Transfer Restricted Securities held by each of the Holders hereunder and not
joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as
any Transfer Restricted Securities remain outstanding and during any period in
which the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of
the Exchange Act, to make available, upon request of any Holder, to such Holder
or beneficial owner of Transfer Restricted Securities in connection with any
sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A and (ii) is subject to
Section 13 or 15 (d) of the Exchange Act, to make all filings required thereby
in a timely manner in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchaser or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchaser or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantors
shall, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is
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inconsistent with the rights granted to the Holders in this Agreement or
otherwise conflicts with the provisions hereof. Neither the Company nor any
Guarantors has previously entered into any agreement granting any registration
rights with respect to its securities to any Person pursuant to which such other
Person currently has unexercised registration rights, except for those
registration rights granted in connection with the Company's 12.75% Series A
Senior Subordinated Series A Notes due 2004. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's and the Guarantors' securities
under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given, unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchaser, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect their rights or the
rights of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under
the Indenture; and
(ii) if to the Company or the Guarantors:
Chattem, Inc.
1715 West 38th Street
22
<PAGE>
Chattanooga, Tennessee 37409
Telecopier No.:(423) 821-6423
Attention: President and Chief Operating Officer
With a copy to:
Miller & Martin
1000 Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37402
Telecopier No.:(423) 785-8480
Attention: Hugh F. Sharber, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
Upon the date of filing of the Exchange Offer or a Shelf Registration
Statement, as the case may be, notice shall be delivered to the Initial
Purchaser in the form attached hereto as Exhibit A.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders; provided, that nothing herein shall be deemed to permit any
assignment, transfer or other disposition of Transfer Restricted Securities in
violation of the terms hereof or of the Purchase Agreement or the Indenture. If
any transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Holder shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Holder shall be entitled to receive the benefits hereof.
23
<PAGE>
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
24
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CHATTEM, INC.
By:
-------------------------------------------
Name: A. Alexander Taylor II
Title: President and Chief Operating Officer
SIGNAL INVESTMENT & MANAGEMENT CO.
By:
--------------------------------------------
Name: A. Alexander Taylor II
Title: President
NATIONSBANC MONTGOMERY SECURITIES LLC
By:
-------------------------
Name:
Title:
25
<PAGE>
EXHIBIT A
NOTICE OF FILING OF REGISTRATION STATEMENT
To: NationsBanc Montgomery Securities LLC
From: Chattem, Inc.
Re: 8 7/8% Senior Subordinated Series A Notes Due 2008
Date: , 199
----------- ---
For your information only (NO ACTION REQUIRED):
Today, , 199 , we filed [an Exchange
------------- --
Registration Statement] [a Shelf Registration Statement] with the Securities and
Exchange Commission. We currently expect this registration statement to be
declared effective by , 199 .
-------------------------- --
26
<PAGE>
Exhibit 10.1
AMENDED AND RESTATED
CREDIT AGREEMENT
(New Credit Agreement)
among
CHATTEM, INC.,
as Borrower,
Domestic Subsidiaries of Borrower,
as Guarantors,
THE LENDERS IDENTIFIED HEREIN,
AND
NATIONSBANK OF TENNESSEE, N.A.,
as Agent
DATED AS OF MARCH 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.........................................................1
1.1 Definitions............................................................................1
1.2 Computation of Time Periods and Other Definitional Provisions.........................23
1.3 Accounting Terms......................................................................24
SECTION 2 CREDIT FACILITIES.......................................................................24
2.1 Revolving Loans.......................................................................24
2.2 Swingline Loan Subfacility............................................................26
2.3 Continuations and Conversions.........................................................28
2.4 Minimum Amounts.......................................................................28
2.5 Notes.................................................................................29
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS..................................................29
3.1 Interest..............................................................................29
3.2 Place and Manner of Payments..........................................................29
3.3 Prepayments...........................................................................30
3.4 Fees..................................................................................32
3.5 Payment in full at Maturity...........................................................32
3.6 Computations of Interest and Fees.....................................................32
3.7 Pro Rata Treatment....................................................................33
3.8 Allocation of Payments After Event of Default.........................................34
3.9 Sharing of Payments...................................................................35
3.10 Capital Adequacy.....................................................................35
3.11 Inability To Determine Interest Rate.................................................36
3.12 Illegality...........................................................................36
3.13 Requirements of Law..................................................................37
3.14 Taxes................................................................................38
3.15 Indemnity............................................................................40
3.16 Replacement of Lenders...............................................................41
SECTION 4 GUARANTY................................................................................41
4.1 Guaranty of Payment...................................................................41
4.2 Obligations Unconditional.............................................................41
4.3 Modifications.........................................................................42
4.4 Waiver of Rights......................................................................43
4.5 Reinstatement.........................................................................43
4.6 Remedies..............................................................................43
4.7 Limitation of Guaranty................................................................44
4.8 Rights of Contribution................................................................44
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5 CONDITIONS PRECEDENT....................................................................45
5.1 Closing Conditions....................................................................45
5.2 Conditions to All Extensions of Credit................................................51
SECTION 6 REPRESENTATIONS AND WARRANTIES..........................................................52
6.1 Financial Condition...................................................................52
6.2 No Material Change....................................................................52
6.3 Organization and Good Standing........................................................52
6.4 Due Authorization.....................................................................53
6.5 No Conflicts..........................................................................53
6.6 Consents..............................................................................53
6.7 Enforceable Obligations...............................................................53
6.8 No Default............................................................................54
6.9 Ownership.............................................................................54
6.10 Indebtedness.........................................................................54
6.11 Litigation...........................................................................54
6.12 Taxes................................................................................54
6.13 Compliance with Law..................................................................54
6.14 ERISA................................................................................55
6.15 Subsidiaries.........................................................................56
6.16 Use of Proceeds; Margin Stock........................................................56
6.17 Government Regulation................................................................56
6.18 Environmental Matters................................................................57
6.19 Intellectual Property................................................................58
6.20 Solvency.............................................................................58
6.21 Investments..........................................................................58
6.22 No Financing of Corporate Takeovers..................................................59
6.23 Location of Collateral...............................................................59
6.24 Disclosure...........................................................................59
6.25 Licenses, etc........................................................................59
6.26 No Burdensome Restrictions...........................................................59
6.27 Brokers' Fees........................................................................59
6.28 Labor Matters........................................................................60
6.29 Collateral Documents.................................................................60
6.30 Related Transactions.................................................................60
6.31 Representations and Warranties Incorporated from Purchase Agreement..................60
6.32 Senior Debt..........................................................................60
SECTION 7 AFFIRMATIVE COVENANTS...................................................................61
7.1 Information Covenants.................................................................61
7.2 Preservation of Existence and Franchises..............................................65
7.3 Books and Records.....................................................................65
7.4 Compliance with Law...................................................................65
7.5 Payment of Taxes and Other Indebtedness...............................................65
7.6 Insurance.............................................................................65
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.7 Maintenance of Property...............................................................66
7.8 Performance of Obligations............................................................67
7.9 Collateral............................................................................67
7.10 Use of Proceeds......................................................................67
7.11 Audits/Inspections...................................................................67
7.12 Financial Covenants..................................................................68
7.13 Additional Credit Parties............................................................69
7.14 Ownership of Subsidiaries............................................................70
7.15 Appraisal Reports....................................................................70
7.16 Year 2000 Compatibility..............................................................70
SECTION 8 NEGATIVE COVENANTS......................................................................70
8.1 Indebtedness..........................................................................70
8.2 Liens.................................................................................71
8.3 Nature of Business....................................................................71
8.4 Consolidation and Merger..............................................................71
8.5 Sale or Lease of Assets...............................................................72
8.6 Advances, Investments and Loans.......................................................72
8.7 Dividends.............................................................................72
8.8 Transactions with Affiliates..........................................................73
8.9 Fiscal Year; Organizational Documents.................................................73
8.10 Prepayments of Indebtedness..........................................................73
8.11 Subordinated Debt....................................................................73
8.12 Limitations..........................................................................74
8.13 Sale Leasebacks......................................................................74
8.14 Negative Pledges.....................................................................74
8.15 Capital Expenditures.................................................................74
8.16 Operating Leases.....................................................................74
8.17 Payment Blockage Notice..............................................................74
SECTION 9 EVENTS OF DEFAULT.......................................................................75
9.1 Events of Default.....................................................................75
9.2 Acceleration; Remedies................................................................78
S0.1ECTION 10 AGENCY PROVISIONS...................................................................79
10.1 Appointment..........................................................................79
10.2 Delegation of Duties.................................................................80
10.3 Exculpatory Provisions...............................................................80
10.4 Reliance on Communications...........................................................80
10.5 Notice of Default....................................................................81
10.6 Non-Reliance on Agent and Other Lenders..............................................81
10.7 Indemnification......................................................................82
10.8 Agent in Its Individual Capacity.....................................................82
10.9 Successor Agent......................................................................82
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 11 MISCELLANEOUS..........................................................................83
11.1 Notices..............................................................................83
11.2 Right of Set-Off.....................................................................83
11.3 Benefit of Agreement.................................................................83
11.4 No Waiver; Remedies Cumulative.......................................................86
11.5 Payment of Expenses; Indemnification.................................................87
11.6 Amendments, Waivers and Consents.....................................................87
11.7 Counterparts.........................................................................88
11.8 Headings.............................................................................89
11.9 Defaulting Lender....................................................................89
11.10 Survival of Indemnification and Representations and Warranties......................89
11.11 Governing Law; Venue................................................................89
11.12 Waiver of Jury Trial................................................................90
11.13 Time................................................................................90
11.14 Severability........................................................................90
11.15 Entirety............................................................................90
11.16 Binding Effect......................................................................90
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1(a) Commitment Percentages
Schedule 1.1(b) Existing Permitted Investments
Schedule 5.1(g) Mortgaged Properties and Leasehold Properties
Schedule 6.10 Indebtedness
Schedule 6.14 ERISA Matters
Schedule 6.15 Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.19 Intellectual Property
Schedule 6.23(a) Real Property Locations
Schedule 6.23(b) Personal Property Locations
Schedule 6.23(c) Chief Executive Offices
Schedule 7.6 Insurance
Schedule 8.2 Liens
Schedule 8.8 Affiliate Transactions
Schedule 11.1 Notices
EXHIBITS
Exhibit 2.1 Form of Notice of Borrowing
Exhibit 2.3 Form of Notice of Continuation/Conversion
Exhibit 2.5(a) Form of Revolving Loan Note
Exhibit 2.5(b) Form of Swingline Note
Exhibit 7.1(d) Form of Officer's Certificate
Exhibit 7.1(f) Form of Borrowing Base Certificate
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
</TABLE>
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
(New Credit Agreement)
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Credit Agreement"),
is entered into as of March 24, 1998 among CHATTEM, INC., a Tennessee
corporation (the "Borrower"), each of the Borrower's Domestic Subsidiaries,
individually a "Guarantor" and collectively the "Guarantors"), the New Credit
Agreement Lenders (as defined herein), and NATIONSBANK OF TENNESSEE, N.A., as
agent for the New Credit Agreement Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower, the Guarantors, the lenders party thereto and
NationsBank of Tennessee, N.A., as agent are currently parties to that certain
Credit Agreement dated as of June 26, 1997 (as amended or modified from time to
time, the "New Credit Agreement"). The New Credit Agreement replaced and
refinanced the credit facilities provided by the lenders pursuant to that
certain Credit Agreement dated as of April 26, 1996 (as amended or modified from
time to time, the "Prior New Credit Agreement"). The credit facilities provided
pursuant to the Prior New Credit Agreement replaced and refinanced the credit
facilities provided to the Borrower by The First National Bank of Chicago, as
agent and certain other lenders under the credit agreements dated as of June 17,
1994;
WHEREAS, the Borrower and the Guarantors have requested that the New
Credit Agreement Lenders provide an amended and restated $45,000,000 credit
facility to replace and refinance the credit facilities provided pursuant to the
Prior New Credit Agreement, making this Credit Agreement the New Credit
Agreement under the Indenture (as hereinafter defined); and
WHEREAS, the New Credit Agreement Lenders have agreed to make the
requested credit facility available to the Borrower on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
<PAGE>
"Acquired Assets" means, collectively, those assets acquired
under and pursuant to the Purchase Agreement.
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date, as provided in Section 7.13.
"Additional Subordinated Debt" means the Indebtedness
evidenced by the Second Indenture or by the guarantees thereof in an
aggregate amount not to exceed $200,000,000.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Agent" means NationsBank of Tennessee, N.A. or any
successor administrative agent appointed pursuant to Section 10.9.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to
all directors and executive officers of such Person), controlled by or
under direct or indirect common control with such Person. A Person
shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the
securities having ordinary voting power for the election of directors
of such corporation or (ii) to direct or cause direction of the
management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Agency Services Address" means NationsBank of Tennessee,
N.A., NC1-001-15-04, 101 South Tryon Street, Charlotte, North Carolina
28255, Attn: Agency Services, or such other address as may be
identified by written notice from the Agent to the Borrower.
"Applicable Percentage" means for Revolving Loans, the
appropriate applicable percentages corresponding to the Leverage Ratio
in effect as of the most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
Applicable Percentage For Applicable Percentage
Pricing Leverage Eurodollar For Base Rate
Level Ratio Loans Loans
-------- ---------------- -------------------------- -----------------------
<S> <C> <C> <C>
I < 4.0 to 1.0 2.25% 1.25%
II > 4.0 to 1.0 2.50% 1.50%
-
but < 4.5 to 1.0
III > 4.5 to 1.0 but 2.75% 1.75%
-
< 5.0 to 1.0
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
IV > 5.0 to 1.0 3.00% 2.00%
</TABLE>
The Applicable Percentage for Revolving Loans shall, in each
case, be determined and adjusted quarterly on the date (each a
"Calculation Date") five Business Days after the date by which the
Borrower is required to provide the officer's certificate in accordance
with the provisions of Section 7.1(e); provided, however that (i) the
initial Applicable Percentage for Revolving Loans shall be based on
Pricing Level II (as shown above) and shall remain at Pricing Level II
until the first Calculation Date subsequent to the Closing Date and,
thereafter, the Pricing Level shall be determined by the then current
Leverage Ratio, and (ii) if the Borrower fails to provide the officer's
certificate required by Section 7.1(e) on or before the most recent
Calculation Date or fails to deliver a copy of such officer's
certificate to the Agency Services Address as required by Section
7.1(e), the Applicable Percentage for Revolving Loans from such
Calculation Date shall be based on Pricing Level IV until such time
that an appropriate officer's certificate is provided whereupon the
Pricing Level shall be determined by the then current Leverage Ratio.
Each Applicable Percentage shall be effective from one Calculation Date
until the next Calculation Date. Any adjustment in the Applicable
Percentage shall be applicable to all existing Loans as well as any new
Loans made or issued.
"Asset Disposition" means the disposition of any or all of the
assets of the Borrower, or any of its Subsidiaries, whether by sale,
lease, transfer or otherwise unless such disposition is permitted by
the terms of Section 8.5(a), (b) or (c) hereof.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any successors and permitted assigns.
3
<PAGE>
"Borrowing Base" means, as of any day, the sum, calculated in
Dollars, of (a) 80% of Eligible Receivables plus (b) 50% of Eligible
Inventory in each case as set forth in the most recent Borrowing Base
Certificate delivered to the Agent and the Lenders in accordance with
the terms of Section 7.1(g) plus (c) $3 million during the period of
December 1 to May 31 of each year.
"Borrowing Base Certificate" means a Borrowing Base
Certificate substantially in the form of Exhibit 7.1(g).
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized
or required by law or other governmental action to close in Charlotte,
North Carolina; provided that in the case of Eurodollar Loans, such day
is also a day on which dealings between banks are carried on in U.S.
dollar deposits in the London interbank market.
"Calculation Date" has the meaning set forth in the definition
of Applicable Percentage.
"Capital Expenditures" means all expenditures of the Credit
Parties and their Subsidiaries which, in accordance with GAAP, would be
classified as capital expenditures, including, without limitation,
Capital Leases.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated (or with respect to Foreign
Subsidiaries, U.S. dollar denominated and non U.S. dollar denominated)
time deposits and certificates of deposit of (i) any Lender or SunTrust
Bank, Chattanooga, N.A., (ii) any domestic (or with respect to Foreign
Subsidiaries, any domestic or nondomestic) commercial bank of
recognized standing having capital and surplus in excess of
4
<PAGE>
$500,000,000 or (iii) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is
at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than 270
days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Bank (or by the parent company
thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within six months of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including any of the Lenders
or SunTrust Bank, Chattanooga, N.A.) or recognized securities dealer
having capital and surplus in excess of $500,000,000 for direct
obligations issued by or fully guaranteed by the United States of
America in which the Borrower shall have a perfected first priority
security interest (subject to no other Liens) and having, on the date
of purchase thereof, a fair market value of at least 100% of the amount
of the repurchase obligations and (e) Investments, classified in
accordance with GAAP as current assets, in money market investment
programs registered under the Investment Company Act of 1940, as
amended, which are administered by SunTrust Bank, Chattanooga, N.A. or
reputable financial institutions having capital of at least
$500,000,000 and the portfolios of which are limited to Investments of
the character described in the foregoing subdivisions (a) through (d).
"Change of Control" means any of the following events: either
(i) a "person" or a "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of more than 35% of the then outstanding voting
stock of the Borrower or (ii) a majority of the Board of Directors of
the Borrower shall consist of individuals who are not Continuing
Directors; "Continuing Director" means, as of any date of
determination, (A) an individual who on the date two years prior to
such determination date was a member of the Borrower's Board of
Directors or (B) any new Director whose nomination for election by the
Borrower's shareholders was approved by a vote of at least 75% of the
Directors then still in office who either were Directors on the date
two years prior to such determination date or whose nomination for
election was previously so approved.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended,
modified, succeeded or replaced from time to time.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Documents" means the Security Agreements, the
Pledge Agreement, the Mortgage Documents and such other documents
executed and delivered in connection with the attachment and perfection
of the Lenders' security interests in the assets of the Credit Parties,
including, without limitation, UCC financing statements and patent and
trademark filings.
"Commitment Fees" means the fees payable to the New Credit
Agreement Lenders pursuant to Section 3.4(a).
"Commitments" means the Revolving Committed Amount and the
Swingline Committed Amount.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement, the Collateral Documents, the Fee Letter and all
other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
5
<PAGE>
"Credit Parties" means the Borrower and the Guarantors and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the New Credit Agreement
Lenders and the Agent, whenever arising, under this Credit Agreement,
the Notes, the Collateral Documents or any of the other Credit
Documents to which the Borrower or any other Credit Party is a party
(including, but not limited to, any interest accruing after the
occurrence of a Bankruptcy Event with respect to any Credit Party,
regardless of whether such interest is an allowed claim under the
Bankruptcy Code) and (b) all liabilities and obligations owing from a
Credit Party to any New Credit Agreement Lender, or any Affiliate of a
New Credit Agreement Lender, arising under interest rate protection
agreements, foreign currency exchange agreements, commodity purchase or
option agreements or other interest or exchange rate or commodity price
hedging agreements (collectively, the "Hedging Agreements").
"Debt Issuance" means the issuance of any Indebtedness by a
Credit Party or any of its Subsidiaries, other than Indebtedness
permitted by Section 8.1.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time (a) has failed to make a Loan, Tranche A Term Loan or Tranche
B Term Loan or purchase a Participation Interest required pursuant to
the terms of this Credit Agreement or Supplemental Credit Agreement,
(b) has failed to pay to the Agent or any Lender an amount owed by such
Lender pursuant to the terms of this Credit Agreement or Supplemental
Credit Agreement or (c) has been deemed insolvent or has become subject
to a bankruptcy or insolvency proceeding or to a receiver, trustee or
similar official.
"Domestic Subsidiaries" means all Subsidiaries of the Borrower
that are domiciled, incorporated or organized under the laws of any
state of the United States or the District of Columbia.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"EBIT" means, for any period, with respect to the Borrower and
its Subsidiaries on a consolidated basis, the sum of (a) Net Income for
such period (excluding the effect of any extraordinary or other
non-recurring gains or losses outside of the ordinary course of
business) plus (b) an amount which, in the determination of Net Income
for such period has been deducted for (i) Interest Expense for such
period and (ii) total Federal, state, foreign or other income taxes for
such period, all as determined in accordance with GAAP.
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"EBITDA" means, for any period, with respect to the Borrower
and its Subsidiaries on a consolidated basis, the sum of (a) Net Income
for such period (excluding the effect of any extraordinary or other
non-recurring gains or losses outside of the ordinary course of
business) plus (b) an amount which, in the determination of Net Income
for such period has been deducted for (i) Interest Expense for such
period, (ii) total Federal, state, foreign or other income taxes for
such period and (iii) all depreciation, amortization and other non-cash
charges for such period, all as determined in accordance with GAAP.
"Effective Date" means the date on which the conditions set
forth in Section 5.1 shall have been fulfilled (or waived in the sole
discretion of the Lenders) and on which the initial Loans shall have
been made.
"Eligible Assignee" means (a) any Lender or Affiliate or
subsidiary of a Lender and (b) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D of the
Securities and Exchange Commission) reasonably acceptable to the Agent
and the Borrower.
"Eligible Inventory" means, as of any date of determination
and without duplication, the lower of (a) the aggregate book value
(based on a FIFO or a moving average cost valuation, consistently
applied) or (b) fair market value of all raw materials and finished
goods inventory owned by the Borrower, in either case, less appropriate
reserves determined in accordance with GAAP, but excluding in any event
(i) inventory subject to any Lien, other than Liens securing Credit
Party Obligations, (ii) inventory which is not in good condition or
fails to meet standards for sale or use imposed by governmental
agencies, departments or divisions having regulatory authority over
such goods, (iii) inventory which is not useable or saleable at prices
approximating their cost in the ordinary course of the Borrower's
business (including without duplication the amount of any reserves for
obsolescence, unsalability or decline in value), (iv) inventory located
outside of the United States, (v) inventory located at a location not
owned or leased by the Borrower, (vi) inventory located at a location
leased by the Borrower or in a public warehouse facility with respect
to which the Agent shall not have received a landlord, bailee and/or
warehousemen's access and lien waiver satisfactory to the Agent, (vii)
inventory which is leased or on consignment, (viii) inventory
consisting of packaging materials and supplies, (ix) inventory which
consists of goods in transit, (x) inventory with respect to which the
Agent does not have a valid and perfected first-priority security
interest and (xi) inventory which fails to meet such other
specifications and requirements as may from time to time be established
by the Agent in its reasonable discretion.
"Eligible Receivables" means, at any time, the aggregate book
value of all accounts receivable, receivables, and obligations for
payment created or arising from the sale of inventory or the rendering
of services in the ordinary course of business (collectively, the
"Receivables"), owned by or owing to the Borrower, net of allowances
and reserves for doubtful or uncollectible accounts and sales
adjustments consistent with the Borrower's internal policies and in any
event in accordance with GAAP, but
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excluding in any event (i) Receivables subject to any Lien, other than
Liens securing Credit Party Obligations, (ii) Receivables which are
more than 60 days past due (net of reserves for bad debts in connection
with any such Receivables), (iii) Receivables not otherwise excluded by
clause (ii) above but owing from an account debtor having twenty
percent (20%) of the balance owing by such account debtor to the
Borrower (calculated without taking into account any credit balances of
such account debtor) more than sixty (60) days past due, (iv)
Receivables evidenced by notes, chattel paper or other instruments,
unless such notes, chattel paper or instruments have been delivered to
and are in the possession of the Agent, (v) Receivables owing by an
account debtor which is not solvent or is subject to any bankruptcy or
insolvency proceeding of any kind, (vi) Receivables owing by an account
debtor located outside of the United States (unless payment for the
goods shipped is secured by an irrevocable letter of credit in a form
and from an institution acceptable to the Agent), (vii) Receivables
which are contingent or subject to offset, deduction, counterclaim,
dispute or other defense to payment, in each case to the extent of such
offset, deduction, counterclaim, dispute or other defense, (viii)
Receivables for which any direct or indirect Subsidiary of the Borrower
or any Affiliate of the Borrower is the account debtor, (ix)
Receivables representing a sale to the government of the United States
of America or any subdivision thereof unless the Borrower has complied
(to the satisfaction of the Agent), with respect to the granting of a
security interest in such Receivable, with the Federal Assignment of
Claims Act or other similar applicable law, (x) Receivables from any
single account debtor and its Affiliates which otherwise constitute
Eligible Receivables comprising more than twenty five percent (25%) of
all Eligible Receivables, but only to the extent in excess of such
twenty-five percent (25%) and (xi) Receivables which fail to meet such
other specifications and requirements as may from time to time be
established by the Agent in its reasonable discretion.
"Environmental Claim" means any investigation, written notice,
violation, written demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an
actual or alleged violation of, any Environmental Law, (b) in
connection with any Hazardous Material, (c) from any assessment,
abatement, removal, remedial, corrective, or other response action in
connection with an Environmental Law or other order of a Governmental
Authority or (d) from any actual or alleged damage, injury, threat, or
harm to health, safety, natural resources, or the environment.
"Environmental Laws" means any current or future legal
requirement of any Governmental Authority pertaining to (a) the
protection of health, safety, and the indoor or outdoor environment,
(b) the conservation, management, or use of natural resources and
wildlife, (c) the protection or use of surface water and groundwater,
(d) the management, manufacture, possession, presence, use, generation,
transportation, treatment, storage, disposal, release, threatened
release, abatement, removal, remediation or handling of, or exposure
to, any hazardous or toxic substance or material or (e) pollution
(including any release to air, land, surface water, and groundwater),
and includes, without limitation, the Comprehensive Environmental
Response, Compensation,
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and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendment of 1984, 42 USC 6901 et seq.,
Federal Water Pollution Control Act, as amended by the Clean Water Act
of 1977, 33 USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC
7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et
seq., Hazardous Materials Transportation Act, 49 USC App. 1801 et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 USC 651 et
seq., Oil Pollution Act of 1990, 33 USC 2701 et seq., Emergency
Planning and Community Right-to-Know Act of 1986, 42 USC 11001 et seq.,
National Environmental Policy Act of 1969, 42 USC 4321 et seq., Safe
Drinking Water Act of 1974, as amended, 42 USC 300(f) et seq., any
analogous implementing or successor law, and any amendment, rule,
regulation, order, or directive issued thereunder.
"Equity Issuance" means any issuance by the Borrower to any
Person of (a) shares of its capital stock or other equity interests,
(b) any shares of its capital stock or other equity interests pursuant
to the exercise of options (other than stock issued to employees and
directors pursuant to employees or directors stock option plans) or
warrants or (c) any shares of its capital stock or other equity
interests pursuant to the conversion of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
form time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity, whether or not
incorporated, which is under common control with any Credit Party or
any of its Subsidiaries within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes any Credit Party or any
of its Subsidiaries and which is treated as a single employer under
Sections 414(b), (c), (m), or (o) of the Code.
"Eurodollar Loan" means any Loan, Tranche A Term Loan or
Tranche B Term Loan bearing interest based at a rate determined by
reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
London Interbank Offered Rate
Eurodollar Rate = ---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
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<PAGE>
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" has the meaning specified in Section 9.1.
"Excess Cash Flow" means, with respect to any fiscal year
period of the Borrower and its Subsidiaries, on a consolidated basis,
an amount equal to (a) EBITDA for such period minus (b) Capital
Expenditures for such period minus (c) cash Interest Expense for such
period minus (d) Federal, state and other income taxes actually paid
during such period minus (e) Principal Amortization Payments made
during such period minus (f) voluntary prepayments made with respect to
the Tranche A Term Loans or Tranche B Term Loans during such period
minus (g) increases in Working Capital for such period plus (h)
decreases in Working Capital for such period, minus (i) any cash gain
from an Asset Disposition (to the extent included in EBITDA and paid to
the Lenders as a mandatory prepayment pursuant to Section 3.3(b)(iii)
hereof and Section 3.3(b)(iii) of the Supplemental Credit Agreement).
"Extension of Credit" means, as to any Lender, the making of a
Loan by such Lender (or a participation therein by a Lender).
"Federal Funds Rate" means for any day the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to
the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding
Business Day and (b) if no such rate is so published on such next
preceding Business Day, the Federal Funds Rate for such day shall be
the average rate quoted to the Agent on such day on such transactions
as determined by the Agent.
"Fee Letter" means that certain letter agreement, dated as of
February 24, 1998, between the Agent and the Borrower, as amended,
modified, supplemented or replaced from time to time.
"Fixed Charge Coverage Ratio" means, as of the end of each
fiscal quarter of the Borrower, for the twelve month period ending on
such date, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) EBITDA for the applicable
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period minus Capital Expenditures for the applicable period minus
Federal, State and other income taxes paid in cash for the applicable
period to (b) the sum of (i) cash Interest Expense for the applicable
period plus (ii) Scheduled Funded Debt Payments for the applicable
period.
"Foreign Subsidiaries" means all Subsidiaries of the
Borrower that are not Domestic Subsidiaries.
"Funded Debt" means, without duplication, the sum of (a) all
Indebtedness of the Borrower and its Subsidiaries for borrowed money,
(b) all purchase money Indebtedness of the Borrower and its
Subsidiaries, (c) the principal portion of all obligations of the
Borrower and its Subsidiaries under Capital Leases, (d) commercial
letters of credit and the maximum amount of all performance and standby
letters of credit issued or bankers' acceptance facilities created for
the account of the Borrower or any of its Subsidiaries, including,
without duplication, all unreimbursed draws thereunder, (e) all
Guaranty Obligations of the Borrower and its Subsidiaries with respect
to Funded Debt of another person, (f) all Funded Debt of another entity
secured by a Lien on any property of the Borrower or any of its
Subsidiaries whether or not such Funded Debt has been assumed by a
Borrower or any of its Subsidiaries, (g) all Funded Debt of any
partnership or unincorporated joint venture to the extent the Borrower
or one of its Subsidiaries is legally obligated or has a reasonable
expectation of being liable with respect thereto, net of any assets of
such partnership or joint venture and (h) the principal balance
outstanding under any synthetic lease, tax retention operating lease,
off-balance sheet loan or similar off-balance sheet financing product
pursuant to which a Borrower or any of its Subsidiaries is the obligor
where such transaction is considered borrowed money indebtedness for
tax purposes but is classified as an operating lease in accordance with
GAAP.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3.
"Governmental Authority" means any Federal, state, local,
provincial or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantor" means each of the Domestic Subsidiaries of the
Borrower and each Additional Credit Party which has executed a Joinder
Agreement, together with their successors and assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness,
leases, dividends or other obligations of any other Person in any
manner, whether direct or indirect, and including without limitation
any obligation, whether or not contingent, (a) to purchase any such
Indebtedness or other obligation or any property constituting security
therefor, (b) to advance or provide funds or other support for the
payment or purchase of such indebtedness or obligation or to maintain
working capital,
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solvency or other balance sheet condition of such other Person
(including, without limitation, maintenance agreements, comfort
letters, take or pay arrangements, put agreements or similar agreements
or arrangements) for the benefit of the holder of Indebtedness of such
other Person, (c) to lease or purchase property, securities or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation, or (d) to otherwise assure or hold harmless the owner of
such Indebtedness or obligation against loss in respect thereof. The
amount of any Guaranty Obligation hereunder shall (subject to any
limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger)
of the Indebtedness in respect of which such Guaranty Obligation is
made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedging Agreements" has the meaning set forth in the
definition of Credit Party Obligations.
"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c)
all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person to
the extent of the value of such property (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) all obligations,
including without limitation, intercompany items, of such Person issued
or assumed as the deferred purchase price of property or services
purchased by such Person which would appear as liabilities on a balance
sheet of such Person, (e) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed, (f)
all Guaranty Obligations of such Person, (g) the principal portion of
all obligations of such Person under (i) Capital Leases and (ii) any
synthetic lease, tax retention operating lease, off-balance sheet loan
or similar off-balance sheet financing product of such Person where
such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an operating lease in accordance with
GAAP (collectively, "TROLS"), (h) all obligations of such Person in
respect of interest rate protection agreements, foreign currency
exchange agreements, or other interest or exchange rate or commodity
price hedging agreements, (i) the maximum amount of all performance and
standby letters of credit issued or bankers' acceptances facilities
created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (j) all preferred
stock issued by such Person and required by the terms thereof to be
redeemed, or for which mandatory sinking fund payments are due, by a
fixed date and (k) the aggregate amount of uncollected accounts
receivable of such Person subject at such time to a sale of receivables
(or similar transaction) regardless of whether such transaction is
effected without recourse to such Person or in a manner that would not
be reflected on the balance sheet of such Person in
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accordance with GAAP. The Indebtedness of any Person shall include the
Indebtedness of any partnership or unincorporated joint venture in
which such Person is legally obligated or has a reasonable expectation
of being liable with respect thereto.
"Indenture" means that certain Indenture dated as of August 3,
1994 among the Borrower as issuer, Signal Investment & Management Co.
as guarantor and SouthTrust Bank of Alabama, National Association, as
trustee, as the same may be modified, supplemented or amended from time
to time.
"Interest Coverage Ratio" means, as of the end of each fiscal
quarter of the Borrower, for the twelve month period ending on such
date, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) EBIT for the applicable period to
(b) cash Interest Expense for the applicable period.
"Interest Expense" means, for any period, with respect to the
Borrower and its Subsidiaries on a consolidated basis, all interest
expense, including the interest component under Capital Leases, as
determined in accordance with GAAP.
"Interest Payment Date" means (a) as to Base Rate Loans other
than Swingline Loans, the last Business Day of each fiscal quarter of
the Borrower and on the Revolving Loan Maturity Date and (b) as to
Eurodollar Loans or any Swingline Loan, on the last day of each
applicable Interest Period and on the Revolving Loan Maturity Date.
"Interest Period" means, (i) as to Eurodollar Loans, a period
of one, two or three months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof) and (ii) as to any Swingline
Loan, a period commencing in each case on the date of the borrowing and
ending on the date agreed to by the Borrower and the Swingline Lender
in accordance with the provision of Section 2.3(b)(i) (such ending date
in any event to be not more than seven (7) Business Days from the date
of borrowing); provided, however, (a) if any Interest Period would end
on a day which is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day (except that where the
next succeeding Business Day falls in the next succeeding calendar
month, then on the next preceding Business Day), (b) no Interest Period
shall extend beyond the Revolving Loan Maturity Date and (c) where an
Interest Period begins on a day for which there is no numerically
corresponding day in the calendar month in which the Interest Period is
to end, such Interest Period shall end on the last Business Day of such
calendar month.
"Investment" means (a) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or
otherwise) of assets, shares of capital stock, bonds, notes,
debentures, partnership, joint venture or other ownership interests or
other securities of any Person or (b) any deposit with, or advance,
loan or other extension of credit to, any Person (other than deposits
made in connection with the purchase of equipment or other assets in
the ordinary course of business) or (c) any other capital contribution
to or investment in such Person, including, without limitation, any
Guaranty Obligation incurred for the benefit of such person.
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"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.13.
"Leasehold Properties" has the meaning set forth in Section
5.1(h).
"Lender" means collectively, the Supplemental Credit
Lenders and the New Credit Agreement Lenders.
"Leverage Ratio" means, as of the end of each fiscal quarter
of the Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) Funded Debt on such date to (b)
EBITDA for the twelve month period ending on such date.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including,
without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or
similar statement or notice filed under the Uniform Commercial Code as
adopted and in effect in the relevant jurisdiction or other similar
recording or notice statute, and any lease in the nature thereof).
"Loan" or "Loans" means the Revolving Loans and/or the
Swingline Loans (or a portion of any Revolving Loan), individually or
collectively, as appropriate.
"London Interbank Offered Rate" means, with respect to any
Eurodollar Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) appearing on Telerate Page 3750 (or any successor page) as the
London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period;
provided, however, if more than one rate is specified on Telerate Page
3750, the applicable rate shall be the arithmetic mean of all such
rates. If, for any reason, such rate is not available, the term "London
Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan
for the Interest Period applicable thereto, the rate of interest per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London interbank offered
rate for deposits in Dollars at approximately 11:00 A.M. (London time)
two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, however, if more
than one rate is specified on Reuters Screen LIBO Page, the applicable
rate shall be the arithmetic mean of all such rates.
"Material Adverse Effect" means a material adverse effect,
after taking into account applicable insurance (to the extent the
provider thereof has the financial ability to support its obligations
with respect thereto and is not disputing same), on (a) the operations,
financial condition, business or prospects of the Borrower and its
Subsidiaries taken as a whole, (b)
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the ability of a Credit Party to perform its respective obligations
under this Credit Agreement, or any of the other Credit Documents, the
Supplemental Credit Agreement or any of the other Supplemental Credit
Documents or (c) the validity or enforceability of this Credit
Agreement, or any of the other Credit Documents, the Supplemental
Credit Agreement or any of the other Supplemental Credit Documents, or
the rights and remedies of the Lenders hereunder or thereunder taken as
a whole.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Mortgage Documents" means the Mortgages, the Mortgage
Policies and such other documents and agreements executed or delivered
in connection with the Real Properties.
"Mortgage Policies" has the meaning set forth in Section
5.1(g).
"Mortgages" has the meaning set forth in Section 5.1(g).
"Mortgaged Properties" has the meaning set forth in Section
5.1(g).
"Multiemployer Plan" means a Plan covered by Title IV of ERISA
which is a multiemployer plan as defined in Sections 3(37) or
4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan covered by Title IV of
ERISA, other than a Multiemployer Plan, which any Credit Party or any
of its Subsidiaries or any ERISA Affiliate and at least one employer
other than a Credit Party or any of its Subsidiaries or any ERISA
Affiliate are contributing sponsors.
"NationsBank" means NationsBank of Tennessee, N.A. and its
successors.
"Net Cash Proceeds" means the gross cash proceeds (including
cash actually received by way of deferred payment pursuant to a
promissory note, receivable, or otherwise) received from an Asset
Disposition, an Equity Issuance, a Debt Issuance or Recovery Event net
of (a) transaction costs payable to third parties or (b) a good faith
estimate of the taxes payable with respect to such proceeds (including,
without duplication, withholding taxes).
"Net Income" means, for any period, the net income after taxes
for such period of the Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP.
"Net Worth" means, as of any date, shareholders' equity or net
worth of the Borrower and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP.
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"New Credit Agreement Lender" means any of the Persons
identified as a "New Credit Agreement Lender" on the signature pages
hereto, and any Person which may become a Lender by way of assignment
in accordance with the terms hereof, together with their successors and
permitted assigns.
"Non-Excluded Taxes" has the meaning set forth in Section
3.14.
"Note" or "Notes" means the Revolving Loan Notes and/or the
Swingline Note, individually or collectively, as appropriate.
"Notice of Borrowing" means a request by the Borrower for a
Revolving Loan, in the form of Exhibit 2.1.
"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest
Period or to convert a Eurodollar Loan to a Base Rate Loan or a Base
Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.5.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Participation Interest" means the Extension of Credit by a
Lender by way of the issuance of or a purchase of a participation in
Swingline Loans as provided in Section 2.2, or in any Loans as provided
in Section 3.9.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
"Permitted Acquisition" means the acquisition of all of the
capital stock of another Person, all or substantially all of the assets
of another Person or a brand or product line of another Person,
provided that each of the following conditions are satisfied: (v) prior
to such acquisition, the Borrower shall deliver to the Agent and
Lenders evidence reasonably satisfactory to the Agent and Required
Lenders demonstrating that after giving effect to such acquisition on a
pro forma basis, as if such acquisition had occurred on the first day
of the twelve month period ending on the last day of the Borrower's
most recently completed fiscal quarter, the Credit Parties and their
Subsidiaries would have been in compliance with all the financial
covenants set forth in Section 7.12, (w) simultaneously with any such
acquisition, the Borrower shall have taken all action required under
applicable law, or reasonably requested by the Agent, to grant to the
Agent, for the benefit of the Lenders, a valid and perfected
first-priority security interest in all the assets acquired pursuant to
such acquisition, (x) the acquisition is consummated pursuant to a
negotiated acquisition agreement and involves the purchase of a
consumer product or product line similar to those manufactured,
distributed or sold by the Borrower as of the date hereof, or of a
business that manufactures, distributes or
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sells one or more consumer products or product lines, similar to those
manufactured, distributed or sold by the Borrower as of the date
hereof, (y) after giving effect to the acquisition, the representations
and warranties set forth in Section 6 hereof shall be true and correct
in all material respects on and as of the date of such acquisition with
the same effect as though made on and as of such date, and (z) no
Default or Event of Default exists and is continuing or would result
from such acquisition.
"Permitted Investments" means Investments which are (a) cash
or Cash Equivalents, (b) accounts receivable created, acquired or made
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms, (c) Investments in a Domestic
Subsidiary of a Credit Party, (d) loans to directors, officers,
employees, agents, customers or suppliers in the ordinary course of
business for reasonable business expenses, not to exceed in the
aggregate $500,000.00 at any one time, (e) Investments subsequent to
the Closing Date in (i) Chattem (Canada) Inc. not to exceed $500,000.00
in the aggregate, (ii) Chattem (U.K.) Limited not to exceed $500,000.00
in the aggregate, and (iii) HBA Insurance, Ltd. not to exceed
$500,000.00 in the aggregate, (f) Investments in Permitted
Acquisitions, including any contingency payments associated therewith,
not to exceed $5,000,000 in the aggregate during the term of this
Credit Agreement, (g) the purchase, redemption, acquisition or
retirement by the Borrower of any shares of its capital stock of any
class or any warrants or options to purchase any such shares in an
amount not to exceed $2,000,000 in the aggregate and (h) all those
existing Investments of the Borrower identified on Schedule 1.1(b)
attached hereto.
"Permitted Liens" means (a) Liens securing Credit Party
Obligations, (b) Liens for taxes not yet due or Liens for taxes being
contested in good faith by appropriate proceedings for which adequate
reserves determined in accordance with GAAP have been established (and
as to which the property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof), (c) Liens in respect of
property imposed by law arising in the ordinary course of business such
as materialmen's, mechanics', warehousemen's, carrier's, landlords' and
other nonconsensual statutory Liens which are not due and payable or,
if due and payable, are being contested in good faith by appropriate
proceedings for which adequate reserves determined in accordance with
GAAP have been established (and as to which the property subject to any
such Lien is not yet subject to foreclosure, sale or loss on account
thereof), (d) pledges or deposits made in the ordinary course of
business to secure payment of worker's compensation insurance,
unemployment insurance, pensions or social security programs, (e) Liens
arising from good faith deposits in connection with or to secure
performance of tenders, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations incurred in the
ordinary course of business (other than obligations in respect of the
payment of borrowed money), (f) Liens arising from good faith deposits
in connection with or to secure performance of statutory obligations
and surety and appeal bonds, (g) easements, rights-of-way, restrictions
(including zoning restrictions), minor defects or irregularities in
title and other similar charges or encumbrances not, in any material
respect, impairing the use of the encumbered property for its intended
purposes, (h) judgment Liens that would not constitute an Event of
Default, (i) Liens in connection
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with Indebtedness allowed under Section 8.1(c), (j) Liens arising by
virtue of any statutory or common law provision relating to banker's
liens, rights of setoff or similar rights as to deposit accounts or
other funds maintained with a creditor depository institution and (k)
Liens existing on the date hereof and identified on Schedule 8.2;
provided that no such Lien shall extend to any property other than the
property subject thereto on the Closing Date.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated), or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or,
if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
of ERISA.
"Pledge Agreement" means the Amended and Restated Pledge
Agreement, executed and delivered by each of the applicable Credit
Parties in favor of the Agent, for the benefit of the Lenders, to
secure their obligations under the Credit Documents, as amended,
modified, extended, renewed or replaced from time to time.
"Prime Rate" means the per annum rate of interest established
from time to time by the Agent as its Prime Rate. Any change in the
interest rate resulting from a change in the Prime Rate shall become
effective as of 12:01 a.m. of the Business Day on which each change in
the Prime Rate is announced by the Agent. The Prime Rate is a reference
rate used by the Agent in determining interest rates on certain loans
and is not intended to be the lowest rate of interest charged on any
extension of credit to any debtor.
"Principal Amortization Payment" means a principal payment on
the Tranche A Term Loan as set forth in Section 2.1(c) of the
Supplemental Credit Agreement.
"Purchase Agreement" means that certain Asset Purchase
Agreement, as amended and modified from time to time, by and among
Bristol-Myers Squibb Company, as the seller, and Signal and the
Borrower, as the purchasers, dated as of February 22, 1998.
"Recovery Event" means the receipt by the Borrower or any of
its Subsidiaries of any cash insurance proceeds, condemnation award
payable or indemnification payments from other third parties by reasons
of theft, loss, physical destruction or damage, taking or similar event
with respect to any of their respective property or assets.
"Regulation D, G, U, or X" means Regulation D, G, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
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"Reportable Event" means a "reportable event" as defined in
Section 4043 of ERISA with respect to which the notice requirements to
the PBGC have not been waived.
"Required Lenders" means Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes at least 67% of the
Credit Exposure of all Lenders at such time; provided, however, that if
any Lender shall be a Defaulting Lender at such time then there shall
be excluded from the determination of Required Lenders the aggregate
principal amount of Credit Exposure of such Lender at such time. For
purposes of the preceding sentence, the term "Credit Exposure" as
applied to each Lender shall mean (a) at any time prior to the
termination of the Commitments, the sum of (i) the Revolving Loan
Commitment Percentage of such Lender multiplied by the Revolving
Committed Amount plus (ii) the Tranche A Term Loan Commitment
Percentage of such Lender multiplied by the aggregate principal amount
of Tranche A Term Loans outstanding at such time plus (iii) the Tranche
B Term Loan Commitment Percentage of such Lender multiplied by the
aggregate principal amount of Tranche B Term Loans outstanding at such
time and (b) at any time after the termination of the Commitments, the
sum of (i) the principal balance of the outstanding Loans of such
Lender plus (ii) the principal balance of the outstanding Tranche A
Term Loans of such Lender plus (iii) the principal balance of
outstanding Tranche B Term Loans of such Lender.
"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
"Revolving Loan Commitment Percentage" means, for each New
Credit Agreement Lender, the percentage identified as its Revolving
Loan Commitment Percentage on Schedule 1.1(a), as such percentage may
be modified in connection with any assignment made in accordance with
the provisions of Section 11.3.
"Revolving Committed Amount" means THIRTY MILLION DOLLARS
($30,000,000) or such lesser amount as the Revolving Committed Amount
may be reduced pursuant to Section 2.1(d) or Section 3.3.
"Revolving Loans" means the Revolving Loans made to the
Borrower pursuant to Section 2.1.
"Revolving Note" or "Revolving Notes" means the promissory
notes of the Borrower in favor of each of the New Credit Agreement
Lenders evidencing the Revolving Loans provided pursuant to Section
2.1, individually or collectively, as appropriate, as such promissory
notes may be amended, modified, supplemented, extended, renewed or
replaced from time to time and as evidenced in the form of Exhibit
2.5(a).
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"Revolving Loan Maturity Date" means the earlier of (i) June
26, 2002 and (ii) the date on which the Tranche A Term Loans are repaid
in full.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Scheduled Funded Debt Payments" means, as of the date of
determination, for the Borrower and its Subsidiaries, on a consolidated
basis, the sum of all scheduled payments of principal on Funded Debt
for the applicable period ending on the date of determination
(including the principal component of payments due on Capital Leases
during the applicable period ending on the date of determination); it
being understood that Scheduled Funded Debt Payments shall not include
voluntary prepayments or the mandatory prepayments required pursuant to
Section 3.3.
"Second Indenture" means that certain Indenture dated as of
the Closing Date among the Borrower, Signal and SouthTrust Bank of
Alabama, National Association, as the same may be amended, modified,
restated or supplemented from time to time.
"Security Agreements" means the Amended and Restated Security
Agreements, including without limitation, a separate Security Agreement
for aircraft as amended or modified from time to time, executed and
delivered by each of the Credit Parties in favor of the Agent for the
benefit of the Lenders to secure their obligations under the Credit
Documents, as such may be amended, modified, extended, renewed,
restated or replaced from time to time.
"Senior Leverage Ratio" means as of the end of each fiscal
quarter of the Borrower, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the ratio of (a) Funded Debt
minus Subordinated Debt minus Additional Subordinated Debt on such date
to (b) EBITDA for the twelve month period ending on such date.
"Signal" means Signal Investment & Management Co., a Delaware
corporation, which is a wholly-owned subsidiary of the Borrower.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Solvent" means, with respect to any Person as of a particular
date, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (b) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged
or is to engage, (d) the fair value of the assets of such
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Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person and (e) the
present fair saleable value of the assets of such Person is not less
than the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured. In
computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount which, in
light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an
actual or matured liability.
"Subordinated Debt" means the Indebtedness evidenced by the
Indenture or by the guarantees thereof in an aggregate amount not to
exceed $75,000,000.
"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
person directly or indirectly through Subsidiaries has more than a 50%
equity interest at any time.
"Supplemental Credit Agreement" means that certain
Supplemental Credit Agreement dated as of the date hereof, among the
Borrower, the Guarantors, NationsBank of Tennessee, N.A., as agent, and
certain other lenders named therein, as amended, modified, supplemented
or renewed from time to time.
"Supplemental Credit Documents" means the Supplemental Credit
Agreement, the Tranche A Term Loan Notes, the Tranche B Term Loan
Notes, any Joinder Agreement, the Collateral Documents, the Fee Letter
and all other related agreements and documents issued or delivered
thereunder or pursuant thereto.
"Supplemental Credit Lender" means any of the Persons
identified as a "Supplemental Credit Lender" on the signature pages to
the Supplemental Credit Agreement, and any Person which may become a
Supplemental Credit Lender by way of assignment in accordance with the
terms of the Supplemental Credit Agreement, together with their
successors and permitted assigns.
"Swingline Committed Amount" shall have the meaning assigned
to such term in Section 2.2(a).
"Swingline Lender" means NationsBank.
"Swingline Loan" shall have the meaning assigned to such term
in Section 2.2(a).
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"Swingline Note" means the promissory note of the Borrower in
favor of the Swingline Lender in the original principal amount of
$5,000,000, as such promissory note may be amended, modified, restated
or replaced from time to time.
"Termination Event" means (a) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (b) the
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section
4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(c) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(d) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (e) any
event or condition which might reasonably constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan; or (f) the complete or partial
withdrawal of any Credit Party or any of its Subsidiaries or any ERISA
Affiliate from a Multiemployer Plan.
"Term Loans" means the Tranche A Term Loans and the Tranche B
Term Loans.
"Tranche A Term Loans" means the Tranche A Term Loans made to
the Borrower pursuant to Section 2.1 of the Supplemental Credit
Agreement.
"Tranche A Term Loan Commitment Percentage" means, for a
Supplemental Credit Lender, the percentage identified as its Tranche A
Term Loan Commitment Percentage on Schedule 1.1(a) of the Supplemental
Credit Agreement, as such percentage may be modified in connection with
any assignment made in accordance with the provisions of Section 11.3
of the Supplemental Credit Agreement.
"Tranche A Term Loan Committed Amount" means TWENTY SEVEN
MILLION FIVE HUNDRED FORTY THOUSAND DOLLARS ($27,540,000.00).
"Tranche A Term Loan Maturity Date" means June 26, 2002.
"Tranche A Term Loan Note" or "Tranche A Term Loan Notes"
means the promissory notes of the Borrower in favor of the Supplemental
Credit Lenders having a Tranche A Term Loan Commitment Percentage
evidencing the Tranche A Term Loans provided pursuant to Section 2.1 of
the Supplemental Credit Agreement, individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time as
evidenced in the form of Exhibit 2.4(a) of the Supplemental Credit
Agreement.
"Tranche B Term Loan Committed Amount" means THIRTY FOUR
MILLION EIGHT HUNDRED TWENTY FIVE THOUSAND DOLLARS ($34,825,000).
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"Tranche B Term Loan Commitment Percentage" means, for a
Supplemental Credit Lender, the percentage identified as its Tranche B
Term Loan Commitment Percentage on Schedule 1.1(a) of the Supplemental
Credit Agreement, as such percentage may be modified in connection with
any assignment made in accordance with the provisions of Section 11.3
of the Supplemental Credit Agreement.
"Tranche B Term Loan Note" or "Tranche B Term Loan Notes"
means the promissory notes of the Borrower in favor of the Supplemental
Credit Lenders having a Tranche B Term Loan Commitment Percentage
evidencing the Tranche B Term Loans provided pursuant to Section 2.1 of
the Supplemental Credit Agreement, individually or collectively, as
appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time as
evidenced in the form of Exhibit 2.4(b) of the Supplemental Credit
Agreement.
"Tranche B Term Loans" means, the Tranche B Term Loans made to
the Borrower pursuant to Section 2.1 of the Supplemental Credit
Agreement.
"TROLS" has the meaning set forth in the definition of
Indebtedness.
"Unused Commitment" means, for any period, the amount by which
(a) the then applicable aggregate Revolving Committed Amount exceeds
(b) the daily average sum for such period of the outstanding aggregate
principal amount of all Revolving Loans (but not including any
Swingline Loans).
"Working Capital" means, at any time, with respect to the
Borrower and its Subsidiaries on a consolidated basis, the excess of
current assets (excluding cash and Cash Equivalents) over current
liabilities (excluding the current portion of Funded Debt), as
determined in accordance with GAAP.
1.2 Computation of Time Periods and Other Definitional Provisions.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
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1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the New Credit
Agreement Lenders hereunder shall be prepared, in accordance with GAAP applied
on a consistent basis. All financial statements delivered to the New Credit
Agreement Lenders hereunder shall be accompanied by a statement from the
Borrower that GAAP has not changed since the most recent financial statements
delivered by the Borrower to the New Credit Agreement Lenders or if GAAP has
changed describing such changes in detail and explaining how such changes affect
the financial statements. All calculations made for the purposes of determining
compliance with this Credit Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with the most recent annual or quarterly financial statements delivered pursuant
to Section 7.1 (or, prior to the delivery of the first financial statements
pursuant to Section 7.1, consistent with the financial statements described in
Section 5.1(c)); provided, however, if (a) the Borrower shall object to
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) either Agent or the Required Lenders shall so object in
writing within 60 days after delivery of such financial statements (or after the
New Credit Agreement Lenders have been informed of the change in GAAP affecting
such financial statements, if later), then such calculations shall be made on a
basis consistent with the most recent financial statements delivered by the
Borrower to the New Credit Agreement Lenders as to which no such objection shall
have been made.
SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Loan Commitment. Subject to the terms and
conditions set forth herein, each New Credit Agreement Lender severally
agrees to make revolving loans (each a "Revolving Loan" and
collectively the "Revolving Loans") to the Borrower, in Dollars, at any
time and from time to time, during the period from and including the
Effective Date to but not including the Revolving Loan Maturity Date
(or such earlier date if the Revolving Committed Amount has been
terminated as provided herein); provided, however, that (i) the sum of
the aggregate amount of Revolving Loans outstanding plus the aggregate
amount of Swingline Loans outstanding shall not exceed the lesser of
(x) the Revolving Committed Amount and (y) the Borrowing Base, and (ii)
with respect to each individual New Credit Agreement Lender, such New
Credit Agreement Lender's outstanding Revolving Loans shall not exceed
such New Credit Agreement Lender's Revolving Loan Commitment Percentage
of the Revolving Committed Amount.
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(b) Method of Borrowing for Revolving Loans. By no later than
11:00 a.m. (i) on the Business Day of the requested borrowing of
Revolving Loans that will be Base Rate Loans or (ii) three Business
Days prior to the date of the requested borrowing of Revolving Loans
that will be Eurodollar Loans, the Borrower shall submit a written
Notice of Borrowing in the form of Exhibit 2.1 (or telephone notice
promptly confirmed in writing) to the Agent setting forth (A) the
amount requested, (B) whether such Revolving Loans shall accrue
interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate, (C)
with respect to Revolving Loans that will be Eurodollar Loans, the
Interest Period applicable thereto and (D) evidence that the Borrower
has complied in all respects with Section 5.2.
(c) Funding of Revolving Loans. Upon receipt of a Notice of
Borrowing, the Agent shall promptly inform the applicable New Credit
Agreement Lenders as to the terms thereof. Each such New Credit
Agreement Lender shall make its Revolving Loan Commitment Percentage of
the requested Revolving Loans available to the Agent by 1:00 p.m. on
the date specified in the Notice of Borrowing by deposit, in Dollars,
of immediately available funds at the offices of the Agent at its
principal office in Charlotte, North Carolina or at such other address
as the Agent may designate in writing. The amount of the requested
Revolving Loans will then be made available to the Borrower by the
Agent by crediting the account of the Borrower on the books of such
office of the Agent, to the extent the amount of such Revolving Loans
are made available to the Agent.
No New Credit Agreement Lender shall be responsible for the
failure or delay by any other New Credit Agreement Lender in its
obligation to make Revolving Loans hereunder; provided, however, that
the failure of any New Credit Agreement Lender to fulfill its
obligations hereunder shall not relieve any other New Credit Agreement
Lender of its obligations hereunder. Unless the Agent shall have been
notified by any New Credit Agreement Lender prior to the date of any
such Revolving Loan that such New Credit Agreement Lender does not
intend to make available to the Agent its portion of the Revolving
Loans to be made on such date, the Agent may assume that such New
Credit Agreement Lender has made such amount available to the Agent on
the date of such Revolving Loans, and the Agent in reliance upon such
assumption, may (in its sole discretion but without any obligation to
do so) make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to the Agent, the
Agent shall be able to recover such corresponding amount from such New
Credit Agreement Lender. If such New Credit Agreement Lender does not
pay such corresponding amount forthwith upon the Agent's demand
therefor, the Agent will promptly notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Agent. The Agent
shall also be entitled to recover from the New Credit Agreement Lender
or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount
was made available by the Agent to the Borrower to the date such
corresponding amount is recovered by the Agent at a per annum rate
equal to (i) from the Borrower at the applicable rate for such
Revolving Loan pursuant to the Notice of Borrowing and (ii) from a New
Credit Agreement Lender at the Federal Funds Rate.
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(d) Reductions of Revolving Committed Amount. Upon at least
three Business Days' notice, the Borrower shall have the right to
permanently terminate or reduce the aggregate unused amount of the
Revolving Committed Amount at any time or from time to time; provided
that (i) each partial reduction shall be in an aggregate amount at
least equal to $1,000,000 and in integral multiples of $500,000 above
such amount and (ii) no reduction shall be made which would reduce the
Revolving Committed Amount to an amount less than the aggregate amount
of outstanding Revolving Loans. Any reduction in (or termination of)
the Revolving Committed Amount shall be permanent and may not be
reinstated.
2.2 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions
set forth herein, the Swingline Lender, in its individual capacity,
agrees to make certain revolving credit loans to the Borrower (each a
"Swingline Loan" and, collectively, the "Swingline Loans") at any time
and from time to time, during the period from and including the
Effective Date to but not including the Revolving Loan Maturity Date
for the purposes hereinafter set forth; provided, however, (i) the
aggregate amount of Swingline Loans outstanding at any time shall not
exceed FIVE MILLION DOLLARS ($5,000,000.00) (the "Swingline Committed
Amount"), and (ii) the sum of the aggregate principal amount of
outstanding Revolving Loans plus the aggregate principal amount of
outstanding Swingline Loans shall not exceed the lesser of (x) the
Revolving Committed Amount and (y) the Borrowing Base. Swingline Loans
hereunder shall be made as Base Rate Loans in accordance with the
provisions of this Section 2.2, and may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower
desires a Swingline Loan advance hereunder it shall give
written notice (or telephone notice promptly confirmed in
writing) to the Swingline Lender not later than 11:00 A.M.
(Charlotte, North Carolina time) on the Business Day of
the requested Swingline Loan advance. Each such notice
shall be irrevocable and shall specify (A) that a
Swingline Loan advance is requested, (B) the date of the
requested Swingline Loan advance (which shall be a
Business Day) and (C) the principal amount of the
Swingline Loan advance requested. Each Swingline Loan
shall be made as a Base Rate Loan and shall have such
maturity date as the Swingline Lender and the Borrower
shall agree upon receipt by the Swingline Lender of any
such notice from the Borrower. The Swingline Lender shall
initiate the transfer of funds representing the Swingline
Loan advance to the Borrower by 3:00 P.M. (Charlotte,
North Carolina time) on the Business Day of the requested
borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall
be in a minimum principal amount of $100,000 and in
integral multiples of $100,000 in excess thereof.
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(iii) Repayment of Swingline Loans. The principal
amount of all Swingline Loans shall be due and payable on
the earlier of (A) the maturity date agreed to by the
Swingline Lender and the Borrower with respect to such
Loan (which maturity date shall not be a date more than
seven (7) Business Days from the date of advance thereof)
and (B) the Revolving Loan Maturity Date. The Swingline
Lender may, at any time, in its sole discretion, by
written notice to the Borrower and the New Credit
Agreement Lenders, demand repayment of its Swingline Loans
by way of a Revolving Loan advance, in which case the
Borrower shall be deemed to have requested a Revolving
Loan advance comprised solely of Base Rate Loans in the
amount of such Swingline Loans; provided, however, that
any such demand shall be deemed to have been given one
Business Day prior to the Revolving Loan Maturity Date and
on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the
indebtedness hereunder and the exercise of remedies in
accordance with the provisions of Section 9.2. Each New
Credit Agreement Lender hereby irrevocably agrees to make
its pro rata share of each such Revolving Loan in the
amount, in the manner and on the date specified in the
preceding sentence notwithstanding (I) the amount of such
borrowing may not comply with the minimum amount for
advances of Revolving Loans otherwise required hereunder,
(II) whether any conditions specified in Section 5.2 are
then satisfied, (III) whether a Default or an Event of
Default then exists, (IV) failure of any such request or
deemed request for Revolving Loan to be made by the time
otherwise required hereunder, (V) whether the date of such
borrowing is a date on which Revolving Loans are otherwise
permitted to be made hereunder or (VI) any termination of
the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that
any Revolving Loan cannot for any reason be made on the
date otherwise required above (including, without
limitation, as a result of the commencement of a
proceeding under the Bankruptcy Code with respect to the
Borrower or any other Credit Party), then each New Credit
Agreement Lender hereby agrees that it shall forthwith
purchase (as of the date such borrowing would otherwise
have occurred, but adjusted for any payments received from
the Borrower on or after such date and prior to such
purchase) from the Swingline Lender such participations in
the outstanding Swingline Loans as shall be necessary to
cause each such New Credit Agreement Lender to share in
such Swingline Loans ratably based upon its Revolving Loan
Commitment Percentage (determined before giving effect to
any termination of the Commitments pursuant to Section
2.1(d)), provided that (A) all interest payable on the
Swingline Loans shall be for the account of the Swingline
Lender until the date as of which the respective
participation is purchased and (B) at the time any
purchase of participations pursuant to this sentence is
actually made, the purchasing New Credit Agreement Lender
shall be required to pay to the Swingline Lender, to the
extent not paid to the Swingline Lender by the Borrower in
accordance with the terms of subsection (c) below,
interest on the principal amount of participation
purchased for each day from and including the day upon
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which such borrowing would otherwise have occurred to but
excluding the date of payment for such participation, at the
rate equal to the Federal Funds Rate.
(c) Interest on Swingline Loans. Subject to the provisions of
Section 3.1, each Swingline Loan shall bear interest at per annum rate
equal to the Base Rate. Interest on Swingline Loans shall be payable in
arrears on each applicable Interest Payment Date (or at such other
times as may be specified herein).
2.3 Continuations and Conversions.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to continue in existence Eurodollar Loans for a
subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or
to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a)
each such continuation or conversion must be requested by the Borrower pursuant
to a written Notice of Continuation/Conversion, in the form of Exhibit 2.3, in
compliance with the terms set forth below, (b) except as provided in Section
3.12, Eurodollar Loans may only be continued or converted into Base Rate Loans
on the last day of the Interest Period applicable thereto, (c) Eurodollar Loans
may not be continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default and (d)
any request to extend a Eurodollar Loan that fails to comply with the terms
hereof or any failure to request an extension of a Eurodollar Loan at the end of
an Interest Period shall constitute a request for a conversion to a Base Rate
Loan on the last day of the applicable Interest Period. Each continuation or
conversion must be requested by the Borrower no later than 11:00 a.m. (i) one
Business Day prior to the date for a requested conversion of a Eurodollar Loan
to a Base Rate Loan or (ii) three Business Days prior to the date for a
requested extension of a Eurodollar Loan or conversion of a Base Rate Loan to a
Eurodollar Loan, in each case pursuant to a written Notice of
Continuation/Conversion submitted to the Agent which shall set forth (A) whether
the Borrower wishes to continue or convert such Loans and (B) if the request is
to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan,
the Interest Period applicable thereto.
2.4 Minimum Amounts.
Each request for a borrowing, conversion or continuation shall be
subject to the requirements that (a) each Eurodollar Loan shall be in a minimum
amount of $1,000,000 and in integral multiples of $500,000 in excess thereof,
(b) each Base Rate Loan shall be in a minimum amount of the lesser of $1,000,000
(and integral multiples of $500,000 in excess thereof) or the remaining amount
available under the Revolving Committed Amount and (c) no more than ten
Eurodollar Loans shall, in the aggregate, be outstanding under the Supplemental
Credit Agreement and hereunder at any one time. For the purposes of this
Section, all Eurodollar Loans with the same Interest Periods shall be considered
as one Eurodollar Loan, but Eurodollar Loans with different Interest Periods,
even if they begin on the same date, shall be considered as separate Eurodollar
Loans.
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2.5 Notes.
(a) Revolving Loan Notes. The Revolving Loans made by each New
Credit Agreement Lender shall be evidenced by a duly executed
promissory note of the Borrower to each applicable New Credit Agreement
Lender in the face amount of its Revolving Loan Commitment Percentage
of the Revolving Committed Amount in substantially the form of Exhibit
2.5(a).
(b) Swingline Note. The Swingline Loans shall be evidenced by
a duly executed promissory note of the Borrower to the Swingline Lender
in substantially the form of Exhibit 2.5(b) in a principal amount equal
to the amount of the Swingline Committed Amount.
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS
3.1 Interest.
(a) Interest Rate. All Base Rate Loans (including, without
limitation, all Swingline Loans) shall accrue interest at the Adjusted
Base Rate and all Eurodollar Loans shall accrue interest at the
Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Loans and any other amounts
owing hereunder or under the other Credit Documents (including without
limitation fees and expenses) shall bear interest, payable on demand,
at a per annum rate equal to 4% plus the rate which would otherwise be
applicable (or if no rate is applicable, then the rate for Revolving
Loans that are Base Rate Loans plus four percent (4%) per annum).
(c) Interest Payments. Interest on Loans (including, without
limitation, all Swingline Loans) shall be due and payable in arrears on
each Interest Payment Date. If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be deemed
to be the next succeeding Business Day (subject to accrual of interest
for the period of such extension), except that in the case of
Eurodollar Loans where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding day.
3.2 Place and Manner of Payments.
All payments of principal, interest, fees, expenses and other amounts
to be made by a Credit Party under this Credit Agreement shall be received not
later than 2:00 p.m. on the date when due, in Dollars and in immediately
available funds, by the Agent at its offices at NationsBank Plaza, Charlotte,
North Carolina. Payments received after such time shall be
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deemed to have been received on the next Business Day. The Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to the Agent,
the Loans, fees or other amounts payable by the Borrower hereunder to which such
payment is to be applied (and in the event that it fails to specify, or if such
application would be inconsistent with the terms hereof, the Agent shall,
subject to Section 3.7, distribute such payment to the New Credit Agreement
Lenders in such manner as the Agent may deem appropriate). The Agent will
distribute such payments to the applicable New Credit Agreement Lenders on the
date received if any such payment is received prior to 2:00 p.m.; otherwise the
Agent will distribute such payment to the applicable Lenders on the next
succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day (subject to accrual of interest and fees for
the period of such extension), except that in the case of Eurodollar Loans, if
the extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the Agent and
any prepayment of Eurodollar Loans will be subject to Section 3.15;
(ii) Base Rate Loans may only be prepaid after written notice
(confirmed by a telephone call from the Borrower) to the Agent not
later than 11:00 a.m. on the Business Day of the applicable prepayment;
(iii) each such partial prepayment of Loans shall be (A) in the case of
Revolving Loans in the minimum principal amount of $500,000 and
integral multiples of $500,000 in excess thereof and (B) in the case of
Swingline Loans, in a minimum principal amount of $1,000,000 and
integral multiples of $1,000,000 in excess thereof.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If at any time the sum
of the aggregate amount of Revolving Loans outstanding
plus the aggregate amount of Swingline Loans outstanding
exceeds the lesser of (x) the Revolving Committed Amount
and (y) the Borrowing Base, the Borrower shall immediately
make a principal payment to the Agent in the manner and in
an amount necessary to be in compliance with Section 2.1.
(ii) Excess Cash Flow. Within 10 days after the date the
audited financial statements are required to be delivered
pursuant to Section 7.1(a), the Borrower shall make a
prepayment of the Loans, Tranche A Term Loans and Tranche
B Term Loans in an amount equal to 75% of the Excess Cash
Flow earned during such prior fiscal year (to be applied
as set forth in Section 3.3(c) below).
(iii) Asset Dispositions. Immediately upon receipt by
the Borrower or any of its Subsidiaries of proceeds from
any Asset Disposition, the
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Borrower shall forward 100% of the Net Cash Proceeds of such
Asset Disposition to the Lenders as a prepayment of the Loans,
Tranche A Term Loans and Tranche B Term Loans (to be applied
as set forth in Section 3.3(c) below).
(iv) Issuances of Equity. Immediately upon
receipt by the Borrower or any of its Subsidiaries of proceeds
from any Equity Issuance, the Borrower shall forward 50% of
the Net Cash Proceeds of such Equity Issuance to the Lenders
as a prepayment of the Loans, Tranche A Term Loans and Tranche
B Term Loans (to be applied as set forth in Section 3.3(c)
below).
(v) Recovery Event. Subject to the terms and
conditions of Section 7.6 hereof, immediately upon receipt by
the Borrower or any of its Subsidiaries of proceeds from any
Recovery Event, the Borrower shall forward 100% of the Net
Cash Proceeds from such Recovery Event to the Lenders as a
prepayment of the Loans, Tranche A Term Loans and Tranche B
Term Loans (to be applied as set forth in Section 3.3(c)
below).
(vi) Debt Issuances. Immediately upon receipt by the
Borrower or any of its Subsidiaries of proceeds from any Debt
Issuance, the Borrower shall prepay the Loans, the Tranche A
Term Loans and the Tranche B Term Loans in an aggregate amount
equal to 100% of the Net Cash Proceeds of such Debt Issuance
to the Lenders (such prepayment to be applied as set forth in
Section 3.3(c) below).
(c) Application of Prepayments. All amounts required to be
paid pursuant to Section 3.3(b)(i) shall be applied first to Revolving
Loans and second to Swingline Loans. All amounts required to be paid
pursuant to Section 3.3(b)(ii), (iii), (iv), (v) and (vi) above shall
be applied, first pro rata among the outstanding Tranche A Term Loans
and Tranche B Term Loans (which amounts shall then be applied to the
remaining Principal Amortization Payments due with respect to the
Tranche A Term Loans and Tranche B Term Loans in inverse order of
maturity thereof), second to the Revolving Loans (with a corresponding
reduction in the Revolving Committed Amount) and third to Swingline
Loans (with a corresponding reduction in the Revolving Committed
Amount). One or more holders of the Tranche B Term Loans may decline to
accept a mandatory prepayment under Sections 3.3(b)(ii), (iii), (iv),
(v) or (vi) with respect to the Tranche B Term Loans (to the extent
there is sufficient Tranche A Term Loans outstanding to be paid with
such prepayment) in which case such declined prepayments shall be
allocated pro rata among the Tranche A Term Loans and among the Tranche
B Term Loans held by Lenders accepting such prepayments; provided,
however, a Lender declining to accept a mandatory prepayment shall be
required to make such election to decline with respect to the Tranche B
Term Loan of such Lender. Within the parameters of the application set
forth above, prepayments shall be applied first to Base Rate Loans and
then to Eurodollar Loans in direct order of Interest Period maturities.
All prepayments hereunder shall be subject to Section 3.15.
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3.4 Fees.
(a) Commitment Fees. In consideration of the Revolving
Committed Amount being made available by the New Credit Agreement
Lenders hereunder, the Borrower agrees to pay to the Agent, for the pro
rata benefit of each applicable New Credit Agreement Lender (based on
each New Credit Agreement Lender's Revolving Loan Commitment Percentage
of the Revolving Committed Amount), a fee equal to one-half of one
percent (.5%) per annum on the Unused Commitment (the "Commitment
Fees"). The accrued Commitment Fees shall commence to accrue on the
Closing Date and shall be payable quarterly in arrears on the 15th day
following the last day of each calendar quarter (as well as on the
Revolving Loan Maturity Date and on any date that the Revolving
Committed Amount is reduced) for the immediately preceding fiscal
quarter (or portion thereof), beginning with the first of such dates to
occur after the Closing Date.
(b) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account, an annual fee as agreed to between the
Borrower and the Agent in the Fee Letter.
3.5 Payment in full at Maturity.
On the Revolving Loan Maturity Date, the entire outstanding
principal balance of all Revolving Loans, together with accrued but
unpaid interest and all other sums owing with respect thereto, shall be
due and payable in full, unless accelerated sooner pursuant to Section
9.
3.6 Computations of Interest and Fees.
(a) Except for Base Rate Loans, in which case interest shall
be computed on the basis of a 365 or 366 day year as the case may be
(unless the Base Rate is determined by reference to the Federal Funds
Rate), all computations of interest and fees hereunder shall be made on
the basis of the actual number of days elapsed over a year of 360 days.
Interest shall accrue from and include the date of borrowing (or
continuation or conversion) but exclude the date of payment.
(b) It is the intent of the New Credit Agreement Lenders and
the Credit Parties to conform to and contract in strict compliance with
applicable usury law from time to time in effect. All agreements
between the New Credit Agreement Lenders and the Borrower are hereby
limited by the provisions of this paragraph which shall override and
control all such agreements, whether now existing or hereafter arising
and whether written or oral. In no way, nor in any event or contingency
(including but not limited to prepayment or acceleration of the
maturity of any obligation), shall the interest taken, reserved,
contracted for, charged, or received under this Credit Agreement, under
the Notes or otherwise, exceed the maximum nonusurious amount
permissible under applicable law. If, from any possible construction of
any of the Credit Documents or any other document, interest would
otherwise be payable in excess of the maximum
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nonusurious amount, any such construction shall be subject to the
provisions of this paragraph and such documents shall be automatically
reduced to the maximum nonusurious amount permitted under applicable
law, without the necessity of execution of any amendment or new
document. If any New Credit Agreement Lender shall ever receive
anything of value which is characterized as interest on the Loans under
applicable law and which would, apart from this provision, be in excess
of the maximum lawful amount, an amount equal to the amount which would
have been excessive interest shall, without penalty, be applied to the
reduction of the principal amount owing on the Loans and not to the
payment of interest, or refunded to the Borrower or the other payor
thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal amount of the Loans. The right
to demand payment of the Loans or any other indebtedness evidenced by
any of the Credit Documents does not include the right to receive any
interest which has not otherwise accrued on the date of such demand,
and the New Credit Agreement Lenders do not intend to charge or receive
any unearned interest in the event of such demand. All interest paid or
agreed to be paid to the New Credit Agreement Lenders with respect to
the Loans shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated
term (including any renewal or extension) of the Loans so that the
amount of interest on account of such indebtedness does not exceed the
maximum nonusurious amount permitted by applicable law.
3.7 Pro Rata Treatment.
Except to the extent otherwise provided herein, each Loan borrowing,
each Tranche A Term Loan borrowing, each Tranche B Term Loan borrowing, each
payment or prepayment of principal of any Loan, Tranche A Term Loan, or Tranche
B Term Loan, each payment of fees (other than the Administrative Fees retained
by the Agent for its own account), each reduction of the Revolving Committed
Amount, and each conversion or continuation of any Loan, Tranche A Term Loan or
the Tranche B Term Loan, shall be allocated pro rata among the relevant Lenders
in accordance with the respective Revolving Loan Commitment Percentages, Tranche
A Term Loan Commitment Percentages and Tranche B Term Loan Commitment
Percentages, as applicable, of such Lenders (or, if the Commitments, Tranche A
Term Loan Committed Amount or Tranche B Term Loan Committed Amount of such
Lenders have expired or been terminated, in accordance with the respective
principal amounts of their outstanding Loans, Tranche A Term Loans, Tranche B
Term Loans and Participation Interests of such Lenders); provided that, if any
Lender shall have failed to pay its applicable pro rata share of any Loan,
Tranche A Term Loan or Tranche B Term Loan then any amount to which such Lender
would otherwise be entitled pursuant to this Section shall instead be payable to
the Agent; provided further, that in the event any amount paid to any Lender
pursuant to this Section is rescinded or must otherwise be returned by the
Agent, each Lender shall, upon the request of the Agent, repay to the Agent the
amount so paid to such Lender, with interest for the period commencing on the
date such payment is returned by the Agent until the date the Agent receives
such repayment at a rate per annum equal to, during the period to but excluding
the date two Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus four percent (4%) per annum.
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3.8 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement or the
Supplemental Credit Agreement, after the occurrence and during the
continuance of an Event of Default, all amounts collected or received by an
Agent or any Lender on account of amounts outstanding under any of the Credit
Documents or any of the Supplemental Credit Documents or in respect of the
Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the New Credit
Agreement Lenders under the Credit Documents and the Supplemental
Credit Lenders under the Supplemental Credit Documents and any
protective advances made by the Agent with respect to the Collateral
under or pursuant to the terms of the Collateral Documents;
SECOND, to payment of any fees owed to an Agent in its
capacity as Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents and the Supplemental Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to (i) the New Credit Agreement Lenders hereunder and (ii) the
Supplemental Credit Lenders under the Supplemental Credit Agreement;
FIFTH, to the payment of the outstanding principal amount of
the Loans, Tranche A Term Loans and Tranche B Term Loans, and to any
principal amounts outstanding under Hedging Agreements, pro rata, as
set forth below;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and Supplemental Credit
Documents, pro rata, and not repaid pursuant to clauses "FIRST" through
"FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whomever
may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category and (b) each of the Lenders shall receive an amount equal
to its pro rata share (based on the proportion that the then outstanding
Loans, outstanding Tranche A Term Loans, outstanding Tranche B Term Loans and
obligations under Hedging Agreements held by such Lender bears to the
aggregate then outstanding Loans, outstanding Tranche A Term Loans,
outstanding Tranche B Term Loans and obligations under Hedging Agreements) of
amounts available to be applied pursuant to clauses "THIRD", "FOURTH,"
"FIFTH," and "SIXTH" above.
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3.9 Sharing of Payments.
The New Credit Agreement Lenders agree among themselves that, except
to the extent otherwise provided herein, in the event that any Lender shall
obtain payment in respect of any Loan, Tranche A Term Loan or Tranche B Term
Loan, or any other obligation owing to such Lender under this Credit
Agreement or the Supplemental Credit Agreement through the exercise of a
right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender
under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders for cash an interest in such Loans, Tranche A
Term Loans or Tranche B Term Loans, and other obligations in such amounts,
and make such other adjustments from time to time, as shall be equitable to
the end that all New Credit Agreement Lenders and Supplemental Credit Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement and the Supplemental Credit Agreement.
The New Credit Agreement Lenders further agree among themselves that if
payment to a New Credit Agreement Lender or Supplemental Credit Lender
obtained by such New Credit Agreement Lender or Supplemental Credit Lender
through the exercise of a right of setoff, banker's lien, counterclaim or
other event as aforesaid shall be rescinded or must otherwise be restored,
each Lender which shall have shared the benefit of such payment shall, by
repurchase of the interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect
thereto) to each Lender or Supplemental Credit Lender whose payment shall
have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such an interest may, to the fullest extent permitted by
law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such interest as fully as if such Lender were a
holder of such Loan, Tranche A Term Loan or Tranche B Term Loan or other
obligation in the amount of such interest. Except as otherwise expressly
provided in this Credit Agreement, if any Lender or the Agent shall fail to
remit to the Agent or any other Lender an amount payable by such Lender or
the Agent to the Agent or such other Lender pursuant to this Credit Agreement
or the Supplemental Credit Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the Agent
or such other Lender at a rate per annum equal to the Federal Funds Rate. If
under any applicable bankruptcy, insolvency or other similar law, any Lender
receives a secured claim in lieu of a setoff to which this Section 3.9
applies, such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Lenders under this Section 3.9 to share in the benefits of any recovery on
such secured claim.
3.10 Capital Adequacy.
If, after the date hereof, any New Credit Agreement Lender has
determined that the adoption or the becoming effective of, or any change in,
or any change by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof in the
interpretation or administration of, any applicable law, rule or regulation
regarding capital adequacy, or compliance by such New Credit Agreement Lender
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such
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authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such New Credit Agreement Lender's capital or
assets as a consequence of its commitments or obligations hereunder to a
level below that which such New Credit Agreement Lender could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such New Credit Agreement Lender's policies with respect to
capital adequacy), then, upon notice from such New Credit Agreement Lender to
the Borrower, the Borrower shall be obligated to pay to such New Credit
Agreement Lender such additional amount or amounts as will compensate such
New Credit Agreement Lender for such reduction. Each determination by any
such New Credit Agreement Lender of amounts owing under this Section shall,
absent manifest error, be conclusive and binding on the parties hereto.
3.11 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall
have determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period, the Agent shall promptly give telecopy or
telephonic notice thereof to the Borrower and the New Credit Agreement
Lenders. If such notice is given (a) any Eurodollar Loans requested to be
made on the first day of such Interest Period shall be made as Base Rate
Loans, (b) any Loans that were to have been converted on the first day of
such Interest Period to or continued as Eurodollar Loans shall be converted
to or continued as Base Rate Loans and (c) any outstanding Eurodollar Loans
shall be converted, on the first day of such Interest Period, to Base Rate
Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Loans shall be made or continued as such, nor shall the Borrower
have the right to convert Base Rate Loans to Eurodollar Loans.
3.12 Illegality.
Notwithstanding any other provision herein, if the adoption of or
any change in any Requirement of Law or in the interpretation or application
thereof occurring after the Closing Date shall make it unlawful for any New
Credit Agreement Lender to make or maintain Eurodollar Loans as contemplated
by this Credit Agreement, (a) such New Credit Agreement Lender shall promptly
give written notice of such circumstances to the Borrower and the Agent
(which notice shall be withdrawn whenever such circumstances no longer
exist), (b) the commitment of such New Credit Agreement Lender hereunder to
make Eurodollar Loans, continue Eurodollar Loans as such and convert a Base
Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such
time as it shall no longer be unlawful for such New Credit Agreement Lender
to make or maintain Eurodollar Loans, such New Credit Agreement Lender shall
then have a commitment only to make a Base Rate Loan when a Eurodollar Loan
is requested and (c) such New Credit Agreement Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days or the then current Interest
Periods with respect to such Loans or within such earlier period as required
by law. If any such conversion of a Eurodollar Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto,
the Borrower shall pay to such New Credit Agreement Lender such amounts, if
any, as may be required pursuant to Section 3.15.
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3.13 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any New Credit Agreement
Lender, or compliance by any New Credit Agreement Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Closing
Date (or, if later, the date on which such New Credit Agreement Lender
becomes a New Credit Agreement Lender):
(a) shall subject such New Credit Agreement Lender to any tax
of any kind whatsoever with respect to any Eurodollar Loans made by it
or its obligation to make Eurodollar Loans, or change the basis of
taxation of payments to such New Credit Agreement Lender in respect
thereof (except for Non-Excluded Taxes covered by Section 3.14
(including Non-Excluded Taxes imposed solely by reason of any failure
of such New Credit Agreement Lender to comply with its obligations
under Section 3.14(b)) and changes in taxes measured by or imposed upon
the overall net income, or franchise tax (imposed in lieu of such net
income tax), of such New Credit Agreement Lender or its applicable
lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such New Credit Agreement Lender
which is not otherwise included in the determination of the Eurodollar
Rate hereunder; or
(c) shall impose on such New Credit Agreement Lender any other
condition (excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such New
Credit Agreement Lender, by an amount which such New Credit Agreement Lender
reasonably deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or to reduce any amount receivable hereunder in
respect thereof, then, in any such case, upon notice to the Borrower from
such New Credit Agreement Lender, through the Agent, in accordance herewith,
the Borrower shall be obligated to promptly pay such New Credit Agreement
Lender, upon its demand, any additional amounts necessary to compensate such
New Credit Agreement Lender for such increased cost or reduced amount
receivable, provided that, in any such case, the Borrower may elect to
convert the Eurodollar Loans made by such New Credit Agreement Lender
hereunder to Base Rate Loans by giving the Agent at least one Business Day's
notice of such election, in which case the Borrower shall promptly pay to
such New Credit Agreement Lender, upon demand, without duplication, such
amounts, if any, as may be required pursuant to Section 3.15. If any New
Credit Agreement Lender becomes entitled to claim any additional amounts
pursuant to this Section 3.13, it shall provide prompt notice thereof to the
Borrower, through the Agent, certifying (x) that one of the events described
in this Section 3.13 has occurred and describing in reasonable detail the
nature of such event, (y) as to the increased cost or reduced amount
resulting from such event and (z) as to the additional amount demanded by
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such New Credit Agreement Lender and a reasonably detailed explanation of the
calculation thereof. Such a certificate as to any additional amounts payable
pursuant to this Section 3.13 submitted by such New Credit Agreement Lender,
through the Agent, to the Borrower shall be conclusive and binding on the
parties hereto in the absence of manifest error. This covenant shall survive
the termination of this Credit Agreement and the payment of the Loans and all
other amounts payable hereunder.
3.14 Taxes.
(a) Except as provided below in this Section 3.14, all
payments made by the Borrower under this Credit Agreement and any Notes
shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any New Credit Agreement Lender or its applicable lending office, or
any branch or affiliate thereof, and all franchise taxes, branch taxes,
taxes on doing business or taxes on the overall capital or net worth of
any New Credit Agreement Lender or its applicable lending office, or
any branch or affiliate thereof, in each case imposed in lieu of net
income taxes: (i) by the jurisdiction under the laws of which such New
Credit Agreement Lender, applicable lending office, branch or affiliate
is organized or is located, or in which its principal executive office
is located, or any nation within which such jurisdiction is located or
any political subdivision thereof; or (ii) by reason of any connection
between the jurisdiction imposing such tax and such New Credit
Agreement Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such New Credit Agreement Lender
having executed, delivered or performed its obligations, or received
payment under or enforced, this Credit Agreement or any Notes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions or withholdings ("Non-Excluded Taxes") are required to be
withheld from any amounts payable to the Agent or any New Credit
Agreement Lender hereunder or under any Notes, (A) the amounts so
payable to the Agent or such Lender shall be increased to the extent
necessary to yield to an Agent or such New Credit Agreement Lender
(after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded
Taxes and shall not be required to increase any such amounts payable to
any New Credit Agreement Lender that is not organized under the laws of
the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this Section 3.14
whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as
promptly as possible thereafter the Borrower shall send to the Agent
for its own account or for the account of such New Credit Agreement
Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrower
shall indemnify the Agent and the New Credit Agreement Lenders for any
incremental
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taxes, interest or penalties that may become payable by the Agent or
any New Credit Agreement Lender as a result of any such failure. The
agreements in this subsection shall survive the termination of this
Credit Agreement and the payment of the Loans and all other amounts
payable hereunder.
(b) Each New Credit Agreement Lender that is not incorporated
under the laws of the United States of America or a state thereof
shall:
(i)(A) on or before the date of any payment by the
Borrower under this Credit Agreement or Notes to such New
Credit Agreement Lender, deliver to the Borrower and the Agent
(x) two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, certifying that it is entitled to
receive payments under this Credit Agreement and any Notes
without deduction or withholding of any United States federal
income taxes and (y) an Internal Revenue Service Form W-8 or
W-9, or successor applicable form, as the case may be,
certifying that it is entitled to an exemption from United
States backup withholding tax;
(B) deliver to the Borrower and the Agent two further
copies of any such form or certification on or before the date
that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Agent; or
(ii) in the case of any such New Credit Agreement
Lender that is not a "bank" within the meaning of Section
881(c)(3)(A) of the Internal Revenue Code, (A) represent to
the Borrower (for the benefit of the Borrower and the Agent)
that it is not a bank within the meaning of Section
881(c)(3)(A) of the Internal Revenue Code, (B) agree to
furnish to the Borrower, on or before the date of any payment
by the Borrower, with a copy to the Agent, two accurate and
complete original signed copies of Internal Revenue Service
Form W-8, or successor applicable form certifying to such New
Credit Agreement Lender's legal entitlement at the date of
such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Agent two further copies of such form on or before the
date it expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recently provided
form and, if necessary, obtain any extensions of time
reasonably requested by the Borrower or the Agent for filing
and completing such forms), and (C) agree, to the extent
legally entitled to do so, upon reasonable request by the
Borrower, to provide to the Borrower (for the benefit of the
Borrower and the Agent) such other forms as may be reasonably
required in order to establish the legal entitlement of such
Lender to an
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exemption from withholding with respect to payments under this
Credit Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a New Credit Agreement
Lender hereunder which renders all such forms inapplicable or which
would prevent such New Credit Agreement Lender from duly completing and
delivering any such form with respect to it and such New Credit
Agreement Lender so advises the Borrower and the Agent then such New
Credit Agreement Lender shall be exempt from such requirements. Each
Person that shall become a New Credit Agreement Lender or a participant
of a New Credit Agreement Lender pursuant to Section 11.3 shall, upon
the effectiveness of the related transfer, be required to provide all
of the forms, certifications and statements required pursuant to this
subsection (b); provided that in the case of a participant of a New
Credit Agreement Lender, the obligations of such participant of a New
Credit Agreement Lender pursuant to this subsection (b) shall be
determined as if the participant of a New Credit Agreement Lender were
a New Credit Agreement Lender except that such participant of a New
Credit Agreement Lender shall furnish all such required forms,
certifications and statements to the New Credit Agreement Lender from
which the related participation shall have been purchased.
3.15 Indemnity.
The Borrower promises to indemnify each New Credit Agreement Lender
and to hold each New Credit Agreement Lender harmless from any loss or
expense which such New Credit Agreement Lender may sustain or incur (other
than through such New Credit Agreement Lender's gross negligence or willful
misconduct) as a consequence of (a) default by the Borrower in making a
borrowing of, conversion into or continuation of Eurodollar Loans after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Credit Agreement, (b) default by the Borrower in making
any prepayment of a Eurodollar Loan after the Borrower has given a notice
thereof in accordance with the provisions of this Credit Agreement and (c)
the making of a prepayment of Eurodollar Loans on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification may
include an amount equal to (i) the amount of interest which would have
accrued on the amount so prepaid, or not so borrowed, converted or continued,
for the period from the date of such prepayment or of such failure to borrow,
convert or continue to the last day of the applicable Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period
that would have commenced on the date of such failure) in each case at the
applicable rate of interest for such Eurodollar Loans provided for herein
(excluding, however, the Applicable Percentage included therein, if any)
minus (ii) the amount of interest (as reasonably determined by such New
Credit Agreement Lender) which would have accrued to such New Credit
Agreement Lender on such amount by placing such amount on deposit for a
comparable period with leading banks in the interbank Eurodollar market. The
agreements in this Section shall survive the termination of this Credit
Agreement and the payment of the Loans and all other amounts payable
hereunder.
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3.16 Replacement of Lenders.
If any New Credit Agreement Lender delivers a notice to the Borrower
pursuant to Sections 3.10, 3.13 or 3.14, then the Borrower shall have the
right, if no Default or Event of Default then exists, to either (i) replace
such New Credit Agreement Lender (the "Replaced Lender") with one or more
additional banks or financial institutions (collectively, the "Replacement
Lender"), provided that (A) at the time of any replacement pursuant to this
Section 3.16, the Replacement Lender shall enter into one or more assignment
agreements substantially in the form of Exhibit 11.3 pursuant to, and in
accordance with the terms of, Section 11.3(b) (and with all fees payable
pursuant to said Section 11.3(b) to be paid by the Replacement Lender)
pursuant to which the Replacement Lender shall acquire all of the rights and
obligations of the Replaced Lender hereunder and, in connection therewith,
shall pay to the Replaced Lender in respect thereof an amount equal to the
sum of (a) the principal of, and all accrued interest on, all outstanding
Loans of the Replaced Lender, and (b) all accrued, but theretofore unpaid,
fees owing to the Replaced Lender pursuant to Section 3.4, and (B) all
obligations of the Borrower owing to the Replaced Lender (including all
obligations, if any, owing pursuant to Section 3.10, 3.13 or 3.14, but
excluding those obligations specifically described in clause (A) above in
respect of which the assignment purchase price has been, or is concurrently
being paid) shall be paid in full to such Replaced Lender concurrently with
such replacement or (ii) if a Replacement Lender is not located within 60
days of such notice, terminate the Commitments and repay the Loans owing to
such Replaced Lender.
SECTION 4
GUARANTY
4.1 Guaranty of Payment.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each New Credit Agreement
Lender, each Affiliate of New Credit Agreement Lender that enters into a
Hedging Agreement and the Agent the prompt payment of the Credit Party
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise). The Guarantors additionally,
jointly and severally, unconditionally guarantee to each New Credit Agreement
Lender the timely performance of all other obligations under the Credit
Documents and Hedging Agreements. This Guaranty is a guaranty of payment and
not of collection and is a continuing guaranty and shall apply to all Credit
Party Obligations whenever arising.
4.2 Obligations Unconditional.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity
or enforceability of any of the Credit Documents or the Hedging Agreements,
or any other agreement or instrument referred to therein, to the fullest
extent permitted by applicable law, irrespective of any other circumstance
whatsoever which might otherwise constitute a legal or equitable discharge or
defense of a surety or
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guarantor. Each Guarantor agrees that this Guaranty may be enforced by the
New Credit Agreement Lenders without the necessity at any time of resorting
to or exhausting any other security or collateral and without the necessity
at any time of having recourse to the Notes or any other of the Credit
Documents or any collateral, if any, hereafter securing the Credit Party
Obligations or otherwise and each Guarantor hereby waives the right to
require the New Credit Agreement Lenders to proceed against the Borrower or
any other Person (including a co-guarantor) or to require the New Credit
Agreement Lenders to pursue any other remedy or enforce any other right. Each
Guarantor further agrees that it shall have no right of subrogation,
indemnity, reimbursement or contribution against the Borrower or any other
Guarantor of the Credit Party Obligations for amounts paid under this
Guaranty until such time as the New Credit Agreement Lenders (and any
Affiliates of New Credit Agreement Lenders entering into Hedging Agreements)
have been paid in full, all Commitments under the Credit Agreement have been
terminated and no Person or Governmental Authority shall have any right to
request any return or reimbursement of funds from the New Credit Agreement
Lenders in connection with monies received under the Credit Documents. Each
Guarantor further agrees that nothing contained herein shall prevent the New
Credit Agreement Lenders from suing on the Notes or any of the other Credit
Documents or any of the Hedging Agreements or foreclosing its security
interest in or Lien on any collateral, if any, securing the Credit Party
Obligations or from exercising any other rights available to it under this
Credit Agreement, the Notes, any other of the Credit Documents, or any other
instrument of security, if any, and the exercise of any of the aforesaid
rights and the completion of any foreclosure proceedings shall not constitute
a discharge of any of any Guarantor's obligations hereunder; it being the
purpose and intent of each Guarantor that its Guarantor's obligations
hereunder shall be absolute, independent and unconditional under any and all
circumstances. Neither any Guarantor's obligations under this Guaranty nor
any remedy for the enforcement thereof shall be impaired, modified, changed
or released in any manner whatsoever by an impairment, modification, change,
release or limitation of the liability of the Borrower or by reason of the
bankruptcy or insolvency of the Borrower. Each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Credit
Party Obligations and notice of or proof of reliance by the Agent or any New
Credit Agreement Lender upon this Guarantee or acceptance of this Guarantee.
The Credit Party Obligations, and any of them, shall conclusively be deemed
to have been created, contracted or incurred, or renewed, extended, amended
or waived, in reliance upon this Guarantee. All dealings between the Borrower
and any of the Guarantors, on the one hand, and the Agent and the New Credit
Agreement Lenders, on the other hand, likewise shall be conclusively presumed
to have been had or consummated in reliance upon this Guarantee.
4.3 Modifications.
Each Guarantor agrees that (a) all or any part of the security now
or hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the New Credit Agreement
Lenders shall not have any obligation to protect, perfect, secure or insure
any such security interests, liens or encumbrances now or hereafter held, if
any, for the Credit Party Obligations or the properties subject thereto; (c)
the time or place of payment of the Credit Party Obligations may be changed
or extended, in whole or in part, to a time certain or otherwise, and may be
renewed or accelerated, in whole or in part; (d) the Borrower and any other
party liable for payment under the Credit Documents may be granted
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indulgences generally; (e) any of the provisions of the Notes or any of the
other Credit Documents may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Borrower or any other party liable for the payment of the Credit Party
Obligations or liable upon any security therefor may be released, in whole or
in part, at, before or after the stated, extended or accelerated maturity of
the Credit Party Obligations, all without notice to or further assent by the
Guarantor, which shall remain bound thereon, notwithstanding any such
exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.4 Waiver of Rights.
Each Guarantor expressly waives: (a) notice of acceptance of this
Guaranty by the New Credit Agreement Lenders and of all extensions of credit
to the Borrower by the Lenders; (b) presentment and demand for payment or
performance of any of the Credit Party Obligations; (c) protest and notice of
dishonor or of default (except as specifically required in the Credit
Agreement) with respect to the Credit Party Obligations or with respect to
any security therefor; (d) notice of the New Credit Agreement Lenders
obtaining, amending, substituting for, releasing, waiving or modifying any
security interest, lien or encumbrance, if any, hereafter securing the Credit
Party Obligations, or the New Credit Agreement Lenders' subordinating,
compromising, discharging or releasing such security interests, liens or
encumbrances, if any; (e) all other notices to which the Guarantor might
otherwise be entitled; and (f) demand for payment under this Guaranty.
4.5 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment
by or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit
Party Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by an
Agent or such New Credit Agreement Lender in connection with such rescission
or restoration, including any such costs and expenses incurred in defending
against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
4.6 Remedies.
The Guarantors agree that, as between the Guarantors, on the one
hand, and the Agent and the New Credit Agreement Lenders, on the other hand,
the Credit Party Obligations may be declared to be forthwith due and payable
as provided in Section 9 (and shall be deemed to have become automatically
due and payable in the circumstances provided in Section 9) notwithstanding
any stay, injunction or other prohibition preventing such declaration (or
preventing such Credit Party
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Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in
accordance with the terms of the Security Agreements and the other Collateral
Documents and that the New Credit Agreement Lenders may exercise their
remedies thereunder in accordance with their terms.
4.7 Limitation of Guaranty.
Notwithstanding any provision to the contrary contained herein or in
any of the Credit Documents, to the extent the obligations of any Guarantor
shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal
law relating to fraudulent conveyances or transfers) then the obligations of
such Guarantor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
4.8 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any
Guarantor shall become an Excess Funding Guarantor (as defined below), each
other Guarantor shall, on demand of such Excess Funding Guarantor (but
subject to the next sentence hereof), pay to such Excess Funding Guarantor an
amount equal to such Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess
Payment (as defined below). The payment obligation of any Guarantor to any
Excess Funding Guarantor under this Section 4.8 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations
of such Guarantor under the other provisions of this Section 4, and such
Excess Funding Guarantor shall not exercise any right or remedy with respect
to such excess until payment and satisfaction in full of all of such
obligations. For purposes hereof, (i) "Excess Funding Guarantor" shall mean,
in respect of any obligations arising under the other provisions of this
Section 4 (hereafter, the "Guaranteed Obligations"), a Guarantor that has
paid an amount in excess of its Pro Rata Share of the Guaranteed Obligations;
(ii) "Excess Payment" shall mean, in respect of any Guaranteed Obligations,
the amount paid by an Excess Funding Guarantor in excess of its Pro Rata
Share of such Guaranteed Obligations; and (iii) "Pro Rata Share", for the
purposes of this Section 4.8, shall mean, for any Guarantor, the ratio
(expressed as a percentage) of (a) the amount by which the aggregate present
fair saleable value of all of its assets and properties exceeds the amount of
all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of
the Borrower and all of the Guarantors exceeds the amount of all of the debts
and liabilities (including contingent, subordinated, unmatured, and
unliquidated liabilities, but excluding the obligations of the Borrower and
the Guarantors hereunder) of the Borrower and all of the Guarantors, all as
of the Closing Date (if any Guarantor becomes a party hereto subsequent to
the Closing Date, then for the purposes of this Section 4.8 such subsequent
Guarantor shall be deemed to have been a Guarantor as of the Closing Date and
the information pertaining to, and
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only pertaining to, such Guarantor as of the date such Guarantor became a
Guarantor shall be deemed true as of the Closing Date).
SECTION 5
CONDITIONS PRECEDENT
5.1 Closing Conditions.
The obligation of the New Credit Agreement Lenders to enter into this
Credit Agreement and make the initial Extension of Credit is subject to
satisfaction of the following conditions (in form and substance acceptable to
the Lenders in their sole discretion):
(a) Executed Credit Documents. Receipt by the Agent of
duly executed copies of: (i) this Credit Agreement; (ii) the Notes;
(iii) the Collateral Documents and (iv) all other Credit Documents.
(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Effective Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Effective Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Effective Date.
(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing would
have a Material Adverse Effect on the business or operations
of a Credit Party in such jurisdiction and (B) to the extent
available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
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(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Effective Date.
(c) Financial Statements. Receipt by the Agent and the Lenders
of (i) the financial statements with respect to the Acquired Assets for
the years ending December 31, 1995, 1996 and 1997, including balance
sheets and income and cash flow statements, in each case audited by
nationally recognized independent public accountants and prepared in
conformity with GAAP, (ii) the consolidated financial statements of the
Borrower and its Subsidiaries for fiscal year ending November 30, 1997,
including balance sheets and income and cash flow statements, audited
by nationally recognized independent public accountants and containing
an unqualified opinion of such firm that such statements fairly present
in all material respects the consolidated financial condition of the
Borrower and its Subsidiaries and have been prepared in conformity with
GAAP, (iii) a satisfactory proforma consolidated balance sheet of the
Borrower and its Subsidiaries as of the Closing Date giving effect to
the acquisition of the Acquired Assets and the transactions
contemplated by the Purchase Agreement and reflecting estimated
purchase price accounting adjustments, prepared by nationally
recognized independent accountants and (v) such other information
relating to the Acquired Assets as the Agent may reasonably require in
connection with the structuring and syndication of credit facilities of
the type described herein.
(d) Opinion of Counsel. Receipt by the Lenders of an opinion,
or opinions (which shall cover, among other things, authority,
legality, validity, binding effect, enforceability and attachment and
perfection of liens), satisfactory to the Agent, addressed to the Agent
on behalf of the Lenders and dated as of the Effective Date, from legal
counsel to the Credit Parties.
(e) Appraisal Report. Receipt by the Lenders of asset
appraisal reports with respect to the Acquired Assets in form and
substance reasonably satisfactory to the Agent.
(f) Personal Property Collateral. The Agent shall have
received, in form and substance satisfactory to the Agent:
(i) to the extent not previously received by the
Agent, searches of Uniform Commercial Code ("UCC") filings in
the jurisdiction of the chief executive office of each Credit
Party and each jurisdiction where any Collateral is located or
where a filing would need to be made in order to perfect the
Lenders' security interest in the Collateral, copies of the
financing statements on file in such jurisdictions and
evidence that no Liens exist other than Permitted Liens;
(ii) to the extent not previously received by the
Agent, duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Lenders' security interest in the
Collateral;
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(iii) to the extent not previously received by the
Agent, searches of ownership of intellectual property in the
appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral;
(iv) to the extent not previously received by the
Agent, all stock certificates evidencing the stock pledged to
the Agent pursuant to the Pledge Agreement, together with duly
executed in blank undated stock powers attached thereto;
(v) to the extent not previously received by the
Agent, all instruments and chattel paper in the possession of
a Credit Party together with allonges or assignments as may be
necessary or appropriate to perfect the Lenders' security
interest in the Collateral; and
(vi) to the extent not previously received by the
Agent, all material contracts or agreements to which a Credit
Party is a party including, without limitation, the Purchase
Agreement together with assignments and third party consents
as may be necessary or appropriate to perfect the Lenders'
security interest in the Collateral.
(g) Real Property Collateral. The Agent shall have received,
in form and substance satisfactory to the Agent:
(i) (A) fully executed and notarized mortgages, deeds
of trust or deeds to secure debt and (B) fully executed
amendments and notarized amendments to existing mortgages,
deeds of trust and deeds to secure debt (each such mortgage,
deed of trust, deed to secure debt, as amended shall be
referred to herein as, a "Mortgage" and collectively as the
"Mortgages") encumbering the fee interest of the Credit
Parties in each real property asset owned by a Credit Party
set forth on Schedule 5.1(g) (each a "Mortgaged Property" and
collectively the "Mortgaged Properties"), together with such
UCC-1 or UCC-3 financing statements, as appropriate, as the
Agent shall deem appropriate with respect to each such
Mortgaged Property;
(ii) an opinion of counsel (which counsel shall be
satisfactory to the Agent) in the state in which each
Mortgaged Property is located with respect to the
enforceability of the form of Mortgage and sufficiency of the
form of UCC-1 or UCC-3 financing statements, as appropriate,
to be recorded or filed in such state and such other matters
as the Agent may request, in form and substance satisfactory
to the Agent;
(iii) to the extent not previously received by the
Agent, in the case of each leasehold estate of the Credit
Parties set forth on Schedule 5.1(g) (each a "Leasehold
Property" and collectively the "Leasehold Properties"), such
estoppel letters, consents and waivers from the landlords of
such real property as may be
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reasonably required by the Agent, which estoppel letters shall
be in form and substance reasonably satisfactory to the Agent;
(iv) to the extent not previously received by the
Agent, ALTA mortgagee title insurance policies (the "Mortgage
Policies") issued by title insurers satisfactory to the Agent
(the "Title Insurance Company"), in amounts satisfactory to
the Agent with respect to all Mortgaged Properties, assuring
the Agent that the applicable Mortgages, as applicable, create
valid and enforceable first priority mortgage liens on the
respective Mortgaged Properties, free and clear of all defects
and encumbrances except Permitted Liens which Mortgage
Policies shall be in form and substance satisfactory to the
Agent and containing such endorsements as shall be
satisfactory to the Agent and for any other matters that the
Agent may request, and shall provide for affirmative insurance
and such reinsurance as the Agent may request, all of the
foregoing in form and substance satisfactory to the Agent;
(v) to the extent not previously received by the
Agent, certification from a registered engineer or land
surveyor in a form reasonably satisfactory to the Agent or
other evidence acceptable to the Agent that none of the
improvements on the Mortgaged Properties are located within
any area designated by the Director of the Federal Emergency
Management Agency as a "special flood hazard" area or if any
improvements on the Mortgaged Properties are located within a
"special flood hazard" area, evidence of a flood insurance
policy from a company and in an amount satisfactory to the
Agent for the applicable portion of the premises, naming the
Agent for the benefit of the Lenders, as mortgagee;
(vi) to the extent not previously received by the
Agent, evidence satisfactory to the Agent that each of the
Mortgaged Properties, and the uses of the Mortgaged
Properties, are in compliance with all applicable laws,
regulations and ordinances including without limitation health
and environmental protection laws, erosion control ordinances,
storm drainage control laws, doing business and/or licensing
laws, zoning laws (the evidence submitted as to zoning should
include the zoning designation made for each of the Mortgaged
Properties, the permitted uses of each such Mortgaged
Properties under such zoning designation and zoning
requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities
for disabled persons including, but not limited to, the
federal Architectural Barriers Act, the Fair Housing
Amendments Act of 1988, the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990.
(h) Availability. After giving effect to the initial Loans
made on the Effective Date, the lesser of (x) the Revolving Committed
Amount and (y) the Borrowing Base shall be at least $3,000,000 in
excess of the sum of the aggregate amount of the Revolving Loans
outstanding plus the aggregate amount of Swingline Loans outstanding.
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(i) Evidence of Insurance. To the extent not previously
received by the Agent, receipt by the Agent of copies of insurance
policies or certificates of insurance of the Borrower and its
Subsidiaries evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as sole loss payee on behalf of the
Lenders.
(j) Corporate Structure. The corporate capital and ownership
structure of the Borrower and its Subsidiaries shall be satisfactory in
form and substance to the Agent.
(k) Certain Consents. Receipt by the Agent of evidence that
(i) all governmental, shareholder and material third party consents
(including, without limitation, Hart-Scott-Rodino clearance), (ii)
evidence satisfactory to the Agent that the consent of any
manufacturers is not required and (iii) written consent, if necessary
in the sole discretion of the Agent, of any existing lenders or
bondholders and approvals necessary or desirable in connection with the
acquisition of the Acquired Assets and the related financings and other
transactions contemplated hereby and expiration of all applicable
waiting periods without any action being taken by any authority that
could reasonably be likely to restrain, prevent or impose any material
adverse conditions on the acquisition of the Acquired Assets or such
other transactions or that could reasonably be likely to seek or
threaten any of the foregoing, and no law or regulation shall be
applicable which in the judgment of the Agent could reasonably be
likely to have such effect.
(l) Material Adverse Effect. (i) With respect to the Borrower
and its Subsidiaries, there shall not have occurred a change since
November 30, 1997 that has had or could reasonably be expected to have
a Material Adverse Effect, including specifically without limitation
any such change resulting from any matter not disclosed in the Purchase
Agreement or resulting from a change in status of any matter disclosed
in the Purchase Agreement (including matters related to litigation,
tax, accounting, labor, insurance and pension liabilities) and (ii)
with respect to the Acquired Assets, there shall not have occurred a
change since December 31, 1997 that has had or could reasonably be
expected to have a material adverse effect on the business, assets,
operations, condition (financial or otherwise) or prospects of the
Acquired Assets.
(m) Litigation. There shall not exist any (i) order, decree,
judgment, ruling or injunction which restrains the consummation of the
acquisition of the Acquired Assets in the manner contemplated by the
Purchase Agreement or (ii) pending or threatened action, suit,
investigation or proceeding which if adversely determined against the
Borrower or any of its Subsidiaries would have or would reasonably be
expected to have a Material Adverse Effect.
(n) Other Indebtedness. Receipt by the Agent of evidence that
after the acquisition of the Acquired Assets, the Borrower and its
Subsidiaries shall have no borrowed money Indebtedness other than (i)
the Indebtedness under the Credit Documents and Supplemental Credit
Documents, (ii) the Subordinated Debt and (iii) other indebtedness
disclosed on Schedule 6.10 attached hereto.
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(o) Solvency Opinion. Receipt by the Lenders of a
certification from an officer of the Borrower as to the financial
condition, solvency and related matters of the Borrower and its
Subsidiaries, in each case after giving effect to the acquisition of
the Acquired Assets and the initial borrowings under the Credit
Documents and Supplemental Credit Documents.
(p) Purchase Agreement. There shall not have been any material
modification, amendment, supplement or waiver to the Purchase Agreement
without the prior written consent of the Lenders, including, but not
limited to, any modification, amendment, supplement or waiver relating
to the amount or type of consideration to be paid in connection with
the acquisition of the Acquired Assets and the contents of all
disclosure schedules and exhibits, and the acquisition of the Acquired
Assets shall have been consummated in accordance with the terms of the
Purchase Agreement and all applicable law and the aggregate cash amount
paid in connection with such acquisition at the Closing Date shall not
exceed $165 million. Receipt by the Agent of the final Purchase
Agreement, together with all exhibits and schedules thereto, certified
by an officer of the Borrower.
(q) Second Indenture. (i) The Borrower shall have entered into
the Second Indenture, which such Second Indenture shall contain
subordination provisions acceptable to the Lenders and otherwise be in
form and substance satisfactory to the Lenders, (ii) the Agent shall
have received a copy, certified by an officer of the Borrower as true
and complete of the Second Indenture and (iii) the Borrower shall have
received proceeds pursuant to the terms of the Second Indenture in an
aggregate principal amount of $175 million (less customary fees and
expenses).
(r) Change in Market. The absence of any material adverse
change in the market for syndicated bank credit facilities similar in
nature to the transactions described herein or a material disruption
of, or a material adverse change in, financial, banking or capital
market conditions.
(s) Officer's Certificate. The Agent shall have received a
certificate executed by the chief financial officer or chief operating
officer of the Borrower as of the Effective Date stating that (A) the
Borrower and each of the Borrower's Subsidiaries are in compliance with
all existing financial obligations, (B) all governmental, shareholder
and third party consents and approvals, if any, with respect to the
Credit Documents and Supplemental Credit Documents and the transactions
contemplated thereby have been obtained, (C) no action, suit,
investigation or proceeding is pending or threatened in any court or
before any arbitrator or governmental instrumentality that purports to
effect the Borrower, any of the Borrower's Subsidiaries or any
transaction contemplated by the Credit Documents or the Supplemental
Credit Documents, or could have or might be reasonably expected to have
a Material Adverse Effect, (D) the transactions contemplated by the
Purchase Agreement have been consummated in accordance with the terms
thereof and (E) immediately after giving effect to this Credit
Agreement, the Supplemental Credit Agreement, the other Credit
Documents, the Supplemental Credit Documents and all the transactions
contemplated herein or therein to occur on such date, (1) the Borrower
and
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each of the Borrower's Subsidiaries is Solvent, (2) no Default or Event
of Default exists, (3) all representations and warranties contained
herein, in the other Credit Documents and the Supplemental Credit
Documents are true and correct in all material respects, and (4) the
Credit Parties are in compliance with each of the financial covenants
set forth in Section 7.12.
(t) Fees and Expenses. Payment by the Credit Parties of all
fees and expenses owed by them to the Lenders and the Agent, including,
without limitation, payment to the Agent of the fees set forth in the
Fee Letter.
(u) First Priority Lien. Receipt by the Agent of evidence
satisfactory in form and substance to the Agent, that the Agent, on
behalf of the Lenders, holds a perfected, first priority lien, subject
to no other Liens other than Permitted Liens, in the Collateral.
(v) Accountant Certificate. Receipt from Arthur Andersen of a
calculation satisfactory to the Agent calculating the Fixed Charge
Coverage Ratio (as defined in the Indenture) at an amount of at least
2.0 to 1.0 after giving effect to (i) the acquisition of the Acquired
Assets and the incurrence of Indebtedness related thereto and (ii) the
incurrence of Indebtedness under this Credit Agreement and the
Supplemental Credit Agreement as of the Closing Date.
(w) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to (after giving effect to the
purchase of the Acquired Assets), information regarding litigation,
tax, accounting, labor, insurance, pension liabilities (actual or
contingent), real estate leases, material contracts, debt agreements,
property ownership and contingent liabilities of the Borrower and its
Subsidiaries.
5.2 Conditions to All Extensions of Credit.
In addition to the conditions precedent stated elsewhere herein, the
New Credit Agreement Lenders shall not be obligated to make, continue or convert
Loans unless:
(a) Notice. The Borrower shall have delivered (i) in the case
of any new Revolving Loan, a Notice of Borrowing, duly executed and
completed, by the time specified in Section 2.1 and (ii) in the case of
any continuation or conversion of a Loan, a duly executed and completed
Notice of Continuation/Conversion by the time specified in Section 2.2;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in any Credit Document and any
Supplemental Credit Document are true and correct in all material
respects at and as if made as of such date;
(c) No Default. No Default or Event of Default shall
exist or be continuing either prior to or after giving effect
thereto;
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(d) No Material Adverse Effect. There shall not have occurred
any Material Adverse Effect; and
(e) Availability. Immediately after giving effect to the
making of such Loan (and the application of the proceeds thereof), the
sum of the Revolving Loans outstanding plus Swingline Loans outstanding
shall not exceed the Revolving Commitment Amount.
The delivery of each Notice of Borrowing and each Notice of Extension/Conversion
shall constitute a representation and warranty by the Borrower of the
correctness of the matters specified in subsections (b), (c), (d) and (e) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each New Credit
Agreement Lender that:
6.1 Financial Condition.
The financial statements delivered to the Lenders pursuant to Section
5.1(c)(ii), (a) have been prepared in accordance with GAAP and (b) present
fairly (on the basis disclosed in the footnotes to such financial statements)
the consolidated and consolidating (as applicable) financial condition, results
of operations and cash flows of the Credit Parties and their Subsidiaries as of
such date and for such periods. Since November 30, 1996, there has been no sale,
transfer or other disposition by the Borrower or any of its Subsidiaries of any
material part of the business or property of the Borrower or any of its
Subsidiaries, and no purchase or other acquisition by any of them of any
business or property (including any capital stock of any other Person) material
in relation to the consolidated financial condition of the Borrower and its
Subsidiaries, in each case, which, is not reflected in the foregoing financial
statements or in the notes thereto.
6.2 No Material Change.
Since November 30, 1996, (a) there has been no development or event
relating to or affecting Borrower or any of its Subsidiaries which has had or
would be reasonably expected to have a Material Adverse Effect and (b) no
dividends or other distributions have been declared, paid or made upon the
capital stock or other equity interest in Borrower or any of its Subsidiaries
nor, except as otherwise permitted under this Credit Agreement, has any of the
capital stock or other equity interest in a Credit Party been redeemed, retired,
purchased or otherwise acquired for value.
6.3 Organization and Good Standing.
The Borrower and each of its Subsidiaries (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
(or other jurisdiction) of its
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incorporation, (b) is duly qualified and in good standing as a foreign
corporation authorized to do business in every jurisdiction where the failure to
be so qualified would have a Material Adverse Effect and (c) has the requisite
corporate power and authority to own its properties and to carry on its business
as now conducted and as proposed to be conducted.
6.4 Due Authorization.
Each Credit Party (a) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and therein
provided for and (b) is duly authorized to, and has been authorized by all
necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws, (b) violate, contravene or materially conflict with any
Requirement of Law or any other law, regulation (including, without limitation,
Regulation U or Regulation X), order, writ, judgment, injunction, decree or
permit applicable to it, (c) violate, contravene or conflict with contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, deed of trust, contract or other agreement or instrument to
which it is a party or by which it may be bound, the violation of which could
have or might be reasonably expected to have a Material Adverse Effect, or (d)
result in or require the creation of any Lien (other than those contemplated in
or created in connection with the Credit Documents) upon or with respect to its
properties.
6.6 Consents.
No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or third
party in respect of a Credit Party is required in connection with the execution,
delivery or performance of this Credit Agreement or any of the other Credit
Documents by a Credit Party, or if required, such consent, approval and
authorization has been obtained.
6.7 Enforceable Obligations.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
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6.8 No Default.
Neither the Borrower nor any of its Subsidiaries is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default would have or would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed to the New Credit Agreement
Lenders.
6.9 Ownership.
The Borrower and each of its Subsidiaries is the owner of and has good
and marketable title to all of its assets and none of such assets are subject to
any Lien other than Permitted Liens.
6.10 Indebtedness.
The Borrower and its Subsidiaries have no Indebtedness except (a) as
disclosed in the financial statements referenced in Section 6.1, (b) as set
forth on Schedule 6.10 and (c) as otherwise permitted by this Credit Agreement.
6.11 Litigation.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against the Borrower or any of its Subsidiaries which, if adversely
determined, would have or would be reasonably expected to have a Material
Adverse Effect.
6.12 Taxes.
Each of the Borrower and its Subsidiaries has filed, or caused to be
filed, all tax returns (federal, state, local and foreign) required to be filed
and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware of any proposed tax assessments
against it, any of its Subsidiaries or any other Credit Party.
6.13 Compliance with Law.
Each of the Borrower and its Subsidiaries is in compliance with all
Requirements of Law and all other laws, rules, regulations, orders and decrees
(including without limitation Environmental Laws) applicable to it, or to its
properties, unless such failure to comply would not have or would not be
reasonably expected to have a Material Adverse Effect. No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect.
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6.14 ERISA.
Except as set forth on Schedule 6.14 or except as would not result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no Termination Event
has occurred, and, to the best knowledge of the Credit Parties, no
event or condition has occurred or exists as a result of which any
Termination Event could reasonably be expected to occur, with respect
to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and Section 412 of the Code, whether or
not waived, has occurred with respect to any Plan; (iii) each Plan has
been maintained, operated, and funded in compliance with its own terms
and in material compliance with the provisions of ERISA, the Code, and
any other applicable federal or state laws; and (iv) no lien in favor
or the PBGC or a Plan has arisen or is reasonably likely to arise on
account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not, as of the last
annual valuation date prior to the date on which this representation is
made or deemed made, exceed the current value of the assets of such
Plan allocable to such accrued liabilities.
(c) Neither the Borrower, nor any of its Subsidiaries nor any
ERISA Affiliate has incurred, or, to the best knowledge of the Credit
Parties, are reasonably expected to incur, any withdrawal liability
under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower, nor any of its Subsidiaries nor any ERISA
Affiliate has received any notification that any Multiemployer Plan is
in reorganization (within the meaning of Section 4241 of ERISA), is
insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no
Multiemployer Plan is, to the best knowledge of the Credit Parties,
reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject the Borrower or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l)
of ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Borrower or any of its Subsidiaries or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) The present value (determined using actuarial and other
assumptions which are reasonable with respect to the benefits provided
and the employees participating) of the liability of the Borrower and
its Subsidiaries and each ERISA Affiliate for post-retirement welfare
benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of
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ERISA), net of all assets under all such Plans allocable to such
benefits, are reflected on the Financial Statements in accordance with
FAS 106.
(f) Each Plan which is a welfare plan (as defined in Section
3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of
the Code apply has been administered in compliance in all material
respects with such sections.
6.15 Subsidiaries.
Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of each Credit Party. Information on Schedule 6.15 includes
jurisdiction of incorporation, the number of shares of each class of capital
stock or other equity interests outstanding, the number and percentage of
outstanding shares of each class owned (directly or indirectly) by such Credit
Party; and the number and effect, if exercised, of all outstanding options,
warrants, rights of conversion or purchase and all other similar rights with
respect thereto. The outstanding capital stock and other equity interests of all
such Subsidiaries is validly issued, fully paid and non-assessable and is owned
by each such Credit Party, directly or indirectly, free and clear of all Liens
(other than those arising under or contemplated in connection with the Credit
Documents and Supplemental Credit Documents). Other than as set forth in
Schedule 6.15, neither any Credit Party nor any Subsidiary thereof has
outstanding any securities convertible into or exchangeable for its capital
stock nor does any such Person have outstanding any rights to subscribe for or
to purchase or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to its capital stock.
6.16 Use of Proceeds; Margin Stock.
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.10. None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X or Regulation G, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
U, Regulation X, Regulation G or Regulation T. None of the Credit Parties owns
any "margin stock".
6.17 Government Regulation.
No Credit Party is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 or the Interstate Commerce Act, each as amended. In addition, no Credit
Party is (a) an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended, or controlled by such a
company, or (b) a "holding company," or a "Subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "Subsidiary" or a
"holding company," within the meaning of the Public Utility Holding Company Act
of 1935, as amended. No director, executive officer or principal shareholder of
the Borrower or any of its Subsidiaries is a director, executive officer or
principal shareholder of any Lender. For the
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purposes hereof the terms "director", "executive officer" and "principal
shareholder" (when used with reference to any Lender) have the respective
meanings assigned thereto in Regulation O issued by the Board of Governors of
the Federal Reserve System.
6.18 Environmental Matters.
(a) Except as set forth on Schedule 6.18.
(i) each of the Real Properties and all operations at
the Real Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the
businesses operated by the Borrower or any of its Subsidiaries
(the "Businesses"), and there are no conditions relating to
the Businesses or Real Properties that could give rise to
liability under any applicable Environmental Laws.
(ii) None of the Real Properties contains, or has
previously contained, any Hazardous Materials at, on or under
the Real Properties in amounts or concentrations that, if
released, constitute or constituted a violation of, or could
give rise to liability under, Environmental Laws.
(iii) Neither the Borrower nor any of its
Subsidiaries has received any written or oral notice of, or
inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or
potential liability regarding Hazardous Materials or
compliance with Environmental Laws with regard to any of the
Real Properties, Leasehold Properties or the Businesses, nor
does the Borrower or any of its Subsidiaries have knowledge or
reason to believe that any such notice is being threatened.
(iv) Hazardous Materials have not been transported or
disposed of from the Real Properties, or generated, treated,
stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on
behalf or with the permission of, the Borrower or any of its
Subsidiaries in a manner that would reasonably be expected to
give rise to liability under any applicable Environmental Law.
(v) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower or any of its Subsidiaries, threatened, under any
Environmental Law to which the Borrower or any of its
Subsidiaries is or will be named as a party, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to the Borrower or any of its Subsidiaries,
the Real Properties or the Businesses.
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(vi) There has been no release or threat of release
of Hazardous Materials at or from the Real Properties or
arising from or related to the operations (including, without
limitation, disposal) of the Borrower or any of its
Subsidiaries in connection with the Real Properties or
otherwise in connection with the Businesses.
(vii) Neither the Borrower nor any of its
Subsidiaries has assumed any liability of any Person (other
than another Credit Party) under any Environmental Law.
(b) The Borrower has adopted procedures that are designed to
(i) ensure that each Credit Party and their Subsidiaries, any of their
operations and each of the properties owned or leased by each Credit
Party and their Subsidiaries remains in compliance with applicable
Environmental Laws and (ii) minimize any liabilities or potential
liabilities that each Credit Party and their Subsidiaries, any of their
operations and each of the properties owned or leased by each Credit
Party and their Subsidiaries may have under applicable Environmental
Laws.
6.19 Intellectual Property.
The Borrower and each of its Subsidiaries owns, or has the legal right
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes (the "Intellectual Property") necessary for each of them to conduct
its business as currently conducted except for those the failure to own or have
such legal right to use would not have or be reasonably expected to have a
Material Adverse Effect. Set forth on Schedule 6.19 is a list of all
Intellectual Property owned by the Borrower and its Subsidiaries or that the
Borrower or one of its Subsidiaries has the right to use (which list shall
identify the Person that owns or has the right to use each such item of
Intellectual Property). Except as provided on Schedule 6.19, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and to
the Credit Parties' knowledge the use of such Intellectual Property by the
Borrower or any of its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, would
not have or be reasonably expected to have a Material Adverse Effect.
6.20 Solvency.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement and the Supplemental Credit Agreement,
will be Solvent.
6.21 Investments.
All Investments of the Borrower and each of its Subsidiaries are either
Permitted Investments or otherwise permitted by the terms of this Credit
Agreement.
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6.22 No Financing of Corporate Takeovers.
No proceeds of the Loans hereunder have been or will be used to
acquire, directly or indirectly, any security in any transaction which is
subject to Sections 13 or 14 of the Securities Exchange Act of 1934, as amended
(including, without limitation, Sections 13(d) and 14(d) thereof) or to
refinance any Indebtedness used to acquire any such securities.
6.23 Location of Collateral.
Set forth on Schedule 6.23(a) is a list of all Real Properties and
Leasehold Properties with street address, county and state where located. Set
forth on Schedule 6.23(b) is a list of all locations where any personal property
of a Credit Party is located, including county and state where located. Set
forth on Schedule 6.23(c) is the chief executive office and principal place of
business of each Credit Party.
6.24 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the New Credit Agreement Lenders nor any other document, certificate or
statement furnished to the New Credit Agreement Lenders by or on behalf of any
Credit Party in connection with the transactions contemplated hereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein or herein not
misleading.
6.25 Licenses, etc.
The Borrower and each of its Subsidiaries has obtained and holds in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
6.26 No Burdensome Restrictions.
Neither the Borrower nor any Subsidiary of the Borrower is a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, would have or be reasonably expected to
have a Material Adverse Effect.
6.27 Brokers' Fees.
No Credit Party has any obligation to any Person in respect of any
finder's, broker's, investment banking or other similar fee in connection with
any of the transactions contemplated under the Credit Documents.
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6.28 Labor Matters.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any Subsidiary of the Borrower and
none of such Persons has suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
6.29 Collateral Documents.
The Collateral Documents create valid security interests in, and first
Liens on, the Collateral purported to be covered thereby, which security
interests and Liens are and will remain perfected security interests and Liens,
prior to all other Liens other than Permitted Liens. Each of the representations
and warranties made by the Borrower and its Subsidiaries in the Collateral
Documents is true and correct.
6.30 Related Transactions.
The closing of the acquisition of the Acquired Assets will occur
simultaneously with the making of the initial Loans hereunder and under the
Supplemental Credit Agreement and no party has waived, without the consent of
the Required Lenders, any condition precedent to their obligations to close as
set forth in the Purchase Agreement. True and complete copies of the Purchase
Agreement have been delivered to each of the New Credit Agreement Lenders,
together with a true and complete copy of each document to be delivered at the
closing of the acquisition of the Acquired Assets.
6.31 Representations and Warranties Incorporated from Purchase
Agreement.
As of the Closing Date, each of the representations and warranties made
in the Purchase Agreement by each of the parties thereto is true and correct in
all material respects, and such representations and warranties are hereby
incorporated herein by reference with the same effect as though set forth in
their entirety herein, as qualified therein.
6.32 Senior Debt.
(a) The Loans are Senior Debt (as defined in the Indenture) under
Article 10.02 of the Indenture, meaning New Credit Agreement Lenders shall have
all of the rights and privileges of a holder of Senior Debt (as defined in the
Indenture) under the Indenture including, but not limited to, the rights set
forth in Article 10 of the Indenture, (b) this Credit Agreement is the New
Credit Agreement (as defined in the Indenture) and (c) the Loans are Senior
Indebtedness (as defined in the Second Indenture) under the Second Indenture,
meaning the New Credit Agreement Lenders shall have all of the rights and
privileges of a holder of Senior Indebtedness (as defined in the Second
Indenture) under the Second Indenture.
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SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Borrower will furnish, or cause to be furnished, to the Agent:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Borrower, a consolidated and consolidating balance sheet and income
statement of the Borrower and its Subsidiaries, as of the end of such
fiscal year, together with related consolidated and consolidating
statements of operations and retained earnings and of cash flows for
such fiscal year, setting forth in comparative form consolidated
figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and audited by
independent certified public accountants of recognized national
standing reasonably acceptable to the Agent and whose opinion shall be
to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
the Borrower (other than the fourth fiscal quarter, in which case 120
days after the end thereof) a consolidated balance sheet and income
statement of the Borrower and its Subsidiaries, as of the end of such
fiscal quarter, together with related consolidated statements of
operations and retained earnings and of cash flows for such fiscal
quarter in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal year, all
such financial information described above to be in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied by a
certificate of the chief financial officer of the Borrower to the
effect that such quarterly financial statements fairly present in all
material respects the financial condition of the Borrower and its
Subsidiaries and have been prepared in accordance with GAAP, subject to
changes resulting from audit and normal year-end audit adjustments.
(c) Monthly Financial Statements. As soon as available and in
any event within 20 days after the end of each month of the Borrower
(other than the last month of the first three fiscal quarters in which
case 45 days after the end thereof), a consolidated balance sheet and
income statement of the Borrower and its Subsidiaries as at the end of
such month together with (i) related consolidated statements of
operations and retained earnings for such month in each case setting
forth in comparative form consolidated figures for the corresponding
period of the preceding fiscal year and (ii) a separate
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income statement for each Foreign Subsidiary (and such other financial
information as reasonably requested by the Agent or the Required
Lenders), all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of the chief financial officer of the
Borrower to the effect that such monthly financial statements fairly
present in all material respects the financial condition of the
Borrower and its Subsidiaries and have been prepared in accordance with
GAAP, subject to changes resulting from audit and normal year-end audit
adjustments.
(d) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit 7.1(d), (i) demonstrating
compliance with the financial covenants contained in Section 7.12 by
calculation thereof as of the end of each such fiscal period and (ii)
stating that no Default or Event of Default exists, or if any Default
or Event of Default does exist, specifying the nature and extent
thereof and what action the Borrower proposes to take with respect
thereto. The Borrower shall also deliver a copy of such certificate to
the Agency Services Address.
(e) Annual Business Plan and Budgets. At least 60 days after
the end of each fiscal year of the Borrower, beginning with the fiscal
year ending November 30, 1998, an annual business plan and budget of
the Borrower and its Subsidiaries containing, among other things, pro
forma financial statements for the next fiscal year.
(f) Borrowing Base Certificate. Within 20 days after the end
of each calendar month, a Borrowing Base Certificate as of the end of
the immediately preceding month, substantially in the form of Exhibit
7.1(f) and certified by the chief financial officer of the Borrower to
be true and correct as of such date.
(g) Compliance With Certain Provisions of the Credit
Agreement. Within 120 days after the end of each fiscal year of the
Borrower, the Borrower shall deliver a certificate, containing
information regarding (i) the calculation of Excess Cash Flow and (ii)
the amount of any Asset Dispositions, Debt Issuances, Equity Issuances
and Recovery Events that were made during the prior fiscal year.
(h) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(i) Auditor's Reports. Promptly upon receipt thereof, a copy
of any "management letter" submitted by independent accountants to the
Borrower or any of its Subsidiaries in connection with any annual,
interim or special audit of the books of the Borrower or any of its
Subsidiaries.
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(j) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as the Borrower or any of its Subsidiaries shall send to its
shareholders generally or to a holder of any Indebtedness owed by the
Borrower or any of its Subsidiaries in its capacity as such a holder
and (b) upon the written request of the Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(k) Notices. Upon a Credit Party obtaining knowledge thereof,
such Credit Party will give written notice to the Agent immediately of
(a) the occurrence of an event or condition consisting of a Default or
Event of Default, specifying the nature and existence thereof and what
action the Borrower proposes to take with respect thereto, and (b) the
occurrence of any of the following with respect to the Borrower or any
of its Subsidiaries (i) the pendency or commencement of any litigation,
arbitral or governmental proceeding against the Borrower or any of its
Subsidiaries which if adversely determined would have or would be
reasonably expected to have a Material Adverse Effect, or (ii) the
institution of any proceedings against the Borrower or any of its
Subsidiaries with respect to, or the receipt of notice by such Person
of potential liability or responsibility for violation, or alleged
violation of any federal, state or local law, rule or regulation,
including but not limited to, Environmental Laws, the violation of
which would have or would be reasonably expected to have a Material
Adverse Effect.
(l) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, Borrower will give written
notice to the Agent and each of the New Credit Agreement Lenders
promptly (and in any event within five Business Days) of: (i) any event
or condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, a Termination Event; (ii)
with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against the Borrower or any of its ERISA Affiliates, or of a
determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure to make full payment on or before the due date (including
extensions) thereof of all amounts which the Borrower or any of its
Subsidiaries or ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding
standard set forth in ERISA and the Code with respect thereto; or (iv)
any change in the funding status of any Plan that could have a Material
Adverse Effect; together, with a description of any such event or
condition or a copy of any such notice and a statement by the principal
financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any,
which has been or is being taken or is proposed to be taken by the
Credit Parties with respect thereto. Promptly upon request, the
Borrower shall furnish the Agent and each of the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
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report/return (Form 5500 series), as well as all schedules and
attachments thereto required to filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(m) Environmental.
(i) Upon the reasonable written request of the Agent,
the Borrower will furnish or cause to be furnished to the
Agent, at the Borrower's expense, an environmental assessment
of reasonable scope, form and depth, (including, where
appropriate, invasive soil or groundwater sampling) by a
consultant reasonably acceptable to the Agent as to the nature
and extent of the presence of any Hazardous Materials on any
property owned, leased or operated by the Borrower or any of
its Subsidiaries and as to the compliance by the Borrower and
each of its Subsidiaries with Environmental Laws. If the
Borrower fails to deliver such an environmental report within
seventy-five (75) days after receipt of such written request
then the Agent may arrange for same, and the Borrower hereby
grants to the Agent and its representatives access to the Real
Properties and a license to undertake such an assessment
(including, where appropriate, invasive soil or groundwater
sampling). The reasonable cost of any assessment arranged for
by the Agent pursuant to this provision will be payable by the
Borrower on demand and added to the obligations secured by the
Collateral Documents.
(ii) The Borrower and each of its Subsidiaries will
conduct and complete all investigations, studies, sampling,
and testing and all remedial, removal, and other actions
necessary to address all Hazardous Materials on, from, or
affecting any real property owned or leased by the Borrower or
its Subsidiaries to the extent necessary to be in compliance
with all Environmental Laws and all other applicable federal,
state, and local laws, regulations, rules and policies and
with the orders and directives of all Governmental Authorities
exercising jurisdiction over such real property to the extent
any failure would have or be reasonably expected to have a
Material Adverse Effect.
(n) Star Report. At the time of delivery of the financial
statements provided for in Section 7.1(b) above, a company-prepared
report containing information as to brand sales and advertising cost
analysis for the fiscal quarter of the Borrower most recently ending.
(o) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Borrower and its Subsidiaries as the
Agent or the Required Lenders may reasonably request.
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7.2 Preservation of Existence and Franchises.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, do all things necessary to preserve and keep in full force and
effect in all material respects its existence, rights, franchises and authority.
7.3 Books and Records.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
7.4 Compliance with Law.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders, and all
applicable restrictions imposed by all Governmental Authorities, applicable to
it and its property (including, without limitation, Environmental Laws) if
noncompliance with any such law, rule, regulation, order or restriction would
have or reasonably be expected to have a Material Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will, and will cause its Subsidiaries to,
pay and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that a Credit Party or
its Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, claim or Indebtedness which is being contested in good faith by
appropriate proceedings and as to which adequate reserves therefor have been
established in accordance with GAAP, unless the failure to make any such payment
(i) would give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) would have a Material Adverse Effect.
7.6 Insurance.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
(including worker's compensation insurance, liability insurance, casualty
insurance and business interruption insurance) in such amounts, covering such
risks and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice. All liability policies shall
have each New Credit Agreement Lender as an additional insured and all casualty
policies shall have the Agent, on behalf of the Lenders, as loss payee.
In the event there occurs any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to
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the Agent generally describing the nature and extent of such damage or
destruction. Subsequent to any loss, damage to or destruction of the Collateral
of any Credit Party or any part thereof, such Credit Party, whether or not the
insurance proceeds, if any, received on account of such damage or destruction
shall be sufficient for that purpose, at such Credit Party's cost and expense,
will promptly repair or replace the Collateral of such Credit Party so lost,
damaged or destroyed; provided, however, that such Credit Party shall not be
obligated to repair or replace any Collateral so lost, damaged or destroyed to
the extent the failure to make such repair or replacement (a) is desirable to
the proper conduct of the business of such Credit Party in the ordinary course
and otherwise is in the best interest of such Credit Party and (b) would not
materially impair the rights and benefits of the Agent or the New Credit
Agreement Lenders under this Credit Agreement or any other Credit Document. In
the event a Credit Party shall receive any insurance proceeds, as a result of
any loss, damage or destruction, in a net amount in excess of $100,000, such
Credit Party will immediately pay over such proceeds to the Agent as cash
collateral for the Credit Party Obligations. The Agent agrees to release such
insurance proceeds to such Credit Party for replacement or restoration of the
portion of the Collateral of such Credit Party lost, damaged or destroyed if,
(A) within 120 days from the date the Agent receives such insurance proceeds,
the Agent has received written application for such release from such Credit
Party together with evidence reasonably satisfactory to it that the Collateral
lost, damaged or destroyed has been or will be replaced or restored to its
condition (or by Collateral having a value at least equal to the condition of
the asset subject to the loss, damage or destruction) immediately prior to the
loss, destruction or other event giving rise to the payment of such insurance
proceeds and (B) on the date of such release no Default or Event of Default
exists. If the conditions in the preceding sentence are not met, the Agent
shall, on the first Business Day subsequent to the date 120 days after it
received such insurance proceeds, apply such insurance proceeds as a mandatory
prepayment of the Credit Party Obligations for application in accordance with
the terms of Section 3.3(b)(v) and Section 3.3(c). All insurance proceeds shall
be subject to the security interest of the New Credit Agreement Lenders under
the Collateral Documents.
The present insurance coverage of the Borrower and its Subsidiaries is outlined
as to carrier, policy number, expiration date, type and amount on Schedule 7.6,
as Schedule 7.6 may be amended from time to time by written notice to the Agent.
7.7 Maintenance of Property.
Each of the Credit Parties will, and will cause its Subsidiaries to,
maintain and preserve its properties and equipment in good repair, working order
and condition, normal wear and tear excepted, and will make, or cause to be
made, in such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
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7.8 Performance of Obligations.
Each of the Credit Parties will, and will cause its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
7.9 Collateral.
If, subsequent to the Closing Date, a Credit Party shall (a) acquire or
lease any real property or (b) acquire any intellectual property, securities
instruments, chattel paper or other personal property required to be delivered
to the Agent as Collateral hereunder or under any of the Collateral Documents,
the Borrower shall immediately notify the Agent of same. Each Credit Party shall
take such action (including, but not limited to, the actions set forth in
Sections 5.1(f) and (g)), as requested by the Agent and at its own expense, to
ensure that the Lenders have a first priority perfected Lien in all owned real
property (and in such leased real property as requested by the Agent or the
Required Lenders) and all personal property of the Credit Parties (whether now
owned or hereafter acquired), subject only to Permitted Liens. Each Credit Party
shall adhere to the covenants regarding the location of personal property as set
forth in the Security Agreements.
7.10 Use of Proceeds.
The Credit Parties will use proceeds of the Loans solely (a) to
refinance on the Closing Date the existing Indebtedness of the Borrower under
the Prior New Credit Agreement, (b) to provide working capital and (c) for
general corporate purposes.
7.11 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause its Subsidiaries to, permit representatives appointed
by the Agent or any Lender, including, without limitation, independent
accountants, agents, attorneys and appraisers to visit and inspect such Credit
Party's (or its Subsidiary's) property, including its books and records, its
accounts receivable and inventory, its facilities and its other business assets,
and to make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of the Credit Parties and their Subsidiaries. The Credit Parties
agree that the Agent, and its representatives, may conduct an annual audit of
the Collateral, at the expense of the Borrower.
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7.12 Financial Covenants.
(a) Interest Coverage Ratio. The Interest Coverage Ratio, as
of the end of each fiscal quarter, shall be greater than or equal to:
(i) From the Effective Date to and including
August 31, 1998, 1.30 to 1.0;
(ii) From September 1, 1998 and thereafter, 1.40
to 1.0.
(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio, as of the end of each fiscal quarter, shall be greater than or
equal to:
(i) From the Effective Date to and including
August 31, 1998, 1.10 to 1.0; and
(ii) From September 1, 1998 and thereafter, 1.20
to 1.0.
(c) Leverage Ratio. The Leverage Ratio, as of the end of each
fiscal quarter, shall be less than or equal to:
(i) From the Effective Date to and including
August 30, 1998, 10.0 to 1.0;
(ii) From August 31, 1998 to and including
November 29, 1998, 8.50 to 1.0;
(iii) From November 30, 1998 to and including
February 27, 1999, 7.50 to 1.0;
(iv) From February 28, 1999 to and including May
30, 1999, 6.75 to 1.0;
(v) From May 31, 1999, to and including August
30, 1999, 5.50 to 1.0; and
(vi) From August 31, 1999 and thereafter, 5.0 to
1.0.
(d) Senior Leverage Ratio. The Senior Leverage Ratio, as of
the end of each fiscal quarter, shall be less than or equal to:
(i) From the Effective Date to and including May
31, 1998, 3.25 to 1.0;
(ii) From June 1, 1998 to and including August
31, 1998, 3.0 to 1.0; and
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(iii) From September 1, 1998 and thereafter, 2.50
to 1.0.
(e) Net Worth. At all times Net Worth shall be no less than
Four Million Seven Hundred Thousand ($4,700,000) increased on a
cumulative basis, commencing with the fiscal quarter ending May 31,
1998, by an amount equal to, (i) as of the last day of each fiscal
quarter, 50% of Net Income for the fiscal quarter then ended (without
deductions for any losses) plus (ii) 100% of the Net Cash Proceeds from
any Equity Issuance subsequent to the Closing Date.
(f) Appraised Brand Value. As of the end of each fiscal
quarter of the Borrower, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the most recent appraised value
of all brands or product lines of the Borrower and its Subsidiaries on
a consolidated basis on such date shall be greater than or equal to
$340 million.
7.13 Additional Credit Parties.
At the time any Person becomes a Subsidiary of a Credit Party, the
Borrower shall so notify the Agent and promptly thereafter (but in any event
within 30 days after the date thereof) shall cause such Person to (a) if it is a
Domestic Subsidiary, execute a Joinder Agreement in substantially the same form
as Exhibit 7.13, (b) cause all of the capital stock of such Person (if such
Person is a Domestic Subsidiary) or 65% of the capital stock of such Person (if
such Person is a Foreign Subsidiary) to be delivered to the Agent (together with
undated stock powers signed in blank) and pledged to the Agent pursuant to an
appropriate pledge agreement in substantially the form of the Pledge Agreement
and otherwise in a form acceptable to the Agent, (c) if such Person is a
Domestic Subsidiary, pledge all of its assets to the Lenders pursuant to a
security agreement in substantially the form of the Security Agreements and
otherwise in a form acceptable to the Agent, (d) if such Person has any
Subsidiaries, (i) deliver all of the capital stock of such Domestic Subsidiaries
and 65% of the capital stock of such Foreign Subsidiaries (together with undated
stock powers signed in blank) to the Agent and (ii) execute a pledge agreement
in substantially the form of the Pledge Agreement and otherwise in a form
acceptable to the Agent, (e) if such Person owns or leases any real property in
the United States of America, execute any and all necessary mortgages, deeds of
trust, deeds to secure debt, leasehold mortgages, collateral assignments of
leaseholds or other appropriate real estate collateral documentation in a form
acceptable to the Agent and (f) deliver such other documentation as the Agent
may reasonably request in connection with the foregoing, including, without
limitation, appropriate UCC-1 financing statements, real estate title insurance
policies, environmental reports, landlord waivers, certified resolutions and
other organizational and authorizing documents of such Person and favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above), all in form, content and scope reasonably satisfactory to
the Agent.
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7.14 Ownership of Subsidiaries.
The Borrower shall at all times own 100% of the capital stock of its
Subsidiaries (other than to the extent necessary for Chattem (U.K.) Limited and
HBA Insurance Ltd. to qualify for incorporation in their respective countries of
incorporation, any nominal qualifying shares owned by any necessary governmental
authorities) and may not sell, transfer or otherwise dispose of any shares of
capital stock of any of its Subsidiaries.
7.15 Appraisal Reports.
The Borrower and its Subsidiaries shall provide the Agent, upon the
request of the Agent and at the expense of the Borrower, with asset appraisal
reports with respect to the real and personal property of the Borrower and its
Subsidiaries including, without limitation, appraisals of brand values
(provided, however, the Borrower shall not be required to pay for more than one
appraisal of brand values per year). In the event the Agent needs more than one
asset appraisal report of the real and personal property of the Borrower and its
Subsidiaries during any year, the Agent shall have the right to pay and arrange
for such report.
7.16 Year 2000 Compatibility.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, take all action necessary to assure that its computer based
systems are able to operate and effectively process data including dates on and
after January 1, 2000, and, at the reasonable request of the Agent or the
Required Lenders, the Credit Parties will provide evidence to the Lenders of
such year 2000 compatibility.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
No Credit Party will, nor will it permit any of its Subsidiaries to,
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement,
the other Credit Documents and the Supplemental Credit Documents;
(b) the Subordinated Debt;
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(c) Indebtedness existing as of the Closing Date as referenced
in Section 6.10 (and renewals, refinancings or extensions thereof on
terms and conditions no more favorable, in the aggregate, to such
Person than such existing Indebtedness and in a principal amount not in
excess of that outstanding as of the date of such renewal, refinancing
or extension);
(d) Indebtedness owing by one Credit Party to another Credit
Party;
(e) purchase money Indebtedness (including Capital Leases)
incurred by the Borrower or any of its Subsidiaries to finance the
purchase of fixed assets; provided that (i) the total of all such
Indebtedness for all such Persons taken together shall not exceed an
aggregate principal amount of $2,000,000.00 at any one time outstanding
(including any such Indebtedness referred to in subsection (c) above);
(ii) such Indebtedness when incurred shall not exceed the purchase
price of the asset(s) financed; and (iii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing;
(f) obligations of the Credit Parties evidenced by the
interest rate protection agreements referred to in Section 7.14 of the
Supplemental Credit Agreement;
(g) Indebtedness incurred by Foreign Subsidiaries not to
exceed $500,000.00, in the aggregate, at any one time outstanding
(including any such Indebtedness referred to in subsection (c) above);
and
(h) the Additional Subordinated Debt.
8.2 Liens.
No Credit Party will, nor will it permit its Subsidiaries to, contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
No Credit Party will, nor will it permit its Subsidiaries to, alter the
character of its business from that conducted as of the Closing Date or engage
in any business other than the business conducted as of the Closing Date, which
with respect to Signal shall be limited to the ownership of trademarks and
tradenames for the purpose of licensing such trademarks and tradenames to the
Borrower.
8.4 Consolidation and Merger.
No Credit Party will, nor will it permit its Subsidiaries to, enter
into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); provided that
notwithstanding the foregoing provisions of this Section 8.4, the
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following actions may be taken if (a) the Agent is given prior written notice of
such action, and the Credit Parties execute and deliver such documents,
instruments and certificates as the Agent may request in order to maintain the
perfection and priority of the Liens on the assets of the Credit Parties and (b)
after giving effect thereto no Default or Event of Default exists:
(i) any Credit Party may be merged or consolidated with or
into the Borrower or any Credit Party (other than the Borrower) may be
merged or consolidated with or into any other Credit Party; provided
that if such transaction shall be between the Borrower and another
Credit Party, the Borrower shall be the continuing or surviving
corporation; and
(ii) any Foreign Subsidiary may merge or consolidate with any
other Foreign Subsidiary.
8.5 Sale or Lease of Assets.
No Credit Party will, nor will it permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business or assets whether now
owned or hereafter acquired, including, without limitation, inventory,
receivables, real property, leasehold interests, equipment and securities other
than (a) any inventory or other assets sold, leased or disposed of (or
simultaneously replaced with like goods) in the ordinary course of business, (b)
obsolete, idle or worn-out assets no longer used or useful in its business, (c)
the sale, lease or transfer or other disposal by a Credit Party other than the
Borrower of any or all of its assets to the Borrower or to any other Credit
Party, or (d) sales of product lines (or the right to produce a consumer product
or products) provided that the dispositions permitted under this subparagraph
(d) during the term of this Credit Agreement shall be limited to product lines
(or the right to produce a consumer product or products) having sales for the
twelve-month period ending on the fiscal quarter ending immediately preceding
the sale in an aggregate amount of $4,000,000 or less.
8.6 Advances, Investments and Loans.
No Credit Party will, nor will it permit any of its Subsidiaries to,
make any Investments except for Permitted Investments.
8.7 Dividends.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly, (a) declare or pay any dividends (whether cash or
otherwise) or make any other distribution upon any shares of its capital stock
of any class other than the payment of dividends by the Subsidiaries of the
Borrower to the Borrower or (b) other than Permitted Investments purchase,
redeem or otherwise acquire or retire or make any provisions for redemption,
acquisition or retirement of any shares of its capital stock of any class or any
warrants or options to purchase any such shares.
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8.8 Transactions with Affiliates.
Except as set forth on Schedule 8.8, no Credit Party will, nor will it
permit its Subsidiaries to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder, Subsidiary or Affiliate other than on terms and
conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder, Subsidiary or Affiliate.
8.9 Fiscal Year; Organizational Documents.
No Credit Party will, nor will it permit any of its Subsidiaries to,
change its fiscal year or materially change its articles or certificate of
incorporation or its bylaws without the prior written consent of the Required
Lenders.
8.10 Prepayments of Indebtedness.
No Credit Party will, nor will it permit any of its Subsidiaries to,
(a) amend or modify (or permit the amendment or modification of) any of the
terms of any Indebtedness if such amendment or modification would add or change
any terms in a manner adverse to the Lenders, including but not limited to,
shortening final maturity or average life to maturity of such Indebtedness or
requiring any payment to be made sooner than originally scheduled or increasing
the interest rate applicable thereto or change any subordination provision
thereof, (b) during the existence of a Default or Event of Default, or if a
Default or Event of Default would be caused as a result thereof make (or give
any notice with respect thereto) any voluntary or optional payment or prepayment
or redemption or acquisition for value of (including, without limitation, by way
of depositing money or securities with the trustee with respect thereto before
due for the purpose of paying when due), refund, refinance or exchange of any
other Indebtedness.
8.11 Subordinated Debt.
(a) No Credit Party will (i) make or offer to make any principal
payments with respect to the Subordinated Debt, (ii) redeem or offer to redeem
any of the Subordinated Debt, or (iii) deposit any funds intended to discharge
or defease any or all of the Subordinated Debt. The Subordinated Debt may not be
amended or modified in any material manner without the prior written consent of
the Required Lenders, it being specifically understood and agreed that no
amendment to Article 4 or Article 10 of the Indenture shall be made without the
prior written consent of the Required Lenders.
(b) No Credit Party will (i) make or offer to make any principal
payments with respect to the Additional Subordinated Debt, (ii) redeem or offer
to redeem any of the Additional Subordinated Debt or (iii) deposit any funds
intended to discharge or defease any or all of the Additional Subordinated Debt.
The Additional Subordinated Debt may not be amended or modified in any material
manner without the prior written consent of the Required Lenders.
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8.12 Limitations.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause, incur, assume, suffer or
permit to exist or become effective any consensual encumbrance or restriction
of any kind on the ability of any such Person to (a) pay dividends or make
any other distribution on any of such Person's capital stock, (b) pay any
Indebtedness owed to the Borrower or any other Credit Party, (c) make loans
or advances to any other Credit Party or (d) transfer any of its property to
any other Credit Party, except for encumbrances or restrictions existing
under or by reason of (i) customary non-assignment provisions in any lease
governing a leasehold interest, (ii) this Credit Agreement, the other Credit
Documents and the Supplemental Credit Documents, (iii) the Indenture and (iv)
the Second Indenture.
8.13 Sale Leasebacks.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly become or remain liable as lessee or as guarantor or
other surety with respect to any lease, of any property (whether real or
personal or mixed), whether now owned or hereafter acquired, (a) which such
Credit Party or Subsidiary has sold or transferred or is to sell or transfer
to any other Person other than a Credit Party or (b) which such Credit Party
or Subsidiary intends to use for substantially the same purpose as any other
property which has been sold or is to be sold or transferred by such Credit
Party or Subsidiary to any Person in connection with such lease.
8.14 Negative Pledges.
Other than as set forth in Section 4.12 of the Indenture, none of
the Credit Parties will, nor will it permit any of its Subsidiaries to, enter
into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon its properties or
assets, whether now owned or hereafter acquired, or requiring the grant of
any security for such obligation if security is given for some other
obligation.
8.15 Capital Expenditures.
The Credit Parties and their Subsidiaries will not make Capital
Expenditures, in any fiscal year, that would exceed $5,000,000.00 in the
aggregate.
8.16 Operating Leases.
Neither the Borrower nor any of its Subsidiaries shall create,
incur, assume or permit to exist obligations under Operating Leases which
require aggregate annual payments in excess of $1,500,000.00.
8.17 Payment Blockage Notice.
(a) The Borrower (i) covenants and agrees that it will not give the
Payment Blockage Notice (as defined in the Indenture) without the consent of
the Required Lenders and (ii) hereby
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designates and appoints the Agent, as attorney-in-fact of the Borrower,
irrevocably and with full power of substitution, to deliver any Payment
Blockage Notice (as defined in the Indenture) that the Borrower has the right
to deliver pursuant to the terms of the Indenture; provided that the
foregoing appointment shall terminate at such time as the Loans, together
with interest, fees and other obligations hereunder, have been paid in full
and the Commitments hereunder shall have terminated.
(b) The Borrower (i) covenants and agrees that it will not give the
Payment Blockage Notice (as defined in the Second Indenture) without the
consent of the Required Lenders and (ii) hereby designates and appoints the
Agent, as attorney-in-fact of the Borrower, irrevocably and with full power
of substitution, to deliver any Payment Blockage Notice (as defined in the
Second Indenture) that the Borrower has the right to deliver pursuant to the
terms of the Second Indenture; provided that the foregoing appointment shall
terminate at such time as the Loans, together with interest, fees and other
obligations hereunder, have been paid in full and the Commitments hereunder
shall have terminated.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall:
(i) default in the payment when due of any principal
of any of the Loans; or
(ii) default, and such default shall continue for
three or more days, in the payment when due of any interest on
the Loans or of any fees or other amounts owing hereunder,
under any of the other Credit Documents or in connection
herewith.
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was made or deemed
to have been made.
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(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.4, 7.5, 7.6, 7.9, 7.10, 7.12, 7.13, 7.14, 7.15, 7.16 or 8.1
through 8.17 inclusive; or
(ii) default in the due performance or observance by
it of any term, covenant or agreement contained in Section 7.1
and such default shall continue unremedied for a period of
five Business Days after the earlier of an officer of a Credit
Party becoming aware of such default or notice thereof given
by the Agent; or
(iii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) or (ii) of this
Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30
days after the earlier of an officer of a Credit Party
becoming aware of such default or notice thereof given by the
Agent.
(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Credit Documents and such default shall continue
unremedied for a period of at least 30 days after the earlier of an
officer of a Credit Party becoming aware of such default or notice
thereof given by the Agent, or (ii) any Credit Document shall fail to
be in full force and effect or to give the Agent and/or the New Credit
Agreement Lenders the security interests, liens, rights, powers and
privileges purported to be created thereby.
(e) Guaranties. The guaranty given by the Credit Parties
hereunder or by any Additional Credit Party hereafter or any provision
thereof shall cease to be in full force and effect, or any guarantor
thereunder or any Person acting by or on behalf of such guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty.
(f) Bankruptcy, etc. The occurrence of any of the following
with respect to the Borrower or any of its Subsidiaries (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any of the Borrower or any of its Subsidiaries or
for any substantial part of its property or ordering the winding up or
liquidation of its affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect is commenced against the Borrower or any of its Subsidiaries
and such petition remains unstayed and in effect for a period of 60
consecutive days; or (iii) the Borrower or any of its Subsidiaries
shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent
to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment
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or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of such Person or any
substantial part of its property or make any general assignment for the
benefit of creditors; or (iv) the Borrower or any of its Subsidiaries
shall admit in writing its inability to pay its debts generally as they
become due or any action shall be taken by such Person in furtherance
of any of the aforesaid purposes.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) of the Borrower or any of its Subsidiaries in a principal
amount in excess of $500,000.00, including, without limitation, the
Subordinated Debt, the Additional Subordinated Debt and any
indebtedness under the Supplemental Credit Agreement (i) a Credit Party
shall (A) default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness, or
(B) default (after giving effect to any applicable grace period) in the
observance or performance of any term, covenant or agreement relating
to such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause (determined without regard to whether any notice or
lapse of time is required) any such Indebtedness to become due prior to
its stated maturity; or (ii) any such Indebtedness shall be declared
due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees shall
be entered against any one or more of the Borrower or any of its
Subsidiaries involving a liability of $500,000.00 or more, in the
aggregate, (to the extent not paid or covered by insurance provided by
a carrier who has acknowledged coverage) and such judgments, orders or
decrees shall continue unsatisfied, undischarged and unstayed for a
period ending on the first to occur of (i) the last day on which such
judgment, order or decree becomes final and unappealable or (ii) 30
days.
(i) ERISA. Any of the following events or conditions: (A) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of the Borrower or any of their Subsidiaries or any ERISA Affiliate in
favor of the PBGC or a Plan; (B) a Termination Event shall occur with
respect to a Single Employer Plan, which is, in the reasonable opinion
of the Agent, likely to result in the termination of such Plan for
purposes of Title IV of ERISA; (C) a Termination Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in
the reasonable opinion of the Agent, likely to result in (i) the
termination of such Plan for purposes of Title IV of ERISA, or (ii) the
Borrower or any of its Subsidiaries or any ERISA Affiliate incurring
any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within
the meaning of Section 4245 of ERISA) such Plan; or (D) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975
of the Code) or breach of fiduciary responsibility shall occur which
may subject the
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Borrower or any of its Subsidiaries or any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which the Borrower or any of its Subsidiaries or any ERISA
Affiliate has agreed or is required to indemnify any person against any
such liability.
(j) Ownership. There shall occur a Change of Control.
(k) Subordinated Debt. (i) Any holder of the Subordinated Debt
alleges (or any Governmental Authority with applicable jurisdiction
determines) that the New Credit Agreement Lenders or Supplemental
Credit Lenders are not holders of Senior Debt (as defined in the
Indenture) or (ii) the subordination provisions in the Indenture shall,
in whole or in part, terminate, cease to be effective or cease to be
legally valid, binding and enforceable against any holder of the
Subordinated Debt.
(l) Additional Subordinated Debt. (i) Any holder of the
Additional Subordinated Debt alleges (or any Governmental Authority
with applicable jurisdiction determines) that the Supplemental Credit
Lenders or New Credit Agreement Lenders are not holders of Senior
Indebtedness (as defined in the Second Indenture) or (ii) the
subordination provisions in the Second Indenture shall, in whole or in
part, terminate, cease to be effective or cease to be legally valid,
binding and enforceable against any holder of the Additional
Subordinated Debt.
(m) Business. The Borrower commences to engage in any material
respect in a line of business or activity other than the business of
manufacturing and marketing of brand name over-the-counter
pharmaceuticals, dietary supplements, functional toiletries and
cosmetics.
(n) Indenture/Change of Control. There shall occur (i) a
Change of Control (as defined in the Indenture) under the Indenture,
(ii) a Change of Control Triggering Event (as defined in the Indenture)
under the Indenture or (iii) a Change of Control (as defined in the
Second Indenture) under the Second Indenture.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time
thereafter unless and until such Event of Default has been waived in writing
by the Required Lenders (or the Lenders as may be required hereunder), the
Agent shall, upon the request and direction of the Required Lenders, by
written notice to the Borrower, take any of the following actions:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration of Loans. Declare the unpaid principal of and
any accrued interest in respect of all Loans and any and all other
indebtedness or obligations of any and every kind owing by a Credit
Party to any of the Lenders hereunder to be due
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whereupon the same shall be immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Credit Parties.
(c) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents, including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and
all Loans, all accrued interest in respect thereof, all accrued and unpaid
fees and other indebtedness or obligations owing to the Lenders hereunder
shall immediately become due and payable without the giving of any notice or
other action by the Agent or the Lenders, which notice or other action is
expressly waived by the Credit Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Lender has a separate right of payment and shall be considered a
separate "creditor" holding a separate "claim" within the meaning of Section
101(5) of the Bankruptcy Code or any other insolvency statute.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each New Credit Agreement Lender hereby designates and appoints
NationsBank of Tennessee, N.A. as Agent of such New Credit Agreement Lender
to act as specified herein and the other Credit Documents, and each such New
Credit Agreement Lender hereby authorizes the Agent, as the agent for such
New Credit Agreement Lender, to take such action on its behalf under the
provisions of this Credit Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated by
the terms hereof and of the other Credit Documents, together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere herein and in the other Credit Documents, the Agent
shall not have any duties or responsibilities, except those expressly set
forth herein and therein, or any fiduciary relationship with any New Credit
Agreement Lender, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this Credit Agreement
or any of the other Credit Documents, or shall otherwise exist against the
Agent. The provisions of this Section are solely for the benefit of the Agent
and the New Credit Agreement Lenders and none of the Credit Parties shall
have any rights as a third party beneficiary of the provisions hereof. In
performing its functions and duties under this Credit Agreement and the other
Credit Documents, the Agent shall act solely as the agent of the New Credit
Agreement Lenders and does not assume and shall not be deemed to have assumed
any obligation or relationship of agency or trust with or for any Credit
Party.
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10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Credit Documents
(except for its or such Person's own gross negligence or willful misconduct)
or (b) responsible in any manner to any of the New Credit Agreement Lenders
for any recitals, statements, representations or warranties made by any of
the Credit Parties contained herein or in any of the other Credit Documents
or in any certificate, report, document, financial statement or other written
or oral statement referred to or provided for in, or received by the Agent
under or in connection herewith or in connection with the other Credit
Documents, or enforceability or sufficiency therefor of any of the other
Credit Documents, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to
any New Credit Agreement Lender for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of this Credit Agreement, or
any of the other Credit Documents or for any representations, warranties,
recitals or statements made herein or therein or made by the Borrower or any
Credit Party in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Agent to the New
Credit Agreement Lenders or by or on behalf of the Credit Parties to the
Agent or any New Credit Agreement Lender or be required to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the
use of the proceeds of the Loans or of the existence or possible existence of
any Default or Event of Default or to inspect the properties, books or
records of the Credit Parties. The Agent is not a trustee for the New Credit
Agreement Lenders and owes no fiduciary duty to the Lenders.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to any of the Credit Parties, independent
accountants and other experts selected by the Agent with reasonable care).
The Agent may deem and treat the New Credit Agreement Lenders as the owner of
its interests hereunder for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent in accordance with Section 11.3(b). The Agent shall be fully justified
in failing or refusing to take any action under this Credit Agreement or
under any of the other Credit Documents unless it shall first receive such
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advice or concurrence of the Required Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, hereunder or under any of
the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders (including their successors and
assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as
shall be reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each New Credit Agreement Lender expressly acknowledges that neither
the Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates has made any representations or warranties to
it and that no act by the Agent or any affiliate thereof hereinafter taken,
including any review of the affairs of any Credit Party, shall be deemed to
constitute any representation or warranty by the Agent to any New Credit
Agreement Lender. Each New Credit Agreement Lender represents to the Agent
that it has, independently and without reliance upon the Agent or any other
New Credit Agreement Lender, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and investigation into
the business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Credit Parties and made its own
decision to make its Loans hereunder and enter into this Credit Agreement.
Each Lender also represents that it will, independently and without reliance
upon the Agent or any other New Credit Agreement Lender, and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action under this Credit Agreement, and to make such investigation as
it deems necessary to inform itself as to the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of
the Credit Parties. Except for notices, reports and other documents expressly
required to be furnished to the New Credit Agreement Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
New Credit Agreement Lender with any credit or other information concerning
the business, operations, assets, property, financial or other conditions,
prospects or creditworthiness of the Credit Parties which may come into the
possession of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
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10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation
of the Borrower to do so), ratably according to their respective percentage
of the Commitments (or if the Commitments have expired or been terminated, in
accordance with the respective principal amounts of outstanding Loans and
Participation Interest of the New Credit Agreement Lenders), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind whatsoever
which may at any time (including without limitation at any time following
payment in full of the Credit Party Obligations) be imposed on, incurred by
or asserted against the Agent in its capacity as such in any way relating to
or arising out of this Credit Agreement or the other Credit Documents or any
documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing; provided that no
New Credit Agreement Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of the Agent. If any indemnity furnished to
the Agent for any purpose shall, in the opinion of the Agent, be insufficient
or become impaired, the Agent may call for additional indemnity and cease, or
not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section shall survive the
payment of the Credit Party Obligations and all other amounts payable
hereunder and under the other Credit Documents.
10.8 Agent in Its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though the Agent were not the Agent hereunder. With respect
to the Loans made and all obligations owing to it, the Agent shall have the
same rights and powers under this Credit Agreement as any New Credit
Agreement Lender and may exercise the same as though it were not the Agent,
and the terms "New Credit Agreement Lender" and "New Credit Agreement
Lenders" shall include the Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days written notice to
the New Credit Agreement Lenders. Upon any such resignation, the Required
Lenders shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Required Lenders, and shall have
accepted such appointment, within 45 days after the notice of resignation,
then the retiring Agent shall select a successor Agent provided such
successor is a New Credit Agreement Lender hereunder or a commercial bank
organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000,000. Upon
the acceptance of any appointment as the Agent hereunder by a successor, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations as an Agent, as
appropriate, under this Credit
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Agreement and the other Credit Documents and the provisions of this Section
10.9 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to
the number set out below, (c) the Business Day following on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable
law or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described
in Section 9.2, each New Credit Agreement Lender is authorized at any time
and from time to time, without presentment, demand, protest or other notice
of any kind (all of which rights being hereby expressly waived), to set-off
and to appropriate and apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by such New Credit Agreement
Lender (including, without limitation branches, agencies or Affiliates of
such New Credit Agreement Lender wherever located) to or for the credit or
the account of any Credit Party against obligations and liabilities of such
Credit Party to the New Credit Agreement Lenders hereunder, under the Notes,
the other Credit Documents or otherwise, irrespective of whether the Agent or
the New Credit Agreement Lenders shall have made any demand hereunder and
although such obligations, liabilities or claims, or any of them, may be
contingent or unmatured, and any such set-off shall be deemed to have been
made immediately upon the occurrence of an Event of Default even though such
charge is made or entered on the books of such Lender subsequent thereto. The
Credit Parties hereby agree that any Person purchasing a participation in the
Loans and Commitments hereunder pursuant to Section 11.3(c) or 3.9 may
exercise all rights of set-off with respect to its participation interest as
fully as if such Person were a New Credit Agreement Lender hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its
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interests without the prior written consent of the Lenders; and
provided further that the rights of each New Credit Agreement Lender to
transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth in this Section
11.3. Notwithstanding the above, nothing herein shall restrict, prevent
or prohibit any New Credit Agreement Lender from (i) pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by
such Lender from such Federal Reserve Bank, or (ii) granting
assignments or participation in such Lender's Loans and/or Commitments
hereunder to its parent company and/or to any Affiliate of such New
Credit Agreement Lender or to any existing New Credit Agreement Lender
or Affiliate thereof.
(b) Assignments. Each New Credit Agreement Lender may, with
the prior written consent of the Borrower and the Agent (provided that
no consent of the Borrower shall be required during the existence and
continuation of an Event of Default), which consent shall not be
unreasonably withheld or delayed, assign all or a portion of its rights
and obligations hereunder pursuant to an assignment agreement
substantially in the form of Exhibit 11.3 to one or more Eligible
Assignees; provided that (i) any such assignment shall be in a minimum
aggregate amount of $5,000,000 of the Loans of such New Credit
Agreement Lender or Commitments of such New Credit Agreement Lender and
in integral multiples of $1,000,000 above such amount (or the remaining
amount of Loans or Commitments held by such New Credit Agreement
Lender), (ii) each such assignment shall be of a constant, not varying,
percentage of all of the assigning New Credit Agreement Lender's rights
and obligations under the Loans or Commitment being assigned and (iii)
unless otherwise agreed to by the Borrower and the Agent, such New
Credit Agreement Lender proposing to assign all or a portion of its
Revolving Committed Amount shall be required to assign to such Eligible
Assignee or Assignees (to the extent held by such New Credit Agreement
Lender) an identical percentage of the Tranche A Term Loan Committed
Amount of such New Credit Agreement Lender. Any assignment hereunder
shall be effective upon (i) satisfaction of the conditions set forth
above, (ii) delivery to the Agent of a duly executed assignment
agreement together with a transfer fee of $3,500 payable to the Agent
for its own account and (iii) the recordation of an appropriate entry
with respect to such assignment in the Register pursuant to this
Section 11.3. Upon the effectiveness of any such assignment, the
assignee shall become a "New Credit Agreement Lender" for all purposes
of this Credit Agreement and the other Credit Documents and, to the
extent of such assignment, the assigning New Credit Agreement Lender
shall be relieved of its obligations hereunder to the extent of the
Loans and Commitment components being assigned. Along such lines the
Borrower agrees that upon notice of any such assignment and surrender
of the appropriate Note or Notes, it will promptly provide to the
assigning New Credit Agreement Lender and to the assignee separate
promissory notes in the amount of their respective interests
substantially in the form of the original Note or Notes (but with
notation thereon that it is given in substitution for and replacement
of the original Note or Notes or any replacement notes thereof).
By executing and delivering an assignment agreement in accordance with
this Section 11.3(b), the assigning New Credit Agreement Lender
thereunder and the assignee thereunder shall be deemed to confirm to
and agree with each other and the other parties
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hereto as follows: (i) such assigning New Credit Agreement Lender
warrants that it is the legal and beneficial owner of the interest
being assigned thereby free and clear of any adverse claim; (ii) except
as set forth in clause (i) above, such assigning New Credit Agreement
Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Credit Agreement,
any of the other Credit Documents or any other instrument or document
furnished pursuant hereto or thereto, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or the performance or
observance by any Credit Party of any of its obligations under this
Credit Agreement, any of the other Credit Documents or any other
instrument or document furnished pursuant hereto or thereto; (iii) such
assignee represents and warrants that it is legally authorized to enter
into such assignment agreement; (iv) such assignee confirms that it has
received a copy of this Credit Agreement, the other Credit Documents
and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such
assignment agreement; (v) such assignee will independently and without
reliance upon the Agent, such assigning New Credit Agreement Lender or
any other New Credit Agreement Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make
its own credit decisions in taking or not taking action under this
Credit Agreement and the other Credit Documents; (vi) such assignee
appoints and authorizes the Agent to take such action on its behalf and
to exercise such powers under this Credit Agreement or any other Credit
Document as are delegated to the Agent by the terms hereof or thereof,
together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with
their terms all the obligations which by the terms of this Credit
Agreement and the other Credit Documents are required to be performed
by it as a New Credit Agreement Lender.
(c) Participations. Each New Credit Agreement Lender may sell,
transfer, grant or assign participations in all or any part of such New
Credit Agreement Lender's interests and obligations hereunder; provided
that (i) such selling New Credit Agreement Lender shall remain a "New
Credit Agreement Lender" for all purposes under this Credit Agreement
(such selling New Credit Agreement Lender's obligations under the
Credit Documents remaining unchanged) and the participant shall not
constitute a New Credit Agreement Lender hereunder, (ii) no such
participant shall have, or be granted, rights to approve any amendment
or waiver relating to this Credit Agreement or the other Credit
Documents except to the extent any such amendment or waiver would (A)
reduce the principal of or rate of interest on or fees in respect of
any Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of the
Revolving Loan Maturity Date or the date of any mandatory prepayment),
interest or fees in which the participant is participating, or (C)
release all or substantially all of the collateral or guaranties
(except as expressly provided in the Credit Documents) supporting any
of the Loans or Commitments in which the participant is participating,
(iii) sub-participations by the participant (except to an Affiliate,
parent company or Affiliate of a parent company of the participant)
shall be prohibited, (iv) any such participations shall be in a minimum
aggregate amount of $5,000,000 of the Loans
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of such New Credit Agreement Lender or Commitments of such New Credit
Agreement Lender and in integral multiples of $1,000,000 in excess
thereof and (v) unless otherwise agreed to by the Borrower and the
Agent, such selling New Credit Agreement Lender proposing to grant or
assign a participation in the Revolving Committed Amount shall be
required to grant or assign a participation to such participant, in
like percentage, of the Tranche A Term Loan Committed Amount of such
New Credit Agreement Lender. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or
the other Credit Documents (the participant's rights against the
selling New Credit Agreement Lender in respect of such participation to
be those set forth in the participation agreement with such New Credit
Agreement Lender creating such participation) and all amounts payable
by the Borrower hereunder shall be determined as if such New Credit
Agreement Lender had not sold such participation; provided, however,
that such participant shall be entitled to receive additional amounts
under Section 3.15 to the same extent that the New Credit Agreement
Lender from which such participant acquired its participation would be
entitled to the benefit of such cost protection provisions.
(d) Registration. The Agent, acting for this purpose solely on
behalf of the Borrower, shall maintain a register (the "Register") for
the recordation of the names and addresses of the Lenders and the
principal amount of the Loans owing to each New Credit Agreement Lender
from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and the New
Credit Agreement Lenders shall treat each Person whose name is recorded
in the Register as the owner of a Loan or other obligation hereunder
for all purposes of this Credit Agreement and the other Credit
Documents, notwithstanding notice to the contrary. Any assignment of
any Loan or other obligation hereunder shall be effective only upon
appropriate entries with respect thereto being made in the Register.
The Register shall be available for inspection by the Borrower or any
New Credit Agreement Lender at any reasonable time and from time to
time upon reasonable prior notice.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any New Credit
Agreement Lender in exercising any right, power or privilege hereunder or
under any other Credit Document and no course of dealing between the Borrower
or any Credit Party and the Agent or any New Credit Agreement Lender shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies
which the Agent or any New Credit Agreement Lender would otherwise have. No
notice to or demand on any Credit Party in any case shall entitle any Credit
Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Agent or the New
Credit Agreement Lenders to any other or further action in any circumstances
without notice or demand.
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11.5 Payment of Expenses; Indemnification.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket
costs and expenses of (i) the Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Credit
Agreement and the other Credit Documents and the documents and instruments
referred to therein (including, without limitation, the reasonable fees and
expenses of Moore & Van Allen, special counsel to the Agent and the fees and
expenses of counsel for the Agent in connection with collateral or foreign
issues), and any amendment, waiver or consent relating hereto and thereto
including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure
relating to the performance by the Credit Parties under this Credit Agreement
and (ii) the Agent and the New Credit Agreement Lenders in connection with
enforcement of the Credit Documents and the documents and instruments
referred to therein (including, without limitation, in connection with any
such enforcement, the reasonable fees and disbursements of counsel for the
Agent and each of the New Credit Agreement Lenders) and (b) indemnify each
New Credit Agreement Lender, its officers, directors, employees,
representatives and agents from and hold each of them harmless against any
and all losses, liabilities, claims, damages or expenses incurred by any of
them as a result of, or arising out of, or in any way related to, or by
reason of, any investigation, litigation or other proceeding (whether or not
any New Credit Agreement Lender is a party thereto) related to (i) the
entering into and/or performance of any Credit Document or the use of
proceeds of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation, litigation or
other proceeding (but excluding any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified), (ii) any
Environmental Claim and (iii) any claims for Non-Excluded Taxes.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement, nor any other Credit Document, nor
any of the terms hereof or thereof may be amended, changed, waived,
discharged or terminated unless such amendment, change, waiver, discharge or
termination is in writing and signed by the Required Lenders and the Credit
Parties; provided that no such amendment, change, waiver, discharge or
termination shall
(a) without the consent of each Lender affected thereby:
(i) extend the final maturity of any Loan or any portion
thereof,
(ii) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability
of any post-default increase in interest rates) thereon or
fees hereunder,
(iii) reduce or waive the principal amount of any Loan,
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(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a
waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in
the terms of any Commitment of any Lender),
(v) release all or substantially all of the Collateral
securing the Credit Party Obligations hereunder (provided that
the Agent may, without consent from any other Lender, release
any Collateral that is sold or transferred by a Credit Party
in conformance with Section 8.5),
(vi) release the Borrower or substantially all of the
other Credit Parties from its obligations under the Credit
Documents,
(vii) amend, modify or waive any provision of this Section
or Section 3.7, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,
9.1(a), 11.2, 11.3 or 11.5,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders, or
(ix) consent to the assignment or transfer by the
Borrower (or another Credit Party) of any of its rights and
obligations under (or in respect of) the Credit Documents
except as permitted thereby.
(b) No provision of Section 10 may be amended without the
consent of the Agent.
(c) Notwithstanding the above, (i) the right to deliver a
Payment Blockage Notice (as defined in the Indenture) shall reside
solely with the Agent, and the Agent shall deliver such Payment
Blockage Notice only upon the direction of the Required Lenders and
(ii) the right to deliver a Payment Blockage Notice (as defined in the
Second Indenture) shall reside solely with the Agent, and the Agent
shall deliver such Payment Blockage Notice only upon the direction of
the Required Lenders.
(d) Notwithstanding the fact that the consent of all the
Lenders is required in certain circumstances as set forth above, (x)
each Lender is entitled to vote as such Lender sees fit on any
bankruptcy reorganization plan that affects the Loans and each Lender
acknowledges that the provisions of Section 1126(c) of the Bankruptcy
Code supersedes the unanimous consent provisions set forth herein and
(y) the Required Lenders may consent to allow a Credit Party to use
cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the
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same instrument. It shall not be necessary in making proof of this Credit
Agreement to produce or account for more than one such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction
of any provision of this Credit Agreement.
11.9 Defaulting Lender.
Each New Credit Agreement Lender understands and agrees that if such
New Credit Agreement Lender is a Defaulting Lender then it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders
or to object to any matter requiring the consent of all the Lenders;
provided, however, that all other benefits and obligations under the Credit
Documents shall apply to such Defaulting Lender.
11.10 Survival of Indemnification and Representations and
Warranties.
All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, the repayment of the Loans and other obligations and
the termination of the Commitments hereunder.
11.11 Governing Law; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TENNESSEE. Any legal action or proceeding with
respect to this Credit Agreement or any other Credit Document may be
brought in the courts of the State of North Carolina or the State of
Tennessee or of the United States for the Western District of North
Carolina or the Eastern District of Tennessee and, by execution and
delivery of this Credit Agreement, each Credit Party hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of such courts. Each Credit Party
further irrevocably consents to the service of process out of any of
the aforementioned courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1,
such service to become effective 30 days after such mailing. Nothing
herein shall affect the right of a Lender to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against a Credit Party in any other jurisdiction.
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(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
11.12 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.13 Time.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight Time, as the case may be, unless specified otherwise.
11.14 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.15 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.16 Binding Effect.
This Credit Agreement shall become effective at such time when all of
the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have been executed by the Borrower, the Guarantors and the
Agent, and the Agent shall have received copies hereof (telefaxed or otherwise)
which, when taken together, bear the signatures of each New Credit Agreement
Lender, and thereafter this Credit Agreement shall be binding upon and inure to
the benefit of the Borrower, the Guarantors, the Agent and each New Credit
Agreement Lender and their respective successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER:
CHATTEM, INC.,
a Tennessee corporation
By:____________________________
Name:__________________________
Title:___________________________
GUARANTOR: SIGNAL INVESTMENT & MANAGEMENT CO.,
a Delaware corporation
By:____________________________
Name:__________________________
Title:___________________________
NEW CREDIT AGREEMENT
LENDERS:
NATIONSBANK OF TENNESSEE, N.A.,
individually in its capacity as a
New Credit Agreement Lender and in
its capacity as Agent
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
Signature page to Amended and Restated Credit Agreement dated as of March 24,
1998 among Chattem, Inc., as Borrower, each of the Borrower's Domestic
Subsidiaries, as Guarantors, the New Credit Agreement Lenders and NationsBank
of Tennessee, N.A., as agent for the New Credit Agreement Lenders
THE FIRST NATIONAL BANK OF CHICAGO
By:_____________________________
Name:___________________________
Title:__________________________
CREDITANSTALT AG
By:_____________________________
Name:___________________________
Title:__________________________
FIRST AMERICAN NATIONAL BANK
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED CREDIT AGREEMENT
(SUPPLEMENTAL CREDIT AGREEMENT)
among
CHATTEM, INC.,
as Borrower,
Domestic Subsidiaries of Borrower,
as Guarantors,
THE LENDERS IDENTIFIED HEREIN,
AND
NATIONSBANK OF TENNESSEE, N.A.,
as Agent
DATED AS OF MARCH 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1 DEFINITIONS AND ACCOUNTING TERMS........................................2
1.1 Definitions...........................................................2
1.2 Computation of Time Periods and Other Definitional Provisions.........7
1.3 Accounting Terms......................................................8
SECTION 2 CREDIT FACILITIES......................................................8
2.1 Term Loans............................................................8
2.2 Continuations and Conversions........................................10
2.3 Minimum Amounts......................................................10
2.4 Notes................................................................11
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS.................................11
3.1 Interest.............................................................11
3.2 Place and Manner of Payments.........................................11
3.3 Prepayments..........................................................12
3.4 Fees.................................................................14
3.5 Payment in full at Maturity..........................................14
3.7 Pro Rata Treatment...................................................15
3.8 Allocation of Payments After Event of Default........................15
3.9 Sharing of Payments..................................................16
3.10 Capital Adequacy....................................................17
3.11 Inability To Determine Interest Rate................................17
3.12 Illegality..........................................................18
3.13 Requirements of Law.................................................18
3.14 Taxes...............................................................19
3.15 Indemnity...........................................................22
3.16 Replacement of Lenders..............................................22
SECTION 4 GUARANTY...............................................................23
4.1 Guaranty of Payment..................................................23
4.2 Obligations Unconditional............................................23
4.3 Modifications........................................................24
4.4 Waiver of Rights.....................................................24
4.5 Reinstatement........................................................25
4.6 Remedies.............................................................25
4.7 Limitation of Guaranty...............................................25
4.8 Rights of Contribution...............................................25
SECTION 5 CONDITIONS TO EXTENSIONS OF CREDIT.....................................26
5.1 Conditions to Extensions of Credit...................................26
SECTION 6 REPRESENTATIONS AND WARRANTIES.........................................27
6.1 Financial Condition..................................................27
6.2 No Material Change...................................................27
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6.3 Organization and Good Standing........................................27
6.4 Due Authorization.....................................................28
6.5 No Conflicts..........................................................28
6.6 Consents..............................................................28
6.7 Enforceable Obligations...............................................28
6.8 No Default............................................................28
6.9 Ownership.............................................................29
6.10 Indebtedness.........................................................29
6.11 Litigation...........................................................29
6.12 Taxes................................................................29
6.13 Compliance with Law..................................................29
6.14 ERISA................................................................29
6.15 Subsidiaries.........................................................30
6.16 Use of Proceeds; Margin Stock........................................31
6.17 Government Regulation................................................31
6.18 Environmental Matters................................................31
6.19 Intellectual Property................................................33
6.20 Solvency.............................................................33
6.21 Investments..........................................................33
6.22 No Financing of Corporate Takeovers..................................33
6.23 Location of Collateral...............................................33
6.24 Disclosure...........................................................33
6.25 Licenses, etc........................................................34
6.26 No Burdensome Restrictions...........................................34
6.27 Brokers' Fees........................................................34
6.28 Labor Matters........................................................34
6.29 Collateral Documents.................................................34
6.30 Related Transactions.................................................34
6.31 Representations and Warranties Incorporated from Purchase Agreement..35
6.32 Senior Debt..........................................................35
SECTION 7 AFFIRMATIVE COVENANTS...................................................35
7.1 Information Covenants.................................................35
7.2 Preservation of Existence and Franchises..............................39
7.3 Books and Records.....................................................39
7.4 Compliance with Law...................................................39
7.5 Payment of Taxes and Other Indebtedness...............................39
7.6 Insurance.............................................................39
7.7 Maintenance of Property...............................................40
7.8 Performance of Obligations............................................41
7.9 Collateral............................................................41
7.10 Use of Proceeds......................................................41
7.11 Audits/Inspections...................................................41
7.12 Financial Covenants..................................................41
7.13 Additional Credit Parties............................................43
7.14 Interest Rate Protection Agreements..................................43
7.15 Ownership of Subsidiaries............................................44
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7.16 Appraisal Reports....................................................44
7.17 Year 2000 Compatibility..............................................44
SECTION 8 NEGATIVE COVENANTS......................................................44
8.1 Indebtedness..........................................................44
8.2 Liens.................................................................45
8.3 Nature of Business....................................................45
8.4 Consolidation and Merger..............................................45
8.5 Sale or Lease of Assets...............................................46
8.6 Advances, Investments and Loans.......................................46
8.7 Dividends.............................................................46
8.8 Transactions with Affiliates..........................................46
8.9 Fiscal Year; Organizational Documents.................................47
8.10 Prepayments of Indebtedness..........................................47
8.11 Subordinated Debt....................................................47
8.12 Limitations..........................................................47
8.13 Sale Leasebacks......................................................48
8.14 Negative Pledges.....................................................48
8.15 Capital Expenditures.................................................48
8.16 Operating Leases.....................................................48
8.17 Payment Blockage Notice..............................................48
SECTION 9 EVENTS OF DEFAULT.......................................................49
9.1 Events of Default.....................................................49
9.2 Acceleration; Remedies................................................52
SECTION 10 AGENCY PROVISIONS......................................................53
10.1 Appointment..........................................................53
10.2 Delegation of Duties.................................................53
10.3 Exculpatory Provisions...............................................53
10.4 Reliance on Communications...........................................54
10.5 Notice of Default....................................................54
10.6 Non-Reliance on Agent and Other Lenders..............................55
10.7 Indemnification......................................................56
10.8 Agent in Its Individual Capacity.....................................56
10.9 Successor Agent......................................................56
SECTION 11 MISCELLANEOUS..........................................................57
11.1 Notices..............................................................57
11.2 Right of Set-Off.....................................................57
11.3 Benefit of Agreement.................................................58
11.4 No Waiver; Remedies Cumulative.......................................61
11.5 Payment of Expenses; Indemnification.................................61
11.6 Amendments, Waivers and Consents.....................................62
11.7 Counterparts.........................................................63
11.8 Headings.............................................................63
11.9 Defaulting Lender....................................................63
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<S> <C>
11.10 Survival of Indemnification and Representations and Warranties.......63
11.11 Governing Law; Venue.................................................63
11.12 Waiver of Jury Trial.................................................64
11.13 Time.................................................................64
11.14 Severability.........................................................64
11.15 Entirety.............................................................64
11.16 Binding Effect.......................................................65
</TABLE>
<TABLE>
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1(a) Commitment Percentages
Schedule 1.1(b) Existing Permitted Investments
Schedule 6.10 Indebtedness
Schedule 6.11 Litigation
Schedule 6.14 ERISA Matters
Schedule 6.15 Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.19 Intellectual Property
Schedule 6.23(a) Real Property Locations
Schedule 6.23(b) Personal Property Locations
Schedule 6.23(c) Chief Executive Offices
Schedule 7.6 Insurance
Schedule 8.2 Liens
Schedule 8.8 Affiliate Transactions
Schedule 11.1 Notices
EXHIBITS
Exhibit 2.2 Form of Notice of Continuation/Conversion
Exhibit 2.4(a) Form of Tranche A Term Loan Note
Exhibit 2.4(b) Form of Tranche B Term Loan Note
Exhibit 7.1(d) Form of Officer's Certificate
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
</TABLE>
iv
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
(SUPPLEMENTAL CREDIT FACILITY)
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Credit Agreement"),
is entered into as of March 24, 1998 among CHATTEM, INC., a Tennessee
corporation (the "Borrower"), each of the Borrower's Domestic Subsidiaries,
individually a "Guarantor" and collectively the "Guarantors"), the Supplemental
Credit Lenders (as defined herein), and NATIONSBANK OF TENNESSEE, N.A., as agent
for the Supplemental Credit Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower and the Guarantors are party to a Credit
Agreement (the "New Credit Agreement") dated as of the date hereof pursuant to
which NationsBank of Tennessee, N.A., as agent, and certain other lenders named
therein have agreed to provide a credit facility to the Borrower to replace and
refinance certain credit facilities provided to the Borrower pursuant to that
certain Credit Agreement dated as of June 26, 1997 (as amended or modified from
time to time, the "Prior New Credit Agreement"). The Prior New Credit Agreement
replaced and refinanced the credit facilities provided by the lenders pursuant
to that certain Credit Agreement dated as of April 26, 1996 (as amended or
modified from time to time, the "1996 New Credit Agreement"). The credit
facilities provided pursuant to the 1996 New Credit Agreement replaced and
refinanced the credit facilities provided to the Borrower by the First National
Bank of Chicago, as agent and certain other lenders under the credit agreements
dated as of June 17, 1994;
WHEREAS, that certain Indenture dated as of August 3, 1994 among the
Borrower, as issuer, Signal Investment & Management Co., as guarantor, and
SouthTrust Bank of Alabama, National Association, as trustee (as the same may be
modified, supplemented or amended from time to time, the "Indenture"), permits
the Borrower to incur additional indebtedness that will be considered Senior
Debt (as defined in the Indenture) upon the satisfaction of a financial test set
forth in the Indenture;
WHEREAS, the Borrower, the Guarantors, the lenders named therein and
NationsBank of Tennessee, N.A., as agent are currently parties to that certain
Credit Agreement dated as of June 26, 1997 (as amended or modified from time to
time, the "Prior Supplemental Credit Agreement");
WHEREAS, the Borrower and the Guarantors have requested that the
Supplemental Credit Lenders provide, in addition to the credit facilities
provided under the New Credit Agreement, an amended and restated credit facility
(the "Supplemental Credit Facility") to replace the credit facilities provided
pursuant to the Prior Supplemental Credit Agreement;
WHEREAS, the Supplemental Credit Lenders have agreed to make the
requested Supplemental Credit Facility available to the Borrower on the terms
and conditions hereinafter set forth, including without limitation evidence that
the additional indebtedness incurred hereunder will constitute Senior Debt (as
defined in the Indenture) upon the incurrence thereof.
<PAGE>
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
1.1 Definitions.
Unless otherwise defined herein, capitalized terms used herein shall
have the meanings ascribed to such terms in the New Credit Agreement. In
addition, the following terms shall have the following meanings:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date, as provided in Section 7.13.
"Agent" means NationsBank of Tennessee, N.A. or any
successor administrative agent appointed pursuant to Section 10.9.
"Applicable Percentage" means:
(a) For Tranche A Term Loans, the appropriate applicable
percentages corresponding to the Leverage Ratio in effect as of the
most recent Calculation Date as shown below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Applicable
Percentage Applicable
For Percentage For
Pricing Leverage Eurodollar Base Rate
Level Ratio Loans Loans
--------------------------------------------------------------------------
<S> <C> <C> <C>
I Less than 4.0 to 1.0 2.25% 1.25%
--------------------------------------------------------------------------
II Greater than or equal
to 4.0 to 1.0 but less 2.50% 1.50%
than 4.5 to 1.0
--------------------------------------------------------------------------
III Greater than or equal
to 4.5 to 1.0 but less 2.75% 1.75%
than 5.0 to 1.0
--------------------------------------------------------------------------
IV Greater than or equal
to 5.0 to 1.0 3.00% 2.00%
--------------------------------------------------------------------------
</TABLE>
(a) For Tranche B Term Loans, the appropriate applicable
percentages corresponding to the Leverage Ratio in effect as of the
most recent Calculation Date as shown below:
2
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Applicable
Percentage Applicable
For Percentage For
Pricing Leverage Eurodollar Base Rate
Level Ratio Loans Loans
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
I Less than 4.0 to 1.0 2.75% 1.75%
-----------------------------------------------------------------------------------
II Greater than or equal
to 4.0 to 1.0 but less 3.00% 2.00%
than 4.5 to 1.0
-----------------------------------------------------------------------------------
III Greater than or equal
to 4.5 to 1.0 but less 3.25% 2.25%
than 5.0 to 1.0
-----------------------------------------------------------------------------------
IV Greater than or equal
to 5.0 to 1.0 3.50% 2.50%
-----------------------------------------------------------------------------------
</TABLE>
The Applicable Percentage for Tranche A Term Loans and Tranche B Terms
Loans shall, in each case, be determined and adjusted quarterly on the
date (each a "Calculation Date") five Business Days after the date by
which the Borrower is required to provide the officer's certificate in
accordance with the provisions of Section 7.1(d); provided, however
that (i) the initial Applicable Percentage for Tranche A Term Loans and
Tranche B Term Loans shall be based on Pricing Level II (as shown
above) and shall remain at Pricing Level II until the first Calculation
Date subsequent to the Closing Date and, thereafter, the Pricing Level
shall be determined by the then current Leverage Ratio, and (ii) if the
Borrower fails to provide the officer's certificate required by Section
7.1(d) on or before the most recent Calculation Date or fails to
deliver a copy of such officer's certificate to the Agency Services
Address as required by Section 7.1(d), the Applicable Percentage for
Tranche A Term Loans and Tranche B Term Loans from such Calculation
Date shall be based on Pricing Level IV until such time that an
appropriate officer's certificate is provided whereupon the Pricing
Level shall be determined by the then current Leverage Ratio. Each
Applicable Percentage shall be effective from one Calculation Date
until the next Calculation Date. Any adjustment in the Applicable
Percentage shall be applicable to all existing Tranche A Term Loans and
Tranche B Term Loans as well as any new Tranche A Term Loans and new
Tranche B Term Loans made or issued.
"Borrower" means the Person identified as such in the heading
hereof, together with any successors and permitted assigns.
"Calculation Date" has the meaning set forth in the definition
of Applicable Percentage.
"Closing Date" means the date hereof.
"Commitments" means the Revolving Committed Amount, the
Tranche A Term Loan Committed Amount and the Tranche B Term Loan
Committed Amount.
3
<PAGE>
"Credit Documents" means collectively, the Supplemental
Credit Documents and the New Credit Agreement Documents.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the Supplemental Credit
Lenders and the Agent, whenever arising, under this Credit Agreement,
the Tranche A Term Loan Notes, the Tranche B Term Loan Notes, the
Collateral Documents or any of the other Supplemental Credit Documents
to which the Borrower or any other Credit Party is a party (including,
but not limited to, any interest accruing after the occurrence of a
Bankruptcy Event with respect to any Credit Party, regardless of
whether such interest is an allowed claim under the Bankruptcy Code)
and (b) all liabilities and obligations owing from a Credit Party to
any Supplemental Credit Lender, or any Affiliate of a Supplemental
Credit Lender, arising under interest rate protection agreements,
foreign currency exchange agreements, commodity purchase or option
agreements or other interest or exchange rate or commodity price
hedging agreements (collectively, the "Hedging Agreements").
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that, at
such time (a) has failed to make a Loan or purchase a Participation
Interest required pursuant to the terms of this Credit Agreement or the
New Credit Agreement (b) has failed to pay to the Agent or any Lender
an amount owned by such Lender pursuant to the terms of this Credit
Agreement or the New Credit Agreement or (c) has been deemed insolvent
or has become subject to a bankruptcy or insolvency proceeding or to a
receiver or similar official.
"Effective Date" means the date on which the conditions set
forth in Section 5.1 of the New Credit Agreement shall have been
fulfilled (or waived in the sole discretion of the Lenders) and on
which the initial Loans shall have been made.
"Event of Default" has the meaning specified in Section 9.1.
"Extension of Credit" means, as to any Lender, the making of a
Loan by such Lender (or a participation therein by a Lender).
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3.
"Guarantor" means each of the Domestic Subsidiaries of the
Borrower and each Additional Credit Party which has executed a Joinder
Agreement, together with their successors and assigns.
"Hedging Agreements" has the meaning set forth in the
definition of Credit Party Obligations.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last Business Day of each fiscal quarter of the Borrower and on the
Tranche A Term Loan Maturity Date or
4
<PAGE>
Tranche B Term Loan Maturity Date, as applicable, and (b) as to
Eurodollar Loans, on the last day of each applicable Interest Period
and on the Tranche A Term Loan Maturity Date or the Tranche B Term
Loan Maturity Date, as applicable.
"Interest Period" means as to Eurodollar Loans, a period of
one, two or three months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Tranche A Term Loan
Maturity Date or the Tranche B Term Loan Maturity Date, as applicable,
(c) with regard to Tranche A Term Loans and Tranche B Term Loans, as
applicable, no Interest Period shall extend beyond any Principal
Amortization Payment Date unless the portion of the Tranche A Term
Loans and Tranche B Term Loans, as applicable comprised of Base Rate
Loans together with the portion of the Tranche A Term Loans and Tranche
B Term Loans, as applicable comprised of Eurodollar Loans with Interest
Periods expiring prior to the date such Principal Amortization Payment
is due, is at least equal to the amount of such Principal Amortization
Payment due on such date and (d) where an Interest Period begins on a
day for which there is no numerically corresponding day in the calendar
month in which the Interest Period is to end, such Interest Period
shall end on the last Business Day of such calendar month.
"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.13.
"Lender" means collectively, the Supplemental Credit
Lenders and the New Credit Agreement Lenders.
"Loan" or "Loans" means the Revolving Loans, the Swingline
Loans, the Tranche A Term Loans and/or the Tranche B Term Loans (or a
portion of any Revolving Loan, the Tranche A Term Loans and/or the
Tranche B Term Loans), individually or collectively, as appropriate.
"New Credit Agreement Documents" means the New Credit
Agreement, the Notes (other than the Tranche A Term Loan Notes and
Tranche B Term Loan Notes), the Collateral Documents, the Fee Letter
and all other related agreements and documents issued or delivered
hereunder or thereunder or pursuant hereto or thereto.
"New Credit Agreement Lenders" means any of the Persons
identified as a "New Credit Agreement Lender" on the signature pages to
the New Credit Agreement, and any Person which may become a New Credit
Agreement Lender by way of assignment in accordance with the terms of
the New Credit Agreement, together with their successors and permitted
assigns.
"Non-Excluded Taxes" has the meaning set forth in Section
3.14.
5
<PAGE>
"Note" or "Notes" means the Revolving Loan Notes, the
Swingline Note, the Tranche A Term Loan Notes and/or the Tranche B Term
Loan Notes, individually or collectively, as appropriate.
"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest
Period or to convert a Eurodollar Loan to a Base Rate Loan or a Base
Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.2.
"Participation Interest" means the Extension of Credit by a
Lender by way of the purchase of a participation in any Loans as
provided in Section 3.9.
"Principal Amortization Payment" means a principal payment on
the Tranche A Term Loans and Tranche B Terms Loans as set forth in
Section 2.1(c).
"Principal Amortization Payment Date" means the date a
Principal Amortization Payment is due.
"Required Lenders" means Lenders whose aggregate Credit
Exposure (as hereinafter defined) constitutes at least 67% of the
Credit Exposure of all Lenders at such time; provided, however, that if
any Lender shall be a Defaulting Lender at such time then there shall
be excluded from the determination of Required Lenders the aggregate
principal amount of Credit Exposure of such Lender at such time. For
purposes of the preceding sentence, the term "Credit Exposure" as
applied to each Lender shall mean (a) at any time prior to the
termination of the Commitments, the sum of (i) the Revolving Loan
Commitment Percentage of such Lender multiplied by the Revolving
Committed Amount, plus (ii) the Tranche A Term Loan Commitment
Percentage of such Lender multiplied by the aggregate principal amount
of Tranche A Term Loans outstanding at such time, plus (iii) the
Tranche B Term Loan Commitment Percentage of such Lender multiplied by
the aggregate principal amount of Tranche B Term Loans outstanding at
such time and (b) at any time after the termination of the Commitments,
the sum of the principal balance of the outstanding Loans of such
Lender.
"Supplemental Credit Documents" means this Credit Agreement,
the Tranche A Term Loan Notes, the Tranche B Term Loan Notes, any
Joinder Agreement, the Collateral Documents, the Fee Letter and all
other related agreements and documents issued or delivered hereunder or
thereunder.
"Supplemental Credit Lenders" means any of the Persons
identified as a "Supplemental Credit Lender" on the signature pages
hereto, and any Person which may become a Supplemental Credit Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Term Loans" means the Tranche A Term Loans and the Tranche B
Term Loans.
"Tranche A Term Loans" means the Tranche A Term Loans made
to the Borrower pursuant to Section 2.1 hereof.
6
<PAGE>
"Tranche A Term Loan Committed Amount" means TWENTY SEVEN
MILLION FIVE HUNDRED FORTY THOUSAND DOLLARS ($27,540,000).
"Tranche A Term Loan Commitment Percentage" means for a
Supplemental Credit Lender, the percentage identified as its Tranche A
Term Loan Commitment Percentage on Schedule 1.1(a) as such percentage
may be modified in connection with any assignment made in accordance
with the provisions of Section 11.3.
"Tranche A Term Loan Maturity Date" means June 26, 2002.
"Tranche A Term Loan Note" or "Tranche A Term Loan Notes"
means the promissory notes of the Borrower in favor of the Supplemental
Credit Lenders having a Tranche A Term Loan Commitment Percentage
evidencing the Term A Term Loans provided pursuant to Section 2.1,
individually or collectively, as appropriate, as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced
from time to time in the form of Exhibit 2.4(a).
"Tranche B Term Loans" means the Tranche B Term Loans made
to the Borrower pursuant to Section 2.1 hereof.
"Tranche B Term Loan Committed Amount" means THIRTY-FOUR
MILLION EIGHT HUNDRED TWENTY FIVE THOUSAND DOLLARS ($34,825,000).
"Tranche B Term Loan Commitment Percentage" means, for a
Supplemental Credit Lender, the percentage identified as its Tranche B
Term Loan Commitment Percentage on Schedule 1.1(a), as such percentage
may be modified in connection with any assignment made in accordance
with the provisions of Section 11.3.
"Tranche B Term Loan Maturity Date" means February 14, 2004.
"Tranche B Term Loan Note" or "Tranche B Term Loan Notes"
means the promissory notes of the Borrower in favor of the Supplemental
Credit Lenders having a Tranche B Term Loan Commitment Percentage
evidencing the Tranche B Term Loans provided pursuant to Section 2.1,
individually or collectively, as appropriate, as such promissory notes
may be amended, modified, supplemented, extended, renewed or replaced
from time to time as evidenced in the form of Exhibit 2.4(b).
1.2 Computation of Time Periods and Other Definitional Provisions.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
7
<PAGE>
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Supplemental
Credit Lenders hereunder shall be prepared, in accordance with GAAP applied on a
consistent basis. All financial statements delivered to the Supplemental Credit
Lenders hereunder shall be accompanied by a statement from the Borrower that
GAAP has not changed since the most recent financial statements delivered by the
Borrower to the Supplemental Credit Lenders or if GAAP has changed describing
such changes in detail and explaining how such changes affect the financial
statements. All calculations made for the purposes of determining compliance
with this Credit Agreement shall (except as otherwise expressly provided herein)
be made by application of GAAP applied on a basis consistent with the most
recent annual or quarterly financial statements delivered pursuant to Section
7.1 (or, prior to the delivery of the first financial statements pursuant to
Section 7.1, consistent with the financial statements described in Section
5.1(c) of the New Credit Agreement); provided, however, if (a) the Borrower
shall object to determining such compliance on such basis at the time of
delivery of such financial statements due to any change in GAAP or the rules
promulgated with respect thereto or (b) either Agent or the Required Lenders
shall so object in writing within 60 days after delivery of such financial
statements (or after the Supplemental Credit Lenders have been informed of the
change in GAAP affecting such financial statements, if later), then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by the Borrower to the Supplemental Credit Lenders as to
which no such objection shall have been made.
SECTION 2
CREDIT FACILITIES
2.1 Term Loans.
(a) Tranche A Term Loans. Subject to the terms and conditions
set forth herein, each Supplemental Credit Lender that has a Tranche A
Term Loan Commitment Percentage severally agrees on the date hereof, to
make a term loan (collectively, the "Tranche A Term Loans") to the
Borrower, in Dollars, in an amount equal to such Supplemental Credit
Lender's Tranche A Term Loan Commitment Percentage of the Tranche A
Term Loan Committed Amount; provided that the aggregate amount of such
Tranche A Term Loans made on the date hereof shall not exceed the
Tranche A Term Loan Committed Amount. Once repaid, Tranche A Term Loans
cannot be reborrowed.
(b) Tranche B Term Loans. Subject to the terms and conditions
set forth herein, each Supplemental Credit Lender that has a Tranche B
Term Loan Commitment Percentage severally agrees on the date hereof, to
make a term loan (collectively, the "Tranche B Terms Loans") to the
Borrower, in Dollars, in an amount equal to such Supplemental Credit
Lender's Tranche B Term Loan Commitment Percentage of the Tranche B
Term Loan Committed Amount; provided that the aggregate amount of such
Tranche B Term Loans made on the date hereof shall not exceed the
Tranche B Term Loan Committed Amount.
Once repaid, Tranche B Term Loans cannot be reborrowed.
8
<PAGE>
(c) Funding of Term Loans. On the Effective Date, each
Supplemental Credit Lender will make its Tranche A Term Loan Commitment
Percentage of the Tranche A Term Loan Committed Amount and its Tranche
B Term Loan Commitment Percentage of the Tranche B Term Loan Committed
Amount available to the Agent by deposit, in Dollars and in immediately
available funds, at the offices of the Agent at its principal office in
Charlotte, North Carolina or at such other address as the Agent may
designate in writing. The amount of the Tranche A Term Loans and
Tranche B Term Loans will then be made available to the Borrower by the
Agent by crediting the account of the Borrower on the books of such
office of the Agent, to the extent the amount of such Tranche A Term
Loans and Tranche B Term Loans are made available to the Agent. All
Tranche A Term Loans and Tranche B Term Loans on the date hereof shall
be Base Rate Loans. Thereafter, all or any portion of the Tranche A
Term Loans and Tranche B Term Loans may be converted into Eurodollar
Loans in accordance with the terms of Section 2.2.
(c) Amortization. The principal amount of the Tranche A Term
Loans and Tranche B Term Loans shall be repaid in quarterly payments in
the amounts and on the dates set forth below:
<TABLE>
<CAPTION>
Tranche A
Principal Term Loan Principal Principal Tranche B
Amortization Amortization Amortization Term Loan Principal
Payment Dates Payment Payment Dates Amortization Payment
<S> <C> <C> <C>
March 31, 1998 $1,230,000 March 31, 1998 $ 87,500
June 30, 1998 $1,230,000 June 30, 1998 $ 87,500
September 30, 1998 $1,230,000 September 30, 1998 $ 87,500
December 31, 1998 $1,400,000 December 31, 1998 $ 87,500
March 31, 1999 $1,400,000 March 31, 1999 $ 87,500
June 30, 1999 $1,400,000 June 30, 1999 $ 87,500
September 30, 1999 $1,400,000 September 30, 1999 $ 87,500
December 31, 1999 $1,650,000 December 31, 1999 $ 87,500
March 31, 2000 $1,650,000 March 31, 2000 $ 87,500
June 30, 2000 $1,650,000 June 30, 2000 $ 87,500
September 30, 2000 $1,650,000 September 30, 2000 $ 87,500
December 31, 2000 $1,650,000 December 31, 2000 $ 87,500
March 31, 2001 $1,650,000 March 31, 2001 $ 87,500
June 30, 2001 $1,650,000 June 30, 2001 $ 87,500
September 30, 2001 $1,650,000 September 30, 2001 $1,000,000
December 31, 2001 $1,650,000 December 31, 2001 $3,250,000
March 31, 2002 $1,650,000 March 31, 2002 $3,250,000
June 26, 2002 $1,750,000 June 30, 2002 $3,250,000
September 30, 2002 $3,250,000
December 31, 2002 $3,250,000
March 31, 2003 $3,250,000
June 30, 2003 $3,250,000
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Tranche A
Principal Term Loan Principal Principal Tranche B
Amortization Amortization Amortization Term Loan Principal
Payment Dates Payment Payment Dates Amortization Payment
<S> <C> <C> <C>
September 30, 2003 $3,250,000
December 31, 2003 $3,250,000
February 14, 2004 $3,350,000
Total $27,540,000.00 Total $34,825,000.00
</TABLE>
2.2 Continuations and Conversions.
Subject to the terms of Section 5.1, the Borrower shall have the
option, on any Business Day, to continue in existence Eurodollar Loans for a
subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or
to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a)
each such continuation or conversion must be requested by the Borrower pursuant
to a written Notice of Continuation/Conversion, in the form of Exhibit 2.2, in
compliance with the terms set forth below, (b) except as provided in Section
3.12, Eurodollar Loans may only be continued or converted into Base Rate Loans
on the last day of the Interest Period applicable thereto, (c) Eurodollar Loans
may not be continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default and (d)
any request to extend a Eurodollar Loan that fails to comply with the terms
hereof or any failure to request an extension of a Eurodollar Loan at the end of
an Interest Period shall constitute a request for a conversion to a Base Rate
Loan on the last day of the applicable Interest Period. Each continuation or
conversion must be requested by the Borrower no later than 11:00 a.m. (i) one
Business Day prior to the date for a requested conversion of a Eurodollar Loan
to a Base Rate Loan or (ii) three Business Days prior to the date for a
requested extension of a Eurodollar Loan or conversion of a Base Rate Loan to a
Eurodollar Loan, in each case pursuant to a written Notice of
Continuation/Conversion submitted to the Agent which shall set forth (A) whether
the Loans to be continued or converted are Tranche A Term Loans or Tranche B
Term Loans, (B) whether the Borrower wishes to continue or convert such Loans
and (C) if the request is to continue a Eurodollar Loan or convert a Base Rate
Loan to a Eurodollar Loan, the Interest Period applicable thereto.
2.3 Minimum Amounts.
Each request for a conversion or continuation shall be subject to the
requirements that (a) each Eurodollar Loan shall be in a minimum amount of
$1,000,000 and in integral multiples of $500,000 in excess thereof, (b) each
Base Rate Loan shall be in a minimum amount of the lesser of $1,000,000 (and
integral multiples of $500,000 in excess thereof) or the then remaining
principal balance of the Tranche A Term Loan or Tranche B Term Loan, if less, as
applicable, and (c) no more than ten Eurodollar Loans shall, in the aggregate,
be outstanding under the New Credit Agreement and hereunder at any one time. For
the purposes of this Section, all Eurodollar Loans with the same Interest
Periods shall be considered as one Eurodollar Loan, but Eurodollar Loans with
different Interest Periods, even if they begin on the same date, shall be
considered as separate Eurodollar Loans.
10
<PAGE>
2.4 Notes.
(a) Tranche A Term Loan Notes. The Tranche A Term Loans made
by the Supplemental Credit Lenders having a Tranche A Term Loan
Commitment Percentage shall be evidenced by a duly executed promissory
note of the Borrower to each such Supplemental Credit Lender in the
face amount of its Tranche A Term Loan Commitment Percentage of the
Tranche A Term Loan Committed Amount in substantially the form of
Exhibit 2.4(a).
(b) Tranche B Term Loan Notes. The Tranche B Term Loans made
by the Supplemental Credit Lenders having a Tranche B Term Loan
Commitment Percentage shall be evidenced by a duly executed promissory
note of the Borrower to each such Supplemental Credit Lender in the
face amount of its Tranche B Term Loan Commitment Percentage of the
Tranche B Term Loan Committed Amount in substantially the form of
Exhibit 2.4(b).
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS
3.1 Interest.
(a) Interest Rate. All Base Rate Loans shall accrue interest
at the Adjusted Base Rate and all Eurodollar Loans shall accrue
interest at the Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Tranche A Term Loans and
Tranche B Term Loans and any other amounts owing hereunder or under the
other Credit Documents (including without limitation fees and expenses)
shall bear interest, payable on demand, at a per annum rate equal to 4%
plus the rate which would otherwise be applicable (or if no rate is
applicable, then the rate for Revolving Loans that are Base Rate Loans
plus four percent (4%) per annum).
(c) Interest Payments. Interest on Tranche A Term Loans and
Tranche B Term Loans shall be due and payable in arrears on each
Interest Payment Date. If an Interest Payment Date falls on a date
which is not a Business Day, such Interest Payment Date shall be deemed
to be the next succeeding Business Day (subject to accrual of interest
for the period of such extension), except that in the case of
Eurodollar Loans where the next succeeding Business Day falls in the
next succeeding calendar month, then on the next preceding day.
3.2 Place and Manner of Payments.
All payments of principal, interest, fees, expenses and other amounts
to be made by a Credit Party under this Credit Agreement shall be received not
later than 2:00 p.m. on the date when due, in Dollars and in immediately
available funds, by the Agent at its offices at NationsBank Plaza,
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Charlotte, North Carolina. Payments received after such time shall be deemed to
have been received on the next Business Day. Payments received after such time
shall be deemed to have been received on the next Business Day. The Borrower
shall, at the time it makes any payment under this Credit Agreement, specify to
the Agent, the Tranche A Term Loans, the Tranche B Term Loans, fees or other
amounts payable by the Borrower hereunder to which such payment is to be applied
(and in the event that it fails to specify, or if such application would be
inconsistent with the terms hereof, the Agent shall, subject to Section 3.7,
distribute such payment to the Supplemental Credit Lenders in such manner as the
Agent may deem appropriate). The Agent will distribute such payments to the
applicable Supplemental Credit Lenders on the date received if any such payment
is received prior to 2:00 p.m.; otherwise the Agent will distribute such payment
to the applicable Supplemental Credit Lenders on the next succeeding Business
Day. Whenever any payment hereunder shall be stated to be due on a day which is
not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day (subject to accrual of interest and fees for the period
of such extension), except that in the case of Eurodollar Loans, if the
extension would cause the payment to be made in the next following calendar
month, then such payment shall instead be made on the next preceding Business
Day.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Tranche A Term Loans and Tranche B Term Loans in whole or in
part from time to time without premium or penalty; provided, however,
that (i) Eurodollar Loans may only be prepaid on three Business Days'
prior written notice to the Agent and any prepayment of Eurodollar
Loans will be subject to Section 3.15; (ii) Base Rate Loans may only be
prepaid after written notice (confirmed by a telephone call from the
Borrower) to the Agent not later than 11:00 a.m. on the Business Day of
the applicable prepayment; (iii) each such partial prepayment shall be
(A) in the case of the Tranche A Term Loans in the minimum principal
amount of $1,000,000 and integral multiples of $1,000,000 in excess
thereof and (B) in the case of Tranche B Term Loans in the minimum
principal amount of $1,000,000 and integral multiples of $1,000,000 in
excess thereof; (iv) voluntary prepayments with respect to the Term
Loans shall be applied pro rata between the outstanding Tranche A Term
Loans and Tranche B Term Loans (pro rata among the remaining Principal
Amortization Payments in inverse order of maturity thereof); and (v)
any prepayment of Tranche A Term Loans and Tranche B Term Loans made
prior to June 26, 1998 shall be subject to the prepayment penalty
provisions of Section 3.3(d) hereof.
(b) Mandatory Prepayments.
(i) Excess Cash Flow. Within 10 days after the
date the audited financial statements are required to be
delivered pursuant to Section 7.1(a), the Borrower shall make
a prepayment of the Loans in an amount equal to 75% of the
Excess Cash Flow earned during such prior fiscal year (to be
applied as set forth in Section 3.3(c) below).
(ii) Asset Dispositions. Immediately upon
receipt by the Borrower or any of its Subsidiaries of proceeds
from any Asset Disposition, the Borrower shall forward 100% of
the Net Cash Proceeds of such Asset Disposition to
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the Lenders as a prepayment of the Loans (to be applied as
set forth in Section 3.3(c) below).
(iii) Issuances of Equity. Immediately upon
receipt by the Borrower or any of its Subsidiaries of proceeds
from any Equity Issuance (other than the issuance of capital
stock of the Borrower in connection with the Borrower's
purchase of the Acquired Assets), the Borrower shall forward
50% of the Net Cash Proceeds of such Equity Issuance to the
Lenders as a prepayment of the Loans (to be applied as set
forth in Section 3.3(c) below).
(iv) Recovery Event. Subject to the terms and
conditions of Section 7.6 hereof, immediately upon receipt by
the Borrower or any of its Subsidiaries of proceeds from any
Recovery Event, the Borrower shall forward 100% of the Net
Cash Proceeds from such Recovery Event to the Lenders as a
prepayment of the Loans (to be applied as set forth in Section
3.3(c) below).
(v) Debt Issuances. Immediately upon receipt by
the Borrower or any of its Subsidiaries of proceeds from any
Debt Issuance, the Borrower shall prepay the Loans in an
aggregate amount equal to 100% of the Net Cash Proceeds of
such Debt Issuance to the Lenders such prepayment to be
applied as set forth in Section 3.3(c) below.
(c) Application of Prepayments. All amounts required to be
paid pursuant to Section 3.3(b)(ii), (iii), (iv), (v) and (vi) above
shall be applied, first pro rata among the outstanding Tranche A Term
Loans and Tranche B Term Loans (which amounts shall then be applied to
the remaining Principal Amortization Payments due with respect to the
Tranche A Term Loans and Tranche B Term Loans in inverse order of
maturity thereof), second to the Revolving Loans (with a corresponding
reduction in the Revolving Committed Amount) and third to Swingline
Loans (with a corresponding reduction in the Revolving Committed
Amount). One or more holders of the Tranche B Term Loans may decline to
accept a mandatory prepayment under Sections 3.3(b)(ii), (iii), (iv),
(v) or (vi) with respect to the Tranche B Term Loans (to the extent
there is sufficient Tranche A Term Loans outstanding to be paid with
such prepayment) in which case such declined prepayments shall be
allocated pro rata among the Tranche A Term Loans and among the Tranche
B Term Loans held by Lenders accepting such prepayments; provided,
however a Lender declining to accept a mandatory prepayment shall be
required to make such election to decline with respect to the Tranche B
Term Loan of such Lender. Within the parameters of the application set
forth above, prepayments shall be applied first to Base Rate Loans and
then to Eurodollar Loans in direct order of Interest Period maturities.
All prepayments hereunder shall be subject to Section 3.15.
(d) Prepayment Penalty. In the event the Borrower voluntarily
elects to prepay any Tranche A Term Loan and Tranche B Term Loan prior
to June 26, 1998 as permitted by Section 3.3(a) hereof and such
prepayment is made with the proceeds of any other Indebtedness, the
Borrower shall be obligated to pay a prepayment fee equal to one-half
percent (1/2%) of the principal amount prepaid; provided, however, the
prepayment fees referred to in this Section 3.3(d) shall not apply to
any voluntary prepayment made with any
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part of the fifty percent (50%) portion of proceeds from an Equity
Issuance that the Borrower is permitted to retain pursuant to Section
3.3(b)(iv) hereof. After June 26, 1998, the Borrower may prepay the
Tranche A Term Loan and the Tranche B Term Loan without a prepayment
penalty or fee.
3.4 Fees.
The Borrower agrees to pay to the Agent, for its own account, an annual
fee as agreed to between the Borrower and the Agent in the Fee Letter.
3.5 Payment in full at Maturity.
(a) On the Tranche A Term Loan Maturity Date, the entire
outstanding principal balance of all Tranche A Term Loans, together
with accrued but unpaid interest and all other sums owing with respect
thereto, shall be due and payable in full, unless accelerated sooner
pursuant to Section 9 hereof.
(b) On the Tranche B Term Loan Maturity Date, the entire
outstanding principal balance of all Tranche B Term Loans, together
with accrued but unpaid interest and all other sums owing with respect
thereto, shall be due and payable in full, unless accelerated sooner
pursuant to Section 9 hereof.
3.6 Computations of Interest and Fees.
(a) Except for Base Rate Loans, in which case interest shall
be computed on the basis of a 365 or 366 day year as the case may be
(unless the Base Rate is determined by reference to the Federal Funds
Rate), all computations of interest and fees hereunder shall be made on
the basis of the actual number of days elapsed over a year of 360 days.
Interest shall accrue from and include the date of borrowing (or
continuation or conversion) but exclude the date of payment.
(b) It is the intent of the Supplemental Credit Lenders and
the Credit Parties to conform to and contract in strict compliance with
applicable usury law from time to time in effect. All agreements
between the Supplemental Credit Lenders and the Borrower are hereby
limited by the provisions of this paragraph which shall override and
control all such agreements, whether now existing or hereafter arising
and whether written or oral. In no way, nor in any event or contingency
(including but not limited to prepayment or acceleration of the
maturity of any obligation), shall the interest taken, reserved,
contracted for, charged, or received under this Credit Agreement, under
the Tranche A Term Loan Notes, Tranche B Term Loan Notes or otherwise,
exceed the maximum nonusurious amount permissible under applicable law.
If, from any possible construction of any of the Supplemental Credit
Documents or any other document, interest would otherwise be payable in
excess of the maximum nonusurious amount, any such construction shall
be subject to the provisions of this paragraph and such documents shall
be automatically reduced to the maximum nonusurious amount permitted
under applicable law, without the necessity of execution of any
amendment or new document. If any Supplemental Credit Lender shall ever
receive anything of value which is characterized as interest on the
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Tranche A Loans or Tranche B Term Loans under applicable law and which
would, apart from this provision, be in excess of the maximum lawful
amount, an amount equal to the amount which would have been excessive
interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Tranche A Term Loans or Tranche B Term
Loans, as appropriate, and not to the payment of interest, or refunded
to the Borrower or the other payor thereof if and to the extent such
amount which would have been excessive exceeds such unpaid principal
amount of the Tranche A Term Loans or Tranche B Term Loans. The right
to demand payment of the Tranche A Term Loans or Tranche B Term Loans
or any other indebtedness evidenced by any of the Supplemental Credit
Documents does not include the right to receive any interest which has
not otherwise accrued on the date of such demand, and the Supplemental
Credit Lenders do not intend to charge or receive any unearned interest
in the event of such demand. All interest paid or agreed to be paid to
the Supplemental Credit Lenders with respect to the Tranche A Term
Loans or Tranche B Term Loans shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term (including any renewal or extension) of
the Tranche A Term Loans or Tranche B Term Loans so that the amount of
interest on account of such indebtedness does not exceed the maximum
nonusurious amount permitted by applicable law.
3.7 Pro Rata Treatment.
Except to the extent otherwise provided herein, each Loan borrowing,
each payment or prepayment of principal of any Loan, each payment of fees and
the Administrative Fees retained by the Agent for its own account, each
reduction of the Revolving Committed Amount, and each conversion or continuation
of any Loan, shall be allocated pro rata among the relevant Lenders in
accordance with the respective Revolving Loan Commitment Percentages, Tranche A
Term Loan Commitment Percentages and Tranche B Term Loan Commitment Percentages,
as applicable, of such Lenders (or, if the Commitments of such Lenders have
expired or been terminated, in accordance with the respective principal amounts
of their outstanding Loans and Participation Interests of such Lenders);
provided that, if any Lender shall have failed to pay its applicable pro rata
share of any Loan, then any amount to which such Lender would otherwise be
entitled pursuant to this Section shall instead be payable to the Agent;
provided further, that in the event any amount paid to any Lender pursuant to
this Section is rescinded or must otherwise be returned by the Agent, each
Lender shall, upon the request of the Agent, repay to the Agent the amount so
paid to such Lender, with interest for the period commencing on the date such
payment is returned by the Agent until the date the Agent receives such
repayment at a rate per annum equal to, during the period to but excluding the
date two Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus four percent (4%) per annum.
3.8 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement or the
New Credit Agreement, after the occurrence and during the continuance of an
Event of Default, all amounts collected or received by the Agent or any Lender
on account of amounts outstanding under any of the Credit Documents or in
respect of the Collateral shall be paid over or delivered as follows:
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FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent in its
capacity as the Agent;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to the Lenders hereunder and under the New Credit Agreement;
FIFTH, to the payment of the outstanding principal amount of
the Loans, and to any principal amounts outstanding under Hedging
Agreements, pro rata, as set forth below;
SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category and (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans, and
obligations under Hedging Agreements held by such Lender bears to the aggregate
then outstanding Loans, and obligations under Hedging Agreements) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH," "FIFTH," and
"SIXTH" above.
3.9 Sharing of Payments.
The Supplemental Credit Lenders agree among themselves that, except to
the extent otherwise provided herein, in the event that any Lender shall obtain
payment in respect of any Loan or any other obligation owing to such Lender
under this Credit Agreement or the New Credit Agreement through the exercise of
a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim
under Section 506 of the Bankruptcy Code or other security or interest arising
from, or in lieu of, such secured claim, received by such Lender under any
applicable bankruptcy, insolvency or other similar law or otherwise, or by any
other means, in excess of its pro rata share of such payment as provided for in
this Credit Agreement and the New Credit Agreement, such Lender shall promptly
purchase from the other Lenders for cash an interest in such Loans and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement and the New Credit Agreement. The Supplemental Credit Lenders further
agree among themselves that if payment to a Lender obtained by such Lender
through the exercise of a right of setoff, banker's lien, counterclaim or other
event as
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aforesaid shall be rescinded or must otherwise be restored, each Lender
which shall have shared the benefit of such payment shall, by repurchase of the
interest theretofore sold, return its share of that benefit (together with its
share of any accrued interest payable with respect thereto) to each Lender whose
payment shall have been rescinded or otherwise restored. The Borrower agrees
that any Lender so purchasing such an interest may, to the fullest extent
permitted by law, exercise all rights of payment, including setoff, banker's
lien or counterclaim, with respect to such interest as fully as if such Lender
were a holder of such Loan or other obligation in the amount of such interest.
Except as otherwise expressly provided in this Credit Agreement, if any Lender
or the Agent shall fail to remit to the Agent or any other Lender an amount
payable by such Lender or the Agent to the Agent or such other Lender pursuant
to this Credit Agreement or the New Credit Agreement on the date when such
amount is due, such payments shall be made together with interest thereon for
each date from the date such amount is due until the date such amount is paid to
the Agent or such other Lender at a rate per annum equal to the Federal Funds
Rate. If under any applicable bankruptcy, insolvency or other similar law, any
Lender receives a secured claim in lieu of a setoff to which this Section 3.9
applies, such Lender shall, to the extent practicable, exercise its rights in
respect of such secured claim in a manner consistent with the rights of the
Lenders under this Section 3.9 to share in the benefits of any recovery on such
secured claim.
3.10 Capital Adequacy.
If, after the date hereof, any Supplemental Credit Lender has
determined that the adoption or the becoming effective of, or any change in, or
any change by any Governmental Authority, central bank or comparable agency
charged with the interpretation or administration thereof in the interpretation
or administration of, any applicable law, rule or regulation regarding capital
adequacy, or compliance by such Supplemental Credit Lender with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Supplemental Credit Lender's
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which such Supplemental Credit Lender could have achieved
but for such adoption, effectiveness, change or compliance (taking into
consideration such Supplemental Credit Lender's policies with respect to capital
adequacy), then, upon notice from such Supplemental Credit Lender to the
Borrower, the Borrower shall be obligated to pay to such Supplemental Credit
Lender such additional amount or amounts as will compensate such Supplemental
Credit Lender for such reduction. Each determination by any such Supplemental
Credit Lender of amounts owing under this Section shall, absent manifest error,
be conclusive and binding on the parties hereto.
3.11 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall promptly give telecopy or telephonic
notice thereof to the Borrower and the Supplemental Credit Lenders. If such
notice is given (a) any Eurodollar Loans requested to be made on the first day
of such Interest Period shall be made as Base Rate Loans, (b) any Tranche A Term
Loans or Tranche B Term Loans that were to have been converted on the first day
of such Interest Period to or continued as Eurodollar Loans shall be
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converted to or continued as Base Rate Loans and (c) any outstanding Eurodollar
Loans shall be converted, on the first day of such Interest Period, to Base Rate
Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right
to convert Base Rate Loans to Eurodollar Loans.
3.12 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date shall make it unlawful for any Supplemental
Credit Lender to make or maintain Eurodollar Loans as contemplated by this
Credit Agreement, (a) such Supplemental Credit Lender shall promptly give
written notice of such circumstances to the Borrower and the Agent (which notice
shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Supplemental Credit Lender hereunder to make Eurodollar
Loans, continue Eurodollar Loans as such and convert a Base Rate Loan to
Eurodollar Loans shall forthwith be canceled and, until such time as it shall no
longer be unlawful for such Supplemental Credit Lender to make or maintain
Eurodollar Loans, such Supplemental Credit Lender shall then have a commitment
only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such
Supplemental Credit Lender's Tranche A Loans and Tranche B Term Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Base Rate Loans on the respective last days of the then current Interest Periods
with respect to such Tranche A Term Loans and Tranche B Term Loans or within
such earlier period as required by law. If any such conversion of a Eurodollar
Loan occurs on a day which is not the last day of the then current Interest
Period with respect thereto, the Borrower shall pay to such Supplemental Credit
Lender such amounts, if any, as may be required pursuant to Section 3.15.
3.13 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Supplemental Credit
Lender, or compliance by any Supplemental Credit Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority, in each case made subsequent to the Closing Date
(or, if later, the date on which such Supplemental Credit Lender becomes a
Supplemental Credit Lender):
(a) shall subject such Supplemental Credit Lender to any tax
of any kind whatsoever with respect to any Eurodollar Loans made by it
or its obligation to make Eurodollar Loans, or change the basis of
taxation of payments to such Supplemental Credit Lender in respect
thereof (except for Non-Excluded Taxes covered by Section 3.14
(including Non-Excluded Taxes imposed solely by reason of any failure
of such Supplemental Credit Lender to comply with its obligations under
Section 3.14(b)) and changes in taxes measured by or imposed upon the
overall net income, or franchise tax (imposed in lieu of such net
income tax), of such Supplemental Credit Lender or its applicable
lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in
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or for the account of, advances, loans or other extensions of credit
by, or any other acquisition of funds by, any office of such
Supplemental Credit Lender which is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(c) shall impose on such Supplemental Credit Lender any other
condition (excluding any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such
Supplemental Credit Lender, by an amount which such Supplemental Credit Lender
reasonably deems to be material, of making, converting into, continuing or
maintaining Eurodollar Loans or to reduce any amount receivable hereunder in
respect thereof, then, in any such case, upon notice to the Borrower from such
Supplemental Credit Lender, through the Agent, in accordance herewith, the
Borrower shall be obligated to promptly pay such Supplemental Credit Lender,
upon its demand, any additional amounts necessary to compensate such
Supplemental Credit Lender for such increased cost or reduced amount receivable,
provided that, in any such case, the Borrower may elect to convert the
Eurodollar Loans made by such Supplemental Credit Lender hereunder to Base Rate
Loans by giving the Agent at least one Business Day's notice of such election,
in which case the Borrower shall promptly pay to such Supplemental Credit
Lender, upon demand, without duplication, such amounts, if any, as may be
required pursuant to Section 3.15. If any Supplemental Credit Lender becomes
entitled to claim any additional amounts pursuant to this Section 3.13, it shall
provide prompt notice thereof to the Borrower, through the Agent, certifying (x)
that one of the events described in this Section 3.13 has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount resulting from such event and (z) as to the
additional amount demanded by such Supplemental Credit Lender and a reasonably
detailed explanation of the calculation thereof. Such a certificate as to any
additional amounts payable pursuant to this Section 3.13 submitted by such
Supplemental Credit Lender, through the Agent, to the Borrower shall be
conclusive and binding on the parties hereto in the absence of manifest error.
This covenant shall survive the termination of this Credit Agreement and the
payment of the Tranche A Term Loans and Tranche B Term Loans and all other
amounts payable hereunder.
3.14 Taxes.
(a) Except as provided below in this Section 3.14, all
payments made by the Borrower under this Credit Agreement, any Tranche
A Term Loan Notes and any Tranche B Term Loan Notes shall be made free
and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
court, or governmental body, agency or other official, excluding taxes
measured by or imposed upon the overall net income of any Supplemental
Credit Lender or its applicable lending office, or any branch or
affiliate thereof, and all franchise taxes, branch taxes, taxes on
doing business or taxes on the overall capital or net worth of any
Supplemental Credit Lender or its applicable lending office, or any
branch or affiliate thereof, in each case imposed in lieu of net income
taxes: (i) by the jurisdiction under the laws of which such
Supplemental Credit Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal
executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing
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such tax and such Supplemental Credit Lender, applicable lending
office, branch or affiliate other than a connection arising solely
from such Supplemental Credit Lender having executed, delivered or
performed its obligations, or received payment under or enforced, this
Credit Agreement, or any Tranche A Supplemental Term Loan Notes or any
Tranche B Term Loan Notes. If any such non-excluded taxes, levies,
imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") are required to be withheld from any amounts
payable to the Agent or any Supplemental Credit Lender hereunder or
under any Tranche A Term Loan Notes or any Tranche B Term Loan Notes,
(A) the amounts so payable to the Agent or such Supplemental Credit
Lender shall be increased to the extent necessary to yield to the
Agent or such Supplemental Credit Lender (after payment of all
Non-Excluded Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Credit
Agreement, any Tranche A Term Loan Notes or any Tranche B Term Loan
Notes, provided, however, that the Borrower shall be entitled to
deduct and withhold any Non-Excluded Taxes and shall not be required
to increase any such amounts payable to any Supplemental Credit Lender
that is not organized under the laws of the United States of America
or a state thereof if such Supplemental Credit Lender fails to comply
with the requirements of paragraph (b) of this Section 3.14 whenever
any Non-Excluded Taxes are payable by the Borrower, and (B) as
promptly as possible thereafter the Borrower shall send to the Agent
for its own account or for the account of such Supplemental Credit
Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the
Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrower
shall indemnify the Agent and the Supplemental Credit Lenders for any
incremental taxes, interest or penalties that may become payable by
the Agent or any Supplemental Credit Lender as a result of any such
failure. The agreements in this subsection shall survive the
termination of this Credit Agreement and the payment of the Tranche A
Term Loans, Tranche B Term Loans and all other amounts payable
hereunder.
(b) Each Supplemental Credit Lender that is not incorporated
under the laws of the United States of America or a state thereof
shall:
(i) (A) on or before the date of any payment
by the Borrower under this Credit Agreement or
Tranche A Term Loan Notes or Tranche B Term Loan
Notes to such Supplemental Credit Lender, deliver to
the Borrower and the Agent (x) two duly completed
copies of United States Internal Revenue Service Form
1001 or 4224, or successor applicable form, as the
case may be, certifying that it is entitled to
receive payments under this Credit Agreement, any
Tranche A Term Loan Notes or Tranche B Term Loan
Notes without deduction or withholding of any United
States federal income taxes or (y) an Internal
Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that
it is entitled to an exemption from United States
backup withholding tax;
(B) deliver to the Borrower and the
Agent two further copies of any such form or
certification on or before the date that any
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such form or certification expires or becomes
obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower; and
(C) obtain such extensions of time
for filing and complete such forms or certifications
as may reasonably be requested by the Borrower or the
Agent; or
(ii) in the case of any such Supplemental
Credit Lender that is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Internal Revenue Code, (A)
represent to the Borrower (for the benefit of the Borrower and
the Agent) that it is not a bank within the meaning of Section
881(c)(3)(A) of the Internal Revenue Code, (B) agree to
furnish to the Borrower, on or before the date of any payment
by the Borrower, with a copy to the Agent, two accurate and
complete original signed copies of Internal Revenue Service
Form W-8, or successor applicable form certifying to such
Supplemental Credit Lender's legal entitlement at the date of
such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement, any Tranche A Term Loan Notes and any Tranche B
Term Loan Notes (and to deliver to the Borrower and the Agent
two further copies of such form on or before the date it
expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recently provided form
and, if necessary, obtain any extensions of time reasonably
requested by the Borrower or the Agent for filing and
completing such forms), and (C) agree, to the extent legally
entitled to do so, upon reasonable request by the Borrower, to
provide to the Borrower (for the benefit of the Borrower and
the Agent) such other forms as may be reasonably required in
order to establish the legal entitlement of such Supplemental
Credit Lender to an exemption from withholding with respect to
payments under this Credit Agreement, any Tranche A Term Loan
Notes and any Tranche B Term Loan Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Supplemental Credit
Lender hereunder which renders all such forms inapplicable or which
would prevent such Supplemental Credit Lender from duly completing and
delivering any such form with respect to it and such Supplemental
Credit Lender so advises the Borrower and the Agent then such
Supplemental Credit Lender shall be exempt from such requirements. Each
Person that shall become a Supplemental Credit Lender or a participant
of a Supplemental Credit Lender pursuant to Section 11.3 shall, upon
the effectiveness of the related transfer, be required to provide all
of the forms, certifications and statements required pursuant to this
subsection (b); provided that in the case of a participant of a
Supplemental Credit Lender, the obligations of such participant of a
Supplemental Credit Lender pursuant to this subsection (b) shall be
determined as if the participant of a Supplemental Credit Lender were a
Supplemental Credit Lender except that such participant of a
Supplemental Credit Lender shall furnish all such required forms,
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certifications and statements to the Supplemental Credit Lender from
which the related participation shall have been purchased.
3.15 Indemnity.
The Borrower promises to indemnify each Supplemental Credit Lender and
to hold each Supplemental Credit Lender harmless from any loss or expense which
such Supplemental Credit Lender may sustain or incur (other than through such
Supplemental Credit Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a notice
requesting the same in accordance with the provisions of this Credit Agreement,
(b) default by the Borrower in making any prepayment of a Eurodollar Loan after
the Borrower has given a notice thereof in accordance with the provisions of
this Credit Agreement and (c) the making of a prepayment of Eurodollar Loans on
a day which is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to (i) the amount of interest which
would have accrued on the amount so prepaid, or not so borrowed, converted or
continued, for the period from the date of such prepayment or of such failure to
borrow, convert or continue to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or continue, the Interest
Period that would have commenced on the date of such failure) in each case at
the applicable rate of interest for such Eurodollar Loans provided for herein
(excluding, however, the Applicable Percentage included therein, if any) minus
(ii) the amount of interest (as reasonably determined by such Supplemental
Credit Lender) which would have accrued to such Supplemental Credit Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market. The agreements in this Section
shall survive the termination of this Credit Agreement, the payment of the
Tranche A Term Loans and the payment of the Tranche B Term Loans and all other
amounts payable hereunder.
3.16 Replacement of Lenders.
If any Supplemental Credit Lender delivers a notice to the Borrower
pursuant to Sections 3.10, 3.13 or 3.14, then the Borrower shall have the right,
if no Default or Event of Default then exists, to either (i) replace such
Supplemental Credit Lender (the "Replaced Lender") with one or more additional
banks or financial institutions (collectively, the "Replacement Lender"),
provided that (A) at the time of any replacement pursuant to this Section 3.16,
the Replacement Lender shall enter into one or more assignment agreements
substantially in the form of Exhibit 11.3 pursuant to, and in accordance with
the terms of, Section 11.3(b) (and with all fees payable pursuant to said
Section 11.3(b) to be paid by the Replacement Lender) pursuant to which the
Replacement Lender shall acquire all of the rights and obligations of the
Replaced Lender hereunder and, in connection therewith, shall pay to the
Replaced Lender in respect thereof an amount equal to the sum of (a) the
principal of, and all accrued interest on, all outstanding Loans of the Replaced
Lender, and (b) all accrued, but theretofore unpaid, fees owing to the Replaced
Lender pursuant to Section 3.4, and (B) all obligations of the Borrower owing to
the Replaced Lender (including all obligations, if any, owing pursuant to
Section 3.10, 3.13 or 3.14, but excluding those obligations specifically
described in clause (A) above in respect of which the assignment purchase price
has been, or is concurrently being paid) shall be paid in full to such Replaced
Lender concurrently with such replacement or (ii) if a Replacement Lender is not
located within 60 days of such notice, terminate the
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Commitments and repay the Loans in full within 120 days of receipt of such
notice without incurring any prepayment penalty under Section 3.3(d).
SECTION 4
GUARANTY
4.1 Guaranty of Payment.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Supplemental Credit Lender,
each Affiliate of Supplemental Credit Lender that enters into a Hedging
Agreement and the Agent the prompt payment of the Credit Party Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise). The Guarantors additionally, jointly and severally,
unconditionally guarantee to each Supplemental Credit Lender the timely
performance of all other obligations under the Supplemental Credit Documents and
Hedging Agreements. This Guaranty is a guaranty of payment and not of collection
and is a continuing guaranty and shall apply to all Credit Party Obligations
whenever arising.
4.2 Obligations Unconditional.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Supplemental Credit Documents or the Hedging
Agreements, or any other agreement or instrument referred to therein, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor. Each Guarantor agrees that this
Guaranty may be enforced by the Supplemental Credit Lenders without the
necessity at any time of resorting to or exhausting any other security or
collateral and without the necessity at any time of having recourse to the
Tranche A Term Loan Notes, Tranche B Term Loan Notes or any other of the
Supplemental Credit Documents or any collateral, if any, hereafter securing the
Credit Party Obligations or otherwise and each Guarantor hereby waives the right
to require the Supplemental Credit Lenders to proceed against the Borrower or
any other Person (including a co-guarantor) or to require the Supplemental
Credit Lenders to pursue any other remedy or enforce any other right. Each
Guarantor further agrees that it shall have no right of subrogation, indemnity,
reimbursement or contribution against the Borrower or any other Guarantor of the
Credit Party Obligations for amounts paid under this Guaranty until such time as
the Supplemental Credit Lenders (and any Affiliates of Supplemental Credit
Lenders entering into Hedging Agreements) have been paid in full, Tranche A Term
Loan Committed Amount and the Tranche B Term Loan Committed Amount under the
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Supplemental Credit Lenders in connection with monies received under the
Supplemental Credit Documents. Each Guarantor further agrees that nothing
contained herein shall prevent the Supplemental Credit Lenders from suing on the
Tranche A Term Loan Notes, the Tranche B Term Loan Notes or any of the other
Supplemental Credit Documents or any of the Hedging Agreements or foreclosing
its security interest in or Lien on any collateral, if any, securing the Credit
Party Obligations or from exercising any other rights available to it under this
Credit
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Agreement, the Tranche A Term Loan Notes, the Tranche B Term Loan Notes,
any other of the Supplemental Credit Documents, or any other instrument of
security, if any, and the exercise of any of the aforesaid rights and the
completion of any foreclosure proceedings shall not constitute a discharge of
any of any Guarantor's obligations hereunder; it being the purpose and intent of
each Guarantor that its Guarantor's obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances. Neither any
Guarantor's obligations under this Guaranty nor any remedy for the enforcement
thereof shall be impaired, modified, changed or released in any manner
whatsoever by an impairment, modification, change, release or limitation of the
liability of the Borrower or by reason of the bankruptcy or insolvency of the
Borrower. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Credit Party Obligations and notice of or
proof of reliance by the Agent or any Supplemental Credit Lender upon this
Guarantee or acceptance of this Guarantee. The Credit Party Obligations, and any
of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon this
Guarantee. All dealings between the Borrower and any of the Guarantors, on the
one hand, and the Agent and the Supplemental Credit Lenders, on the other hand,
likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee.
4.3 Modifications.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Supplemental Credit
Lenders shall not have any obligation to protect, perfect, secure or insure any
such security interests, liens or encumbrances now or hereafter held, if any,
for the Credit Party Obligations or the properties subject thereto; (c) the time
or place of payment of the Credit Party Obligations may be changed or extended,
in whole or in part, to a time certain or otherwise, and may be renewed or
accelerated, in whole or in part; (d) the Borrower and any other party liable
for payment under the Supplemental Credit Documents may be granted indulgences
generally; (e) any of the provisions of the Tranche A Term Loan Notes, Tranche B
Term Loan Notes, or any of the other Supplemental Credit Documents may be
modified, amended or waived; (f) any party (including any co-guarantor) liable
for the payment thereof may be granted indulgences or be released; and (g) any
deposit balance for the credit of the Borrower or any other party liable for the
payment of the Credit Party Obligations or liable upon any security therefor may
be released, in whole or in part, at, before or after the stated, extended or
accelerated maturity of the Credit Party Obligations, all without notice to or
further assent by the Guarantor, which shall remain bound thereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release.
4.4 Waiver of Rights.
Each Guarantor expressly waives: (a) notice of acceptance of this
Guaranty by the Supplemental Credit Lenders and of all extensions of credit to
the Borrower by the Supplemental Credit Lenders; (b) presentment and demand for
payment or performance of any of the Credit Party Obligations; (c) protest and
notice of dishonor or of default (except as specifically required in the Credit
Agreement) with respect to the Credit Party Obligations or with respect to any
security therefor; (d) notice of the Supplemental Credit Lenders obtaining,
amending, substituting for, releasing, waiving or modifying any security
interest, lien or encumbrance, if any, hereafter
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securing the Credit Party Obligations, or the Supplemental Credit Lenders'
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances, if any; (e) all other notices to which the Guarantor
might otherwise be entitled; and (f) demand for payment under this Guaranty.
4.5 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by an Agent
or such Supplemental Credit Lender in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
4.6 Remedies.
The Guarantors agree that, as between the Guarantors, on the one hand,
and the Agent and the Supplemental Credit Lenders, on the other hand, the Credit
Party Obligations may be declared to be forthwith due and payable as provided in
Section 9 (and shall be deemed to have become automatically due and payable in
the circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in accordance
with the terms of the Security Agreements and the other Collateral Documents and
that the Supplemental Credit Lenders may exercise their remedies thereunder in
accordance with their terms.
4.7 Limitation of Guaranty.
Notwithstanding any provision to the contrary contained herein or in
any of the Supplemental Credit Documents, to the extent the obligations of any
Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of such
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
4.8 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence hereof), pay to such Excess Funding
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Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below
and determined, for this purpose, without reference to the properties, assets,
liabilities and debts of such Excess Funding Guarantor) of such Excess Payment
(as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.8 shall be subordinate and subject in
right of payment to the prior payment in full of the obligations of such
Guarantor under the other provisions of this Section 4, and such Excess Funding
Guarantor shall not exercise any right or remedy with respect to such excess
until payment and satisfaction in full of all of such obligations. For purposes
hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations
arising under the other provisions of this Section 4 (hereafter, the "Guaranteed
Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata
Share of the Guaranteed Obligations; (ii) "Excess Payment" shall mean, in
respect of any Guaranteed Obligations, the amount paid by an Excess Funding
Guarantor in excess of its Pro Rata Share of such Guaranteed Obligations; and
(iii) "Pro Rata Share", for the purposes of this Section 4.8, shall mean, for
any Guarantor, the ratio (expressed as a percentage) of (a) the amount by which
the aggregate present fair saleable value of all of its assets and properties
exceeds the amount of all debts and liabilities of such Guarantor (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair saleable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.8 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date).
SECTION 5
CONDITIONS TO EXTENSIONS OF CREDIT
5.1 Conditions to Extensions of Credit.
The Supplemental Credit Lenders shall not be obligated to continue or
convert Tranche A Term Loans or Tranche B Term Loans unless:
(a) Notice: The Borrower shall have delivered in the case of
any continuation or conversion of a Tranche A Term Loan or Tranche B
Term Loan, a duly executed and completed Notice of
Continuation/Conversion by the time specified in Section 2.2;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in the Supplemental Credit
Documents are true and correct in all material respects at and as if
made as of such date;
(c) No Default. No Default or Event of Default shall exist
or be continuing either prior to or after giving effect thereto; and
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(d) No Material Adverse Effect: There shall not have occurred
any Material Adverse Effect.
The delivery of each Notice of Continuation/Conversion shall constitute
a representation and warranty by the Borrower of the correctness of the matters
specified in subsection (b), (c) and (d) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Supplemental
Credit Lender that:
6.1 Financial Condition.
The financial statements delivered to the Lenders pursuant to Section
5.1(c)(ii) of the New Credit Agreement, (a) have been prepared in accordance
with GAAP and (b) present fairly (on the basis disclosed in the footnotes to
such financial statements) the consolidated and consolidating (as applicable)
financial condition, results of operations and cash flows of the Credit Parties
and their Subsidiaries as of such date and for such periods. Since November 30,
1996, there has been no sale, transfer or other disposition by the Borrower or
any of its Subsidiaries of any material part of the business or property of the
Borrower or any of its Subsidiaries and no purchase or other acquisition (other
than the Acquired Assets) by any of them of any business or property (including
any capital stock of any other Person) material in relation to the consolidated
financial condition of the Borrower and its Subsidiaries, in each case, which,
is not reflected in the foregoing financial statements or in the notes thereto.
6.2 No Material Change.
Since November 30, 1996, (a) there has been no development or event
relating to or affecting Borrower or any of its Subsidiaries which has had or
would be reasonably expected to have a Material Adverse Effect and (b) no
dividends or other distributions have been declared, paid or made upon the
capital stock or other equity interest in Borrower or any of its Subsidiaries
nor, except as otherwise permitted under this Credit Agreement, has any of the
capital stock or other equity interest in a Credit Party been redeemed, retired,
purchased or otherwise acquired for value.
6.3 Organization and Good Standing.
The Borrower and each of its Subsidiaries (a) is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
(or other jurisdiction) of its incorporation, (b) is duly qualified and in good
standing as a foreign corporation authorized to do business in every
jurisdiction where the failure to be so qualified would have a Material Adverse
Effect and (c) has the requisite corporate power and authority to own its
properties and to carry on its business as now conducted and as proposed to be
conducted.
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6.4 Due Authorization.
Each Credit Party (a) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Supplemental
Credit Documents to which it is a party and to incur the obligations herein and
therein provided for and (b) is duly authorized to, and has been authorized by
all necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Supplemental Credit Documents to which it is a party.
6.5 No Conflicts.
Neither the execution and delivery of the Supplemental Credit
Documents, nor the consummation of the transactions contemplated therein, nor
performance of and compliance with the terms and provisions thereof by such
Credit Party will (a) violate or conflict with any provision of its articles or
certificate of incorporation or bylaws, (b) violate, contravene or materially
conflict with any Requirement of Law or any other law, regulation (including,
without limitation, Regulation U or Regulation X), order, writ, judgment,
injunction, decree or permit applicable to it, (c) violate, contravene or
conflict with contractual provisions of, or cause an event of default under, any
indenture, loan agreement, mortgage, deed of trust, contract or other agreement
or instrument to which it is a party or by which it may be bound, the violation
of which could have or might be reasonably expected to have a Material Adverse
Effect, or (d) result in or require the creation of any Lien (other than those
contemplated in or created in connection with the Supplemental Credit Documents)
upon or with respect to its properties.
6.6 Consents.
No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or third
party in respect of a Credit Party is required in connection with the execution,
delivery or performance of this Credit Agreement or any of the other
Supplemental Credit Documents by a Credit Party, or if required, such consent,
approval and authorization has been obtained.
6.7 Enforceable Obligations.
This Credit Agreement and the other Supplemental Credit Documents have
been duly executed and delivered and constitute legal, valid and binding
obligations of each Credit Party enforceable against such Credit Party in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws or similar laws affecting creditors' rights generally or by
general equitable principles.
6.8 No Default.
Neither the Borrower nor any of its Subsidiaries is in default in any
respect under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default would have or would be reasonably
expected to have a Material Adverse Effect. No Default or Event of Default has
occurred or exists except as previously disclosed to the Supplemental Credit
Lenders.
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6.9 Ownership.
The Borrower and each of its Subsidiaries is the owner of and has good
and marketable title to all of its assets and none of such assets are subject to
any Lien other than Permitted Liens.
6.10 Indebtedness.
The Borrower and its Subsidiaries have no Indebtedness except (a) as
disclosed in the financial statements referenced in Section 6.1, (b) as set
forth on Schedule 6.10 and (c) as otherwise permitted by this Credit Agreement.
6.11 Litigation.
There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against the Borrower or any of its Subsidiaries which, if adversely
determined, would have or would be reasonably expected to have a Material
Adverse Effect.
6.12 Taxes.
Each of the Borrower and its Subsidiaries has filed, or caused to be
filed, all tax returns (federal, state, local and foreign) required to be filed
and paid (a) all amounts of taxes shown thereon to be due (including interest
and penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware of any proposed tax assessments
against it, any of its Subsidiaries or any other Credit Party.
6.13 Compliance with Law.
Each of the Borrower and its Subsidiaries is in compliance with all
Requirements of Law and all other laws, rules, regulations, orders and decrees
(including without limitation Environmental Laws) applicable to it, or to its
properties, unless such failure to comply would not have or would not be
reasonably expected to have a Material Adverse Effect. No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect.
6.14 ERISA.
Except as set forth on Schedule 6.14 or except as would not result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no Termination Event
has occurred, and, to the best knowledge of the Credit Parties, no
event or condition has occurred or exists as a result of which any
Termination Event could reasonably be expected to occur, with respect
to any Plan; (ii) no "accumulated funding deficiency," as such term is
defined in Section 302 of ERISA and
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Section 412 of the Code, whether or not waived, has occurred with
respect to any Plan; (iii) each Plan has been maintained, operated,
and funded in compliance with its own terms and in material compliance
with the provisions of ERISA, the Code, and any other applicable
federal or state laws; and (iv) no lien in favor or the PBGC or a Plan
has arisen or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
under each Single Employer Plan (determined within the meaning of
Section 401(a)(2) of the Code, utilizing the actuarial assumptions used
to fund such Plans), whether or not vested, did not, as of the last
annual valuation date prior to the date on which this representation is
made or deemed made, exceed the current value of the assets of such
Plan allocable to such accrued liabilities.
(c) Neither the Borrower, nor any of its Subsidiaries nor any
ERISA Affiliate has incurred, or, to the best knowledge of the Credit
Parties, are reasonably expected to incur, any withdrawal liability
under ERISA to any Multiemployer Plan or Multiple Employer Plan.
Neither the Borrower, nor any of its Subsidiaries nor any ERISA
Affiliate has received any notification that any Multiemployer Plan is
in reorganization (within the meaning of Section 4241 of ERISA), is
insolvent (within the meaning of Section 4245 of ERISA), or has been
terminated (within the meaning of Title IV of ERISA), and no
Multiemployer Plan is, to the best knowledge of the Credit Parties,
reasonably expected to be in reorganization, insolvent, or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject the Borrower or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l)
of ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Borrower or any of its Subsidiaries or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability.
(e) The present value (determined using actuarial and other
assumptions which are reasonable with respect to the benefits provided
and the employees participating) of the liability of the Borrower and
its Subsidiaries and each ERISA Affiliate for post-retirement welfare
benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA), net of all assets under all such Plans allocable to such
benefits, are reflected on the Financial Statements in accordance with
FAS 106.
(f) Each Plan which is a welfare plan (as defined in Section
3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of
the Code apply has been administered in compliance in all material
respects with such sections.
6.15 Subsidiaries.
Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of each Credit Party. Information on Schedule 6.15 includes
jurisdiction of incorporation, the number of
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shares of each class of capital stock or other equity interests outstanding, the
number and percentage of outstanding shares of each class owned (directly or
indirectly) by such Credit Party; and the number and effect, if exercised, of
all outstanding options, warrants, rights of conversion or purchase and all
other similar rights with respect thereto. The outstanding capital stock and
other equity interests of all such Subsidiaries is validly issued, fully paid
and non-assessable and is owned by each such Credit Party, directly or
indirectly, free and clear of all Liens (other than those arising under or
contemplated in connection with the Supplemental Credit Documents). Other than
as set forth in Schedule 6.15, neither any Credit Party nor any Subsidiary
thereof has outstanding any securities convertible into or exchangeable for its
capital stock nor does any such Person have outstanding any rights to subscribe
for or to purchase or any options for the purchase of, or any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to its capital stock.
6.16 Use of Proceeds; Margin Stock.
The proceeds of the Tranche A Term Loans and Tranche B Term Loans
hereunder will be used solely for the purposes specified in Section 7.10. None
of the proceeds of the Tranche A Term Loans and Tranche B Term Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, Regulation X or Regulation G, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
U, Regulation X, Regulation G or Regulation T.
None of the Credit Parties owns any "margin stock".
6.17 Government Regulation.
No Credit Party is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 or the Interstate Commerce Act, each as amended. In addition, no Credit
Party is an "investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended, or controlled by such a company,
or a "holding company," or a "Subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "Subsidiary" or a "holding company,"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended. No director, executive officer or principal shareholder of the Borrower
or any of its Subsidiaries is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director",
"executive officer" and "principal shareholder" (when used with reference to any
Lender) have the respective meanings assigned thereto in Regulation O issued by
the Board of Governors of the Federal Reserve System.
6.18 Environmental Matters.
(a) Except as set forth on Schedule 6.18:
(i) each of the Real Properties and all operations at
the Real Properties are in compliance with all applicable
Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the
businesses operated by the Borrower or any of its Subsidiaries
(the "Businesses"), and there are
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no conditions relating to the Businesses or Real Properties
that could give rise to liability under any applicable
Environmental Laws.
(ii) None of the Real Properties contains, or has
previously contained, any Hazardous Materials at, on or under
the Real Properties in amounts or concentrations that, if
released, constitute or constituted a violation of, or could
give rise to liability under, Environmental Laws.
(iii) Neither the Borrower nor any of its
Subsidiaries has received any written or oral notice of, or
inquiry from any Governmental Authority regarding, any
violation, alleged violation, non-compliance, liability or
potential liability regarding Hazardous Materials or
compliance with Environmental Laws with regard to any of the
Real Properties, Leasehold Properties or the Businesses, nor
does the Borrower or any of its Subsidiaries have knowledge or
reason to believe that any such notice is being threatened.
(iv) Hazardous Materials have not been transported or
disposed of from the Real Properties, or generated, treated,
stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on
behalf or with the permission of, the Borrower or any of its
Subsidiaries in a manner that would reasonably be expected to
give rise to liability under any applicable Environmental Law.
(v) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower or any of its Subsidiaries, threatened, under any
Environmental Law to which the Borrower or any of its
Subsidiaries is or will be named as a party, nor are there any
consent decrees or other decrees, consent orders,
administrative orders or other orders, or other administrative
or judicial requirements outstanding under any Environmental
Law with respect to the Borrower or any of its Subsidiaries,
the Real Properties or the Businesses.
(vi) There has been no release or threat of release
of Hazardous Materials at or from the Real Properties, or
arising from or related to the operations (including, without
limitation, disposal) of the Borrower or any of its
Subsidiaries in connection with the Real Properties or
otherwise in connection with the Businesses.
(vii) Neither the Borrower nor any of its
Subsidiaries has assumed any liability of any Person (other
than another Credit Party) under any Environmental Law.
(b) The Borrower has adopted procedures that are designed to
(i) ensure that each Credit Party and their Subsidiaries, any of their
operations and each of the properties owned or leased by each Credit
Party and their Subsidiaries remains in compliance with applicable
Environmental Laws and (ii) minimize any liabilities or potential
liabilities that each Credit Party and their Subsidiaries, any of their
operations and each of the properties owned or leased by each Credit
Party and their Subsidiaries may have under applicable Environmental
Laws.
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6.19 Intellectual Property.
The Borrower and each of its Subsidiaries owns, or has the legal right
to use, all trademarks, tradenames, copyrights, technology, know-how and
processes (the "Intellectual Property") necessary for each of them to conduct
its business as currently conducted except for those the failure to own or have
such legal right to use would not have or be reasonably expected to have a
Material Adverse Effect. Set forth on Schedule 6.19 is a list of all
Intellectual Property owned by the Borrower and its Subsidiaries or that the
Borrower or one of its Subsidiaries has the right to use (which list shall
identify the Person that owns or has the right to use each such item of
Intellectual Property). Except as provided on Schedule 6.19, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does any Credit Party know of any such claim, and to
the Credit Parties' knowledge the use of such Intellectual Property by the
Borrower or any of its Subsidiaries does not infringe on the rights of any
Person, except for such claims and infringements that in the aggregate, would
not have or be reasonably expected to have a Material Adverse Effect.
6.20 Solvency.
Each Credit Party is and, after consummation of the transactions
contemplated by this Credit Agreement and the New Credit Agreement, will be
Solvent.
6.21 Investments.
All Investments of the Borrower and each of its Subsidiaries are either
Permitted Investments or otherwise permitted by the terms of this Credit
Agreement.
6.22 No Financing of Corporate Takeovers.
No proceeds of the Loans hereunder have been or will be used to
acquire, directly or indirectly, any security in any transaction which is
subject to Sections 13 or 14 of the Securities Exchange Act of 1934, as amended
(including, without limitation, Sections 13(d) and 14(d) thereof) or to
refinance any Indebtedness used to acquire any such securities.
6.23 Location of Collateral.
Set forth on Schedule 6.23(a) is a list of all Real Properties and
Leasehold Properties with street address, county and state where located. Set
forth on Schedule 6.23(b) is a list of all locations where any personal property
of a Credit Party is located, including county and state where located. Set
forth on Schedule 6.23(c) is the chief executive office and principal place of
business of each Credit Party.
6.24 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the Supplemental Credit Lenders nor any other document, certificate or statement
furnished to the Supplemental
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Credit Lenders by or on behalf of any Credit Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.25 Licenses, etc.
The Borrower and each of its Subsidiaries has obtained and holds in
full force and effect, all franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
6.26 No Burdensome Restrictions.
Neither the Borrower nor any Subsidiary of the Borrower is a party to
any agreement or instrument or subject to any other obligation or any charter or
corporate restriction or any provision of any applicable law, rule or regulation
which, individually or in the aggregate, would have or be reasonably expected to
have a Material Adverse Effect.
6.27 Brokers' Fees.
No Credit Party has any obligation to any Person in respect of any
finder's, broker's, investment banking or other similar fee in connection with
any of the transactions contemplated under the Supplemental Credit Documents.
6.28 Labor Matters.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of the Borrower or any Subsidiary of the Borrower and
none of such Persons has suffered any strikes, walkouts, work stoppages or other
material labor difficulty within the last five years.
6.29 Collateral Documents.
The Collateral Documents create valid security interests in, and first
Liens on, the Collateral purported to be covered thereby, which security
interests and Liens are and will remain perfected security interests and Liens,
prior to all other Liens other than Permitted Liens. Each of the representations
and warranties made by the Borrower and its Subsidiaries in the Collateral
Documents is true and correct.
6.30 Related Transactions.
The closing of the acquisition of the Acquired Assets will occur
simultaneously with the making of the initial Loans hereunder and under the New
Credit Agreement, and no party waived, without the consent of the Required
Lenders, any condition precedent to their obligations to close as set forth in
the Purchase Agreement. True and complete copies of the Purchase Agreement have
been delivered to each of the Supplemental Credit Lenders, together with a true
and complete copy of each document to be delivered at the closing of the
acquisition of the Acquired Assets.
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6.31 Representations and Warranties Incorporated from Purchase
Agreement.
As of the Closing Date, each of the representations and warranties made
in the Purchase Agreement by each of the parties thereto is true and correct in
all material respects, and such representations and warranties are hereby
incorporated herein by reference with the same effect as though set forth in
their entirety herein, as qualified therein.
6.32 Senior Debt.
The Tranche A Term Loans and Tranche B Term Loans are Senior Debt (as
defined in the Indenture) under Article 10.02 of the Indenture, meaning the
Supplemental Credit Lenders shall have all of the rights and privileges of a
holder of Senior Debt (as defined in the Indenture) under the Indenture
including, but not limited to, the rights set forth in Article 10 of the
Indenture. The Tranche A Term Loans and Tranche B Term Loans are Senior Debt (as
defined in the Second Indenture) under the Second Indenture, meaning the
Supplemental Credit Lenders shall have all of the rights and privileges of a
holder of Senior Indebtedness (as defined in the Second Indenture) under the
Second Indenture.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder have been paid in full and the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Borrower will furnish, or cause to be furnished, to the Agent:
(a) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of the
Borrower, a consolidated and consolidating balance sheet and income
statement of the Borrower and its Subsidiaries, as of the end of such
fiscal year, together with related consolidated and consolidating
statements of operations and retained earnings and of cash flows for
such fiscal year, setting forth in comparative form consolidated
figures for the preceding fiscal year, all such financial information
described above to be in reasonable form and detail and audited by
independent certified public accountants of recognized national
standing reasonably acceptable to the Agent and whose opinion shall be
to the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter of
the Borrower (other than the fourth
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fiscal quarter, in which case 120 days after the end thereof) a
consolidated balance sheet and income statement of the Borrower and
its Subsidiaries, as of the end of such fiscal quarter, together with
related consolidated statements of operations and retained earnings
and of cash flows for such fiscal quarter in each case setting forth
in comparative form consolidated figures for the corresponding period
of the preceding fiscal year, all such financial information described
above to be in reasonable form and detail and reasonably acceptable to
the Agent, and accompanied by a certificate of the chief financial
officer of the Borrower to the effect that such quarterly financial
statements fairly present in all material respects the financial
condition of the Borrower and its Subsidiaries and have been prepared
in accordance with GAAP, subject to changes resulting from audit and
normal year-end audit adjustments.
(c) Monthly Financial Statements. As soon as available and in
any event within 20 days after the end of each month of the Borrower
(other than the last month of the first three fiscal quarters in which
case 45 days after the end thereof), a consolidated balance sheet and
income statement of the Borrower and its Subsidiaries as at the end of
such month together with (i) related consolidated statements of
operations and retained earnings for such month in each case setting
forth in comparative form consolidated figures for the corresponding
period of the preceding fiscal year and (ii) a separate income
statement for each Foreign Subsidiary (and such other financial
information as reasonably requested by the Agent or the Required
Lenders), all such financial information described above to be in
reasonable form and detail and reasonably acceptable to the Agent, and
accompanied by a certificate of the chief financial officer of the
Borrower to the effect that such monthly financial statements fairly
present in all material respects the financial condition of the
Borrower and its Subsidiaries and have been prepared in accordance with
GAAP, subject to changes resulting from audit and normal year-end audit
adjustments.
(d) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit 7.1(d), (i) demonstrating
compliance with the financial covenants contained in Section 7.12 by
calculation thereof as of the end of each such fiscal period and (ii)
stating that no Default or Event of Default exists, or if any Default
or Event of Default does exist, specifying the nature and extent
thereof and what action the Borrower proposes to take with respect
thereto. The Borrower shall also deliver a copy of such certificate to
the Agency Services Address.
(e) Annual Business Plan and Budgets. At least 60 days after
the end of each fiscal year of the Borrower, beginning with the fiscal
year ending November 30, 1998, an annual business plan and budget of
the Borrower and its Subsidiaries containing, among other things, pro
forma financial statements for the next fiscal year.
(f) Compliance With Certain Provisions of the Credit
Agreement. Within 120 days after the end of each fiscal year of the
Borrower, the Borrower shall deliver a certificate, containing
information regarding (i) the calculation of Excess Cash Flow and (ii)
the amount of any Asset Dispositions, Debt Issuances, Equity Issuances
and Recovery Events that were made during the prior fiscal year.
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(g) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(h) Auditor's Reports. Promptly upon receipt thereof, a copy
of any "management letter" submitted by independent accountants to the
Borrower or any of its Subsidiaries in connection with any annual,
interim or special audit of the books of the Borrower or any of its
Subsidiaries.
(i) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as the Borrower or any of its Subsidiaries shall send to its
shareholders generally or to a holder of any Indebtedness owed by the
Borrower or any of its Subsidiaries in its capacity as such a holder
and (b) upon the written request of the Agent, all reports and written
information to and from the United States Environmental Protection
Agency, or any state or local agency responsible for environmental
matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and
safety matters, or any successor agencies or authorities concerning
environmental, health or safety matters.
(j) Notices. Upon a Credit Party obtaining knowledge thereof,
such Credit Party will give written notice to the Agent immediately of
(a) the occurrence of an event or condition consisting of a Default or
Event of Default, specifying the nature and existence thereof and what
action the Borrower proposes to take with respect thereto, and (b) the
occurrence of any of the following with respect to the Borrower or any
of its Subsidiaries (i) the pendency or commencement of any litigation,
arbitral or governmental proceeding against the Borrower or any of its
Subsidiaries which if adversely determined would have or would be
reasonably expected to have a Material Adverse Effect, or (ii) the
institution of any proceedings against the Borrower or any of its
Subsidiaries with respect to, or the receipt of notice by such Person
of potential liability or responsibility for violation, or alleged
violation of any federal, state or local law, rule or regulation,
including but not limited to, Environmental Laws, the violation of
which would have or would be reasonably expected to have a Material
Adverse Effect.
(k) ERISA. Upon any of the Credit Parties or any ERISA
Affiliate obtaining knowledge thereof, Borrower will give written
notice to the Agent and each of the Supplemental Credit Lenders
promptly (and in any event within five Business Days) of: (i) any event
or condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, a Termination Event; (ii)
with respect to any Multiemployer Plan, the receipt of notice as
prescribed in ERISA or otherwise of any withdrawal liability assessed
against the Borrower or any of its ERISA Affiliates, or of a
determination that any Multiemployer Plan is in reorganization or
insolvent (both within the meaning of Title IV of ERISA); (iii) the
failure to make full payment on or before the due date (including
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extensions) thereof of all amounts which the Borrower or any of its
Subsidiaries or ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding
standard set forth in ERISA and the Code with respect thereto; or (iv)
any change in the funding status of any Plan that could have a Material
Adverse Effect; together, with a description of any such event or
condition or a copy of any such notice and a statement by the principal
financial officer of the Borrower briefly setting forth the details
regarding such event, condition, or notice, and the action, if any,
which has been or is being taken or is proposed to be taken by the
Credit Parties with respect thereto. Promptly upon request, the
Borrower shall furnish the Agent and each of the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and
attachments thereto required to filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(l) Environmental.
(i) Upon the reasonable written request of the Agent,
the Borrower will furnish or cause to be furnished to the
Agent, at the Borrower's expense, an environmental assessment
of reasonable scope, form and depth, (including, where
appropriate, invasive soil or groundwater sampling) by a
consultant reasonably acceptable to the Agent as to the nature
and extent of the presence of any Hazardous Materials on any
property owned, leased or operated by the Borrower or any of
its Subsidiaries and as to the compliance by the Borrower and
each of its Subsidiaries with Environmental Laws. If the
Borrower fails to deliver such an environmental report within
seventy-five (75) days after receipt of such written request
then the Agent may arrange for same, and the Borrower hereby
grants to the Agent and its representatives access to the Real
Properties and a license to undertake such an assessment
(including, where appropriate, invasive soil or groundwater
sampling). The reasonable cost of any assessment arranged for
by the Agent pursuant to this provision will be payable by the
Borrower on demand and added to the obligations secured by the
Collateral Documents.
(ii) The Borrower and each of its Subsidiaries will
conduct and complete all investigations, studies, sampling,
and testing and all remedial, removal, and other actions
necessary to address all Hazardous Materials on, from, or
affecting any real property owned or leased by the Borrower or
its Subsidiaries to the extent necessary to be in compliance
with all Environmental Laws and all other applicable federal,
state, and local laws, regulations, rules and policies and
with the orders and directives of all Governmental Authorities
exercising jurisdiction over such real property to the extent
any failure would have or be reasonably expected to have a
Material Adverse Effect.
(m) Star Report. At the time of delivery of the financial
statements provided for in Section 7.1(b) above, a company-prepared
report containing information as to brand sales and advertising cost
analysis for the fiscal quarter of the Borrower most recently ending.
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(n) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Borrower and its Subsidiaries as the
Agent or the Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, do all things necessary to preserve and keep in full force and
effect in all material respects its existence, rights, franchises and authority.
7.3 Books and Records.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
7.4 Compliance with Law.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, comply with all laws, rules, regulations and orders, and all
applicable restrictions imposed by all Governmental Authorities, applicable to
it and its property (including, without limitation, Environmental Laws) if
noncompliance with any such law, rule, regulation, order or restriction would
have or reasonably be expected to have a Material Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will, and will cause its Subsidiaries to,
pay and discharge (a) all taxes, assessments and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its properties,
before they shall become delinquent, (b) all lawful claims (including claims for
labor, materials and supplies) which, if unpaid, might give rise to a Lien upon
any of its properties, and (c) except as prohibited hereunder, all of its other
Indebtedness as it shall become due; provided, however, that a Credit Party or
its Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, claim or Indebtedness which is being contested in good faith by
appropriate proceedings and as to which adequate reserves therefor have been
established in accordance with GAAP, unless the failure to make any such payment
(i) would give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) would have a Material Adverse Effect.
7.6 Insurance.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
(including worker's compensation insurance, liability insurance, casualty
insurance and business interruption insurance) in such amounts, covering such
risks and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice. All liability policies shall
have each Supplemental Credit Lender as an
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additional insured and all casualty policies shall have the Agent, on behalf of
the Supplemental Credit Lenders, as loss payee.
In the event there occurs any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party shall
promptly give written notice thereof to the Agent generally describing the
nature and extent of such damage or destruction. Subsequent to any loss, damage
to or destruction of the Collateral of any Credit Party or any part thereof,
such Credit Party, whether or not the insurance proceeds, if any, received on
account of such damage or destruction shall be sufficient for that purpose, at
such Credit Party's cost and expense, will promptly repair or replace the
Collateral of such Credit Party so lost, damaged or destroyed; provided,
however, that such Credit Party shall not be obligated to repair or replace any
Collateral so lost, damaged or destroyed to the extent the failure to make such
repair or replacement (a) is desirable to the proper conduct of the business of
such Credit Party in the ordinary course and otherwise is in the best interest
of such Credit Party and (b) would not materially impair the rights and benefits
of the Agent or the Supplemental Credit Lenders under this Credit Agreement or
any other Supplemental Credit Documents. In the event a Credit Party shall
receive any insurance proceeds, as a result of any loss, damage or destruction,
in a net amount in excess of $100,000, such Credit Party will immediately pay
over such proceeds to the Agent as cash collateral for the Credit Party
Obligations. The Agent agrees to release such insurance proceeds to such Credit
Party for replacement or restoration of the portion of the Collateral of such
Credit Party lost, damaged or destroyed if, (A) within 120 days from the date
the Agent receives such insurance proceeds, the Agent has received written
application for such release from such Credit Party together with evidence
reasonably satisfactory to it that the Collateral lost, damaged or destroyed has
been or will be replaced or restored to its condition (or by Collateral having a
value at least equal to the condition of the asset subject to the loss, damage
or destruction) immediately prior to the loss, destruction or other event giving
rise to the payment of such insurance proceeds and (B) on the date of such
release no Default or Event of Default exists. If the conditions in the
preceding sentence are not met, the Agent shall, on the first Business Day
subsequent to the date 120 days after it received such insurance proceeds, apply
such insurance proceeds as a mandatory prepayment of the Credit Party
Obligations for application in accordance with the terms of Section 3.3(b)(v)
and Section 3.3(c). All insurance proceeds shall be subject to the security
interest of the Supplemental Credit Lenders under the Collateral Documents.
The present insurance coverage of the Borrower and its Subsidiaries is outlined
as to carrier, policy number, expiration date, type and amount on Schedule 7.6,
as Schedule 7.6 may be amended from time to time by written notice to the Agent.
7.7 Maintenance of Property.
Each of the Credit Parties will, and will cause its Subsidiaries to,
maintain and preserve its properties and equipment in good repair, working order
and condition, normal wear and tear excepted, and will make, or cause to be
made, in such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
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7.8 Performance of Obligations.
Each of the Credit Parties will, and will cause its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
7.9 Collateral.
If, subsequent to the Closing Date, a Credit Party shall (a) acquire or
lease any real property or (b) acquire any intellectual property, securities
instruments, chattel paper or other personal property required to be delivered
to the Agent as Collateral hereunder or under any of the Collateral Documents,
the Borrower shall immediately notify the Agent of same. Each Credit Party shall
take such action (including, but not limited to, the actions set forth in
Sections 5.1(f) and (g) of the New Credit Agreement), as requested by the Agent
and at its own expense, to ensure that the Lenders have a first priority
perfected Lien in all owned real property (and in such leased real property as
requested by the Agent or the Required Lenders) and all personal property of the
Credit Parties (whether now owned or hereafter acquired), subject only to
Permitted Liens. Each Credit Party shall adhere to the covenants regarding the
location of personal property as set forth in the Security Agreements.
7.10 Use of Proceeds.
The Credit Parties will use proceeds of the Tranche A Term Loans and
Tranche B Term Loans solely (a) to refinance on the Closing Date the existing
Indebtedness of the Borrower under Prior Supplemental Credit Agreement and (b)
to pay related fees and expenses in connection with the foregoing.
7.11 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit
Party will, and will cause its Subsidiaries to, permit representatives appointed
by the Agent or any Lender, including, without limitation, independent
accountants, agents, attorneys and appraisers to visit and inspect such Credit
Party's (or its Subsidiary's) property, including its books and records, its
accounts receivable and inventory, its facilities and its other business assets,
and to make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of the Credit Parties and their Subsidiaries. The Credit Parties
agree that the Agent, and its representatives, may conduct an annual audit of
the Collateral, at the expense of the Borrower.
7.12 Financial Covenants.
(a) Interest Coverage Ratio. The Interest Coverage Ratio,
as of the end of each fiscal quarter, shall be greater than or equal
to:
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(i) From the Effective Date to and including August 31,
1998, 1.30 to 1.0; and
(ii) From September 1, 1998 and thereafter, 1.40 to 1.0.
(b) Fixed Charge Coverage Ratio. The Fixed Charge Coverage
Ratio, as of the end of each fiscal quarter, shall be greater than or
equal to:
(i) From the Effective Date to and including August 31,
1998, 1.10 to 1.0; and
(ii) From September 1, 1998 and thereafter, 1.20 to 1.0.
(c) Leverage Ratio. The Leverage Ratio, as of the end of each
fiscal quarter, shall be less than or equal to:
(i) From the Effective Date to and including August 30,
1998, 10.0 to 1.0;
(ii) From August 31, 1998 to and including November 29,
1998, 8.50 to 1.0;
(iii) From November 30, 1998 to and including February 27,
1999, 7.50 to 1.0;
(iv) From February 28, 1999 to and including May 30, 1999,
6.75 to 1.0;
(v) From May 31, 1999, to and including August 30, 1999,
5.50 to 1.0; and
(vi) From August 31, 1999 and thereafter, 5.0 to 1.0.
(d) Senior Leverage Ratio. The Senior Leverage Ratio, as of
the end of each fiscal quarter, shall be less than or equal to:
(i) From the Effective Date to and including May 31, 1998,
3.25 to 1.0;
(ii) From June 1, 1998 to and including August 31, 1998, 3.0
to 1.0; and
(iii) From September 1, 1998 and thereafter, 2.50 to 1.0.
(e) Net Worth. At all times Net Worth shall be no less than
Four Million Seven Hundred Thousand ($4,700,000) increased on a
cumulative basis, commencing with the fiscal quarter ending May 31,
1998, by an amount equal to, (i) as of the last day of each
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fiscal quarter, 50% of Net Income for the fiscal quarter then ended
(without deductions for any losses) plus (ii) 100% of the Net Cash
Proceeds from any Equity Issuance subsequent to the Closing Date.
(f) Appraised Brand Value. As of the end of each fiscal
quarter of the Borrower, with respect to the Borrower and its
Subsidiaries on a consolidated basis, the most recent appraised value
of all brands or product lines of the Borrower and its Subsidiaries on
a consolidated basis on such date shall be greater than or equal to
$340 million.
7.13 Additional Credit Parties.
At the time any Person becomes a Subsidiary of a Credit Party, the
Borrower shall so notify the Agent and promptly thereafter (but in any event
within 30 days after the date thereof) shall cause such Person to (a) if it is a
Domestic Subsidiary, execute a Joinder Agreement in substantially the same form
as Exhibit 7.13, (b) cause all of the capital stock of such Person (if such
Person is a Domestic Subsidiary) or 65% of the capital stock of such Person (if
such Person is a Foreign Subsidiary) to be delivered to the Agent (together with
undated stock powers signed in blank) and pledged to the Agent pursuant to an
appropriate pledge agreement in substantially the form of the Pledge Agreement
and otherwise in a form acceptable to the Agent, (c) if such Person is a
Domestic Subsidiary, pledge all of its assets to the Lenders pursuant to a
security agreement in substantially the form of the Security Agreements and
otherwise in a form acceptable to the Agent (d) if such Person has any
Subsidiaries, (i) deliver all of the capital stock of such Domestic Subsidiaries
and 65% of the capital stock of such Foreign Subsidiaries (together with undated
stock powers signed in blank) to the Agent and (ii) execute a pledge agreement
in substantially the form of the Pledge Agreement and otherwise in a form
acceptable to the Agent (e) if such Person owns or leases any real property in
the United States of America, execute any and all necessary mortgages, deeds of
trust, deeds to secure debt, leasehold mortgages, collateral assignments of
leaseholds or other appropriate real estate collateral documentation in a form
acceptable to the Agent and (f) deliver such other documentation as the Agent
may reasonably request in connection with the foregoing, including, without
limitation, appropriate UCC-1 financing statements, real estate title insurance
policies, environmental reports, landlord waivers, certified resolutions and
other organizational and authorizing documents of such Person and favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above), all in form, content and scope reasonably satisfactory to
the Agent.
7.14 Interest Rate Protection Agreements.
The Borrower shall, within 30 days of the Closing Date, have in place
interest rate protection agreements, in form and substance acceptable to the
Agent, protecting against fluctuations in interest rates which agreements shall
provide coverage for a period of three (3) years, and in a notional amount of at
least fifty percent (50%) of the outstanding principal amount of the Term Loans.
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7.15 Ownership of Subsidiaries.
The Borrower shall at all times own 100% of the capital stock of its
Subsidiaries (other than to the extent necessary for Chattem (U.K.) Limited and
HBA Insurance Ltd. to qualify for incorporation in their respective countries of
incorporation, any nominal qualifying shares owned by any necessary governmental
authorities) and may not sell, transfer or otherwise dispose of any shares of
capital stock of any of its Subsidiaries.
7.16 Appraisal Reports.
The Borrower and its Subsidiaries shall provide the Agent, upon the
request of the Agent and at the expense of the Borrower, with asset appraisal
reports with respect to the real and personal property of the Borrower and its
Subsidiaries including, without limitation, appraisals of brand values
(provided, however, the Borrower shall not be required to pay for more than one
appraisal of brand values per year). In the event the Agent needs more than one
asset appraisal report of the real and personal property of the Borrower and its
Subsidiaries during any year, the Agent shall have the right to arrange and pay
for such report.
7.17 Year 2000 Compatibility.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, take all action necessary to assure that its computer based
systems are able to operate and effectively process data including dates on and
after January 1, 2000, and, at the reasonable request of the Agent or the
Required Lenders, the Credit Parties will provide evidence to the Lenders of
such year 2000 compatibility.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
No Credit Party will, nor will it permit any of its Subsidiaries to,
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement, the
other Supplemental Credit Documents and the New Credit Agreement
Documents;
(b) the Subordinated Debt;
(c) Indebtedness existing as of the Closing Date as referenced
in Section 6.10 (and renewals, refinancings or extensions thereof on
terms and conditions no more
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favorable, in the aggregate, to such Person than such existing
Indebtedness and in a principal amount not in excess of that
outstanding as of the date of such renewal, refinancing or extension);
(d) Indebtedness owing by one Credit Party to another
Credit Party;
(e) purchase money Indebtedness (including Capital Leases)
incurred by the Borrower or any of its Subsidiaries to finance the
purchase of fixed assets; provided that (i) the total of all such
Indebtedness for all such Persons taken together shall not exceed an
aggregate principal amount of $2,000,000.00 at any one time outstanding
(including any such Indebtedness referred to in subsection (c) above);
(ii) such Indebtedness when incurred shall not exceed the purchase
price of the asset(s) financed; and (iii) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance
outstanding thereon at the time of such refinancing;
(f) obligations of the Credit Parties evidenced by the
interest rate protection agreements referred to in Section 7.14;
(g) Indebtedness incurred by Foreign Subsidiaries not to
exceed $500,000.00, in the aggregate, at any one time outstanding
(including any such Indebtedness referred to in subsection (c) above);
and
(h) the Additional Subordinated Debt.
8.2 Liens.
No Credit Party will, nor will it permit its Subsidiaries to contract,
create, incur, assume or permit to exist any Lien with respect to any of its
property or assets of any kind (whether real or personal, tangible or
intangible), whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
No Credit Party will, nor will it permit its Subsidiaries to, alter the
character of its business from that conducted as of the Closing Date or engage
in any business other than the business conducted as of the Closing Date, which
with respect to Signal shall be limited to the ownership of trademarks and
tradenames for the purpose of licensing such trademarks and tradenames to the
Borrower.
8.4 Consolidation and Merger.
No Credit Party will, nor will it permit its Subsidiaries to, enter
into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); provided that
notwithstanding the foregoing provisions of this Section 8.4, the following
actions may be taken if (a) the Agent is given prior written notice of such
action, and the Credit Parties execute and deliver such documents, instruments
and certificates as the Agent may request in order to maintain the perfection
and priority of the Liens on the assets of the Credit Parties and (b) after
giving effect thereto no Default or Event of Default exists:
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(i) any Credit Party may be merged or consolidated with or
into the Borrower or any Credit Party (other than the Borrower) may be
merged or consolidated with or into any other Credit Party; provided
that if such transaction shall be between the Borrower and another
Credit Party, the Borrower shall be the continuing or surviving
corporation; and
(ii) any Foreign Subsidiary may merge or consolidate with any
other Foreign Subsidiary.
8.5 Sale or Lease of Assets.
No Credit Party will, nor will it permit any of its Subsidiaries to,
convey, sell, lease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any part of its business or assets whether now
owned or hereafter acquired, including, without limitation, inventory,
receivables, real property, leasehold interests, equipment and securities other
than (a) any inventory or other assets sold, leased or disposed of (or
simultaneously replaced with like goods) in the ordinary course of business, (b)
obsolete, idle or worn-out assets no longer used or useful in its business, (c)
the sale, lease or transfer or other disposal by a Credit Party other than the
Borrower of any or all of its assets to the Borrower or to any other Credit
Party, or (d) sales of product lines (or the right to produce a consumer product
or products) provided that the dispositions permitted under this subparagraph
(d) during the term of this Credit Agreement shall be limited to product lines
(or the right to produce a consumer product or products) having sales for the
twelve-month period ending on the fiscal quarter ending immediately preceding
the sale in an aggregate amount of $4,000,000 or less.
8.6 Advances, Investments and Loans.
No Credit Party will, nor will it permit any of its Subsidiaries to,
make any Investments except for Permitted Investments.
8.7 Dividends.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly, (a) declare or pay any dividends (whether cash or
otherwise) or make any other distribution upon any shares of its capital stock
of any class other than the payment of dividends by the Subsidiaries of the
Borrower to the Borrower or (b) other than Permitted Investments purchase,
redeem or otherwise acquire or retire or make any provisions for redemption,
acquisition or retirement of any shares of its capital stock of any class or any
warrants or options to purchase any such shares.
8.8 Transactions with Affiliates.
Except as set forth on Schedule 8.8, no Credit Party will, nor will it
permit its Subsidiaries to, enter into any transaction or series of
transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder, Subsidiary or Affiliate other than on terms and
conditions substantially as favorable as would be obtainable in a comparable
arm's-length transaction with a Person other than an officer, director,
shareholder, Subsidiary or Affiliate.
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8.9 Fiscal Year; Organizational Documents.
No Credit Party will, nor will it permit any of its Subsidiaries to,
change its fiscal year or materially change its charter documents or its bylaws
without the prior written consent of the Required Lenders.
8.10 Prepayments of Indebtedness.
No Credit Party will, nor will it permit any of its Subsidiaries to,
(a) amend or modify (or permit the amendment or modification of) any of the
terms of any Indebtedness if such amendment or modification would add or change
any terms in a manner adverse to the Supplemental Credit Lenders, including but
not limited to, shortening final maturity or average life to maturity of such
Indebtedness or requiring any payment to be made sooner than originally
scheduled or increasing the interest rate applicable thereto or change any
subordination provision thereof, (b) during the existence of a Default or Event
of Default, or if a Default or Event of Default would be caused as a result
thereof make (or give any notice with respect thereto) any voluntary or optional
payment or prepayment or redemption or acquisition for value of (including,
without limitation, by way of depositing money or securities with the trustee
with respect thereto before due for the purpose of paying when due), refund,
refinance or exchange of any other Indebtedness.
8.11 Subordinated Debt.
(a) No Credit Party will (i) make or offer to make any principal
payments with respect to the Subordinated Debt, (ii) redeem or offer to redeem
any of the Subordinated Debt, or (iii) deposit any funds intended to discharge
or defease any or all of the Subordinated Debt. The Subordinated Debt may not be
amended or modified in any material manner without the prior written consent of
the Required Lenders, it being specifically understood and agreed that no
amendment to Article 4 or Article 10 of the Indenture shall be made without the
prior written consent of the Required Lenders.
(b) No Credit Party will (i) make or offer to make any principal
payments with respect to the Additional Subordinated Debt, (ii) redeem or offer
to redeem any of the Additional Subordinated Debt, or (iii) deposit any funds
intended to discharge or defease any or all of the Additional Subordinated Debt.
The Additional Subordinated Debt may not be amended or modified in any material
manner without the prior written consent of the Required Lenders.
8.12 Limitations.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause, incur, assume, suffer or
permit to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any such Person to (a) pay dividends or make any
other distribution on any of such Person's capital stock, (b) pay any
Indebtedness owed to the Borrower or any other Credit Party, (c) make loans or
advances to any other Credit Party or (d) transfer any of its property to any
other Credit Party, except for encumbrances or restrictions existing under or by
reason of (i) customary non-assignment provisions in any lease governing a
leasehold interest, (ii) this Credit Agreement, the other Supplemental Credit
Documents and the New Credit Agreement Documents and (iii) the Indenture.
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8.13 Sale Leasebacks.
No Credit Party will, nor will it permit any of its Subsidiaries to,
directly or indirectly become or remain liable as lessee or as guarantor or
other surety with respect to any lease, of any property (whether real or
personal or mixed), whether now owned or hereafter acquired, (a) which such
Credit Party or Subsidiary has sold or transferred or is to sell or transfer to
any other Person other than a Credit Party or (b) which such Credit Party or
Subsidiary intends to use for substantially the same purpose as any other
property which has been sold or is to be sold or transferred by such Credit
Party or Subsidiary to any Person in connection with such lease.
8.14 Negative Pledges.
Other than as set forth in Section 4.12 of the Indenture, none of the
Credit Parties will, nor will it permit any of its Subsidiaries to, enter into,
assume or become subject to any agreement prohibiting or otherwise restricting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired, or requiring the grant of any security for such
obligation if security is given for some other obligation.
8.15 Capital Expenditures.
The Credit Parties and their Subsidiaries will not make Capital
Expenditures, in any fiscal year, that would exceed $3,500,000.00 in the
aggregate.
8.16 Operating Leases.
Neither the Borrower nor any of its Subsidiaries shall create, incur,
assume or permit to exist obligations under Operating Leases which require
aggregate annual payments in excess of $1,500,000.00.
8.17 Payment Blockage Notice.
(a) The Borrower (i) covenants and agrees that it will not give the
Payment Blockage Notice (as defined in the Indenture) without the consent of the
Required Lenders and (ii) hereby designates and appoints the Agent, as
attorney-in-fact of the Borrower, irrevocably and with full power of
substitution, to deliver any Payment Blockage Notice that the Borrower has the
right to deliver pursuant to the terms of the Indenture; provided that the
foregoing appointment shall terminate at such time as the Loans, together with
interest, fees and other obligations hereunder, have been paid in full and the
Commitments hereunder shall have terminated.
(b) The Borrower (i) covenants and agrees that it will not give the
Payment Blockage Notice (as defined in the Second Indenture) without the consent
of the Required Lenders and (ii) hereby designates and appoints the Agent, as
attorney-in-fact of the Borrower, irrevocably and with full power of
substitution, to deliver any Payment Blockage Notice (as defined in the Second
Indenture) that the Borrower has the right to deliver pursuant to the terms of
the Second Indenture; provided that the foregoing appointment shall terminate at
such time as the Loans,
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together with interest, fees and other obligations hereunder, have been paid in
full and the Commitments hereunder shall have terminated.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall:
(i) default in the payment when due of any
principal of any of the Tranche A Term Loans or Tranche B
Term Loans; or
(ii) default, and such default shall continue for
three or more days, in the payment when due of any interest on
the Tranche A Term Loans or Tranche B Term Loans, or of any
fees or other amounts owing hereunder, under any of the other
Supplemental Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Supplemental Credit Documents, or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall
prove untrue in any material respect on the date as of which it was
made or deemed to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.4, 7.5, 7.6, 7.9, 7.10, 7.12, 7.13, 7.14, 7.15, 7.16 or 8.1
through 8.17 inclusive; or
(ii) default in the due performance or observance by
it of any term, covenant or agreement contained in Section 7.1
and such default shall continue unremedied for a period of
five Business Days after the earlier of an officer of a Credit
Party becoming aware of such default or notice thereof given
by the Agent; or
(iii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) or (ii) of this
Section 9.1) contained in this Credit Agreement and such
default shall continue unremedied for a period of at least 30
days after the earlier of an officer of a Credit Party
becoming aware of such default or notice thereof given by the
Agent.
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(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Supplemental Credit Documents and such default
shall continue unremedied for a period of at least 30 days after the
earlier of an officer of a Credit Party becoming aware of such default
or notice thereof given by the Agent, or (ii) any Supplemental Credit
Documents shall fail to be in full force and effect or to give the
Agent and/or the Supplemental Credit Lenders the security interests,
liens, rights, powers and privileges purported to be created thereby.
(e) Guaranties. The guaranty given by the Credit Parties
hereunder or by any Additional Credit Party hereafter or any provision
thereof shall cease to be in full force and effect, or any guarantor
thereunder or any Person acting by or on behalf of such guarantor shall
deny or disaffirm such Guarantor's obligations under such guaranty.
(f) Bankruptcy, etc. The occurrence of any of the following
with respect to the Borrower or any of its Subsidiaries (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of the Borrower or any of its
Subsidiaries in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or appoint
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of any of the Borrower or any of its Subsidiaries or
for any substantial part of its property or ordering the winding up or
liquidation of its affairs; or (ii) an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect is commenced against the Borrower or any of its Subsidiaries
and such petition remains unstayed and in effect for a period of 60
consecutive days; or (iii) the Borrower or any of its Subsidiaries
shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent
to the entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of such Person or any substantial part of its property
or make any general assignment for the benefit of creditors; or (iv)
the Borrower or any of its Subsidiaries shall admit in writing its
inability to pay its debts generally as they become due or any action
shall be taken by such Person in furtherance of any of the aforesaid
purposes.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) of the Borrower or any of its Subsidiaries in a principal
amount in excess of $500,000.00, including, without limitation, the
Subordinated Debt, the Additional Subordinated Debt and any
indebtedness under the New Credit Agreement (i) a Credit Party shall
(A) default in any payment (beyond the applicable grace period with
respect thereto, if any) with respect to any such Indebtedness, or (B)
default (after giving effect to any applicable grace period) in the
observance or performance of any term, covenant or agreement relating
to such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event or
condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit, the holder or
holders of such Indebtedness (or trustee or agent on behalf of such
holders) to cause (determined without regard to whether any notice or
lapse of time is required) any such Indebtedness to become due prior to
its stated
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maturity; or (ii) any such Indebtedness shall be declared due and
payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees shall
be entered against any one or more of the Borrower or any of its
Subsidiaries involving a liability of $500,000.00 or more, in the
aggregate, (to the extent not paid or covered by insurance provided by
a carrier who has acknowledged coverage) and such judgments, orders or
decrees shall continue unsatisfied, undischarged and unstayed for a
period ending on the first to occur of (i) the last day on which such
judgment, order or decree becomes final and unappealable or (ii) 30
days.
(i) ERISA. Any of the following events or conditions: (A) any
"accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, shall
exist with respect to any Plan, or any lien shall arise on the assets
of the Borrower or any of their Subsidiaries or any ERISA Affiliate in
favor of the PBGC or a Plan; (B) a Termination Event shall occur with
respect to a Single Employer Plan, which is, in the reasonable opinion
of the Agent, likely to result in the termination of such Plan for
purposes of Title IV of ERISA; (C) a Termination Event shall occur with
respect to a Multiemployer Plan or Multiple Employer Plan, which is, in
the reasonable opinion of the Agent, likely to result in (i) the
termination of such Plan for purposes of Title IV of ERISA, or (ii) the
Borrower or any of its Subsidiaries or any ERISA Affiliate incurring
any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within
the meaning of Section 4245 of ERISA) such Plan; or (D) any prohibited
transaction (within the meaning of Section 406 of ERISA or Section 4975
of the Code) or breach of fiduciary responsibility shall occur which
may subject the Borrower or any of its Subsidiaries or any ERISA
Affiliate to any liability under Sections 406, 409, 502(i), or 502(l)
of ERISA or Section 4975 of the Code, or under any agreement or other
instrument pursuant to which the Borrower or any of its Subsidiaries or
any ERISA Affiliate has agreed or is required to indemnify any person
against any such liability;
(j) Ownership. There shall occur a Change of Control;
(k) Subordinated Debt. (i) Any holder of the Subordinated Debt
alleges (or any Governmental Authority with applicable jurisdiction
determines) that the Supplemental Credit Lenders or New Credit
Agreement Lenders are not holders of Senior Debt (as defined in the
Indenture) or (ii) the subordination provisions in the Indenture shall,
in whole or in part, terminate, cease to be effective or cease to be
legally valid, binding and enforceable against any holder of the
Subordinated Debt;
(l) Additional Subordinated Debt. (i) Any holder of the
Additional Subordinated Debt alleges (or any Governmental Authority
with applicable jurisdiction determines) that the Supplemental Credit
Lenders or New Credit Agreement Lenders are not holders of Senior
Indebtedness (as defined in the Second Indenture) or (ii) the
subordination provisions in the Second Indenture shall, in whole or in
part, terminate, cease
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to be effective or cease to be legally valid, binding and enforceable
against any holder of the Additional Subordinated Debt.
(m) Business. The Borrower commences to engage in any material
respect in a line of business or activity other than the business of
manufacturing and marketing of brand name over-the-counter
pharmaceuticals, dietary supplements, functional toiletries and
cosmetics; or
(n) Indenture/Change of Control. There shall occur (i) a
Change of Control (as defined in the Indenture) under the Indenture,
(ii) a Change of Control Triggering Event (as defined in the Indenture)
under the Indenture or (iii) a Change of Control (as defined in the
Second Indenture) under the Second Indenture.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions:
(a) Acceleration of Loans. Declare the unpaid principal of and
any accrued interest in respect of all Tranche A Term Loans and Tranche
B Term Loans, and any and all other indebtedness or obligations of any
and every kind owing by a Credit Party to any of the Supplemental
Credit Lenders hereunder to be due whereupon the same shall be
immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Credit
Parties.
(b) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Supplemental Credit Documents,
including, without limitation, all rights and remedies existing under
the Collateral Documents, all rights and remedies against a Guarantor
and all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then all Tranche A Term Loans and Tranche B Term Loans, all
accrued interest in respect thereof, all accrued and unpaid fees and other
indebtedness or obligations owing to the Lenders hereunder shall immediately
become due and payable without the giving of any notice or other action by the
Agent or the Lenders, which notice or other action is expressly waived by the
Credit Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Supplemental Credit Lender has a separate right of payment and shall
be considered a separate "creditor" holding a separate "claim" within the
meaning of Section 101(5) of the Bankruptcy Code or any other insolvency
statute.
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SECTION 10
AGENCY PROVISIONS
10.1 Appointment.
Each Supplemental Credit Lender hereby designates and appoints
NationsBank of Tennessee, N.A. as Agent of such Supplemental Credit Lender to
act as specified herein and the other Supplemental Credit Documents, and each
such Supplemental Credit Lender hereby authorizes the Agent, as the agent for
such Supplemental Credit Lender, to take such action on its behalf under the
provisions of this Credit Agreement and the other Supplemental Credit Documents
and to exercise such powers and perform such duties as are expressly delegated
by the terms hereof and of the other Supplemental Credit Documents, together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere herein and in the other Supplemental Credit
Documents, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein and therein, or any fiduciary relationship with any
Supplemental Credit Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Supplemental Credit Documents, or shall
otherwise exist against the Agent. The provisions of this Section are solely for
the benefit of the Agent and the Supplemental Credit Lenders and none of the
Credit Parties shall have any rights as a third party beneficiary of the
provisions hereof. In performing its functions and duties under this Credit
Agreement and the other Supplemental Credit Documents, the Agent shall act
solely as the agent of the Supplemental Credit Lenders and does not assume and
shall not be deemed to have assumed any obligation or relationship of agency or
trust with or for any Credit Party.
10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other
Supplemental Credit Documents by or through agents or attorneys-in-fact and
shall be entitled to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be (a) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection herewith or in connection with any of the other Supplemental Credit
Documents (except for its or such Person's own gross negligence or willful
misconduct) or (b) responsible in any manner to any of the Supplemental Credit
Lenders for any recitals, statements, representations or warranties made by any
of the Credit Parties contained herein or in any of the other Supplemental
Credit Documents or in any certificate, report, document, financial statement or
other written or oral statement referred to or provided for in, or received by
the Agent under or in connection herewith or in connection with the other
Supplemental Credit Documents, or enforceability or sufficiency therefor of any
of the other Supplemental Credit Documents, or for any failure of the Borrower
to perform its obligations hereunder or thereunder. The Agent shall not be
responsible to any Supplemental Credit Lender for the effectiveness,
genuineness, validity,
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enforceability, collectibility or sufficiency of this Credit Agreement, or any
of the other Supplemental Credit Documents or for any representations,
warranties, recitals or statements made herein or therein or made by the
Borrower or any Credit Party in any written or oral statement or in any
financial or other statements, instruments, reports, certificates or any other
documents in connection herewith or therewith furnished or made by the Agent to
the Supplemental Credit Lenders or by or on behalf of the Credit Parties to the
Agent or any Supplemental Credit Lender or be required to ascertain or inquire
as to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Tranche A Term Loans, Tranche B Term Loans or of the existence
or possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Credit Parties. The Agent is not a trustee
for the Supplemental Credit Lenders and owes no fiduciary duty to the
Supplemental Credit Lenders.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Supplemental Credit Lenders as the owner of its interests
hereunder for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Agent in accordance with Section
11.3(b). The Agent shall be fully justified in failing or refusing to take any
action under this Credit Agreement or under any of the other Supplemental Credit
Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder or under any of the other Supplemental Credit Documents in
accordance with a request of the Required Lenders (or to the extent specifically
provided in Section 11.6, all the Lenders) and such request and any action taken
or failure to act pursuant thereto shall be binding upon all the Lenders
(including their successors and assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Supplemental Credit Lender or a Credit Party referring to
the Supplemental Credit Documents, describing such Default or Event of Default
and stating that such notice is a "notice of default." In the event that the
Agent receives such a notice, the Agent shall give prompt notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders.
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10.6 Non-Reliance on Agent and Other Lenders.
Each Supplemental Credit Lender expressly acknowledges that neither the
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to it and that no act
by the Agent or any affiliate thereof hereinafter taken, including any review of
the affairs of any Credit Party, shall be deemed to constitute any
representation or warranty by the Agent to any Supplemental Credit Lender. Each
Supplemental Credit Lender represents to the Agent that it has, independently
and without reliance upon the Agent or any other Supplemental Credit Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Credit Parties and made its own decision to make its Tranche A Term Loans and
Tranche B Term Loans hereunder and enter into this Credit Agreement. Each
Supplemental Credit Lender also represents that it will, independently and
without reliance upon the Agent or any other Supplemental Credit Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Credit Agreement, and to make such
investigation as it deems necessary to inform itself as to the business, assets,
operations, property, financial and other conditions, prospects and
creditworthiness of the Credit Parties. Except for notices, reports and other
documents expressly required to be furnished to the Supplemental Credit Lenders
by the Agent hereunder, the Agent shall not have any duty or responsibility to
provide any Supplemental Credit Lender with any credit or other information
concerning the business, operations, assets, property, financial or other
conditions, prospects or creditworthiness of the Credit Parties which may come
into the possession of the Agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
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10.7 Indemnification.
The Supplemental Credit Lenders agree to indemnify the Agent in its
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably according to their
respective percentage of the Tranche A Term Loan Committed Amount and Tranche B
Term Loan Committed Amount, collectively, (or if the Tranche A Term Loan
Committed Amount and Tranche B Term Loan Committed Amount has expired or been
terminated, in accordance with the respective aggregate principal amounts of
outstanding Tranche A Term Loans and Tranche B Term Loans and Participation
Interest of the Supplemental Credit Lenders), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following payment in full of the
Credit Party Obligations) be imposed on, incurred by or asserted against the
Agent in its capacity as such in any way relating to or arising out of this
Credit Agreement or the other Supplemental Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Supplemental Credit
Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of the Agent. If any indemnity furnished to the Agent for any purpose
shall, in the opinion of the Agent, be insufficient or become impaired, the
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section shall survive the payment of the Credit Party
Obligations and all other amounts payable hereunder and under the other
Supplemental Credit Documents.
10.8 Agent in Its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though the Agent were not the Agent hereunder. With respect to
the Tranche A Term Loans and Tranche B Term Loans made and all obligations owing
to it, the Agent shall have the same rights and powers under this Credit
Agreement as any Supplemental Credit Lender and may exercise the same as though
it were not the Agent, and the terms "Lender", "Lenders", "Supplemental Credit
Lender" and "Supplemental Credit Lenders" shall include the Agent in its
individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days written notice to the
Supplemental Credit Lenders. Upon any such resignation, the Required Lenders
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 45 days after the notice of resignation, then the retiring
Agent shall select a successor Agent provided such successor is a Supplemental
Credit Lender hereunder or a commercial bank organized under the laws of the
United States of America or of any State thereof and has a combined capital and
surplus of at least $400,000,000. Upon the acceptance of any appointment as the
Agent hereunder by a successor, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations as an
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Agent, as appropriate, under this Credit Agreement and the other Supplemental
Credit Documents and the provisions of this Section 10.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Credit Agreement.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described in
Section 9.2, each Supplemental Credit Lender is authorized at any time and from
time to time, without presentment, demand, protest or other notice of any kind
(all of which rights being hereby expressly waived), to set-off and to
appropriate and apply any and all deposits (general or special) and any other
indebtedness at any time held or owing by such Supplemental Credit Lender
(including, without limitation branches, agencies or Affiliates of such
Supplemental Credit Lender wherever located) to or for the credit or the account
of any Credit Party against obligations and liabilities of such Credit Party to
the Supplemental Credit Lenders hereunder, under the Tranche A Term Loan Notes,
under the Tranche B Term Loan Notes, the other Supplemental Credit Documents or
otherwise, irrespective of whether the Agent or the Supplemental Credit Lenders
shall have made any demand hereunder and although such obligations, liabilities
or claims, or any of them, may be contingent or unmatured, and any such set-off
shall be deemed to have been made immediately upon the occurrence of an Event of
Default even though such charge is made or entered on the books of such Lender
subsequent thereto. The Credit Parties hereby agree that any Person purchasing a
participation in the Tranche A Term Loans and the Tranche A Term Loan Committed
Amount and/or Tranche B Term Loans and Tranche B Term Loan Committed Amount
hereunder pursuant to Section 11.3(c) or 3.9 may exercise all rights of set-off
with respect to its participation interest as fully as if such Person were a
Supplemental Credit Lender hereunder.
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11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that none of the Credit
Parties may assign and transfer any of its interests without the prior
written consent of the Lenders; and provided further that the rights of
each Supplemental Credit Lender to transfer, assign or grant
participations in its rights and/or obligations hereunder shall be
limited as set forth in this Section 11.3. Notwithstanding the above,
nothing herein shall restrict, prevent or prohibit any Supplemental
Credit Lender from (i) pledging its Tranche A Term Loans and/or Tranche
B Term Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Supplemental Credit Lender from such Federal
Reserve Bank, or (ii) granting assignments or participation in such
Supplemental Credit Lender's Tranche A Term Loans and/or Tranche A Term
Committed Amount or Tranche B Term Loans and/or Tranche B Term Loan
Committed Amount hereunder to its parent company and/or to any
Affiliate of such Supplemental Credit Lender or to any existing Lender
or Affiliate thereof.
(b) Assignments. Each Supplemental Credit Lender may, with the
prior written consent of the Borrower and the Agent (provided that no
consent of the Borrower shall be required during the existence and
continuation of an Event of Default), which consent shall not be
unreasonably withheld or delayed, assign all or a portion of its rights
and obligations hereunder pursuant to an assignment agreement
substantially in the form of Exhibit 11.3 to one or more Eligible
Assignees; provided that (i) any such assignment shall be in a minimum
aggregate amount of $5,000,000 of (A) (I) the Revolving Loans, Tranche
A Term Loans and Tranche A Term Loans or (II) the Revolving Committed
Amount, Tranche A Term Loan Committed Amount and Tranche A Supplemental
Term Loan Committed Amount or (B) Tranche B Term Loans, as applicable,
and in integral multiples of $1,000,000 above such amount (or the
remaining amount of (C) (I) the Revolving Loans and Tranche A Term
Loans or (II) the Revolving Committed Amount and Tranche A Term Loan
Committed Amount or (D) Tranche B Term Loans, as applicable, held by
such Supplemental Credit Lender), (ii) each such assignment shall be of
a constant, not varying, percentage of all of the assigning
Supplemental Credit Lender's rights and obligations under the Tranche A
Term Loans or Tranche B Term Loans, as applicable, being assigned and
(iii) unless otherwise agreed to by the Borrower and the Agent, such
Supplemental Credit Lender proposing to assign all or a portion of the
Tranche A Term Loan Committed Amount or Tranche B Term Loan Committed
Amount shall be required to assign to such Eligible Assignee or
Assignees (to the extent held by such Supplemental Credit Lender) an
identical percentage of Revolving Committed Amount, Tranche A Term Loan
Committed Amount and Tranche B Term Loan Committed Amount of such
Supplemental Credit Lender. Any assignment hereunder shall be effective
upon (i) satisfaction of the conditions set forth above, (ii) delivery
to the Agent of a duly executed assignment agreement together with a
transfer fee of $3,500 payable to the Agent for its own account and
(iii) the recordation of an appropriate entry with respect to such
assignment in the Register pursuant to this Section 11.3. Upon the
effectiveness of any such assignment, the assignee shall become a
"Supplemental Credit Lender" for all purposes of this Credit Agreement
and the other Supplemental Credit Documents and, to the extent of such
assignment, the assigning Supplemental Credit Lender shall be relieved
of its obligations hereunder to the extent of
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the Tranche A Term Loans and Tranche A Term Loan Committed Amount or
Tranche B Term Loans and Tranche B Supplemental Term Loan Committed
Amount components being assigned. Along such lines the Borrower agrees
that upon notice of any such assignment and surrender of the
appropriate Tranche A Term Loan Note or Tranche A Term Loan Notes
and/or Tranche B Term Loan Note or Tranche B Term Loan Notes, it will
promptly provide to the assigning Supplemental Credit Lender and to the
assignee separate promissory notes in the amount of their respective
interests substantially in the form of the original Tranche A Term Loan
Note or Tranche A Term Loan Notes and/or Tranche B Term Loan Note or
Tranche B Term Loan Notes (but with notation thereon that it is given
in substitution for and replacement of the original Tranche A Term Loan
Note or Tranche A Term Notes and/or Tranche B Term Loan Note or Tranche
B Term Loan Notes or any replacement notes thereof).
By executing and delivering an assignment agreement in accordance with
this Section 11.3(b), the assigning Supplemental Credit Lender
thereunder and the assignee thereunder shall be deemed to confirm to
and agree with each other and the other parties hereto as follows: (i)
such assigning Supplemental Credit Lender warrants that it is the legal
and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim; (ii) except as set forth in clause (i)
above, such assigning Supplemental Credit Lender makes no
representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in
connection with this Credit Agreement, any of the other Supplemental
Credit Documents or any other instrument or document furnished pursuant
hereto or thereto, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Credit
Agreement, any of the other Supplemental Credit Documents or any other
instrument or document furnished pursuant hereto or thereto or the
financial condition of any Credit Party or the performance or
observance by any Credit Party of any of its obligations under this
Credit Agreement, any of the other Supplemental Credit Documents or any
other instrument or document furnished pursuant hereto or thereto;
(iii) such assignee represents and warrants that it is legally
authorized to enter into such assignment agreement; (iv) such assignee
confirms that it has received a copy of this Credit Agreement, the
other Supplemental Credit Documents and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such assignment agreement; (v) such
assignee will independently and without reliance upon the Agent, such
assigning Supplemental Credit Lender or any other Supplemental Credit
Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Credit Agreement and the other
Supplemental Credit Documents; (vi) such assignee appoints and
authorizes the Agent to take such action on its behalf and to exercise
such powers under this Credit Agreement or any other Supplemental
Credit Documents as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of
this Credit Agreement and the other Supplemental Credit Documents are
required to be performed by it as a Supplemental Credit Lender.
(c) Participations. Each Supplemental Credit Lender may sell,
transfer, grant or assign participations in all or any part of such
Supplemental Credit Lender's interests and
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obligations hereunder; provided that (i) such selling Supplemental
Credit Lender shall remain a "Supplemental Credit Lender" for all
purposes under this Credit Agreement (such selling Supplemental Credit
Lender's obligations under the Credit Documents remaining unchanged)
and the participant shall not constitute a Supplemental Credit Lender
hereunder, (ii) no such participant shall have, or be granted, rights
to approve any amendment or waiver relating to this Credit Agreement,
or the other Supplemental Credit Documents except to the extent any
such amendment or waiver would (A) reduce the principal of or rate of
interest on or fees in respect of any Tranche A Term Loans or Tranche B
Term Loans in which the participant is participating, (B) postpone the
date fixed for any payment of principal (including extension of the
Tranche A Term Loan Maturity Date or Tranche B Term Loan Maturity Date
or the date of any mandatory prepayment), interest or fees in which the
participant is participating, or (C) release all or substantially all
of the collateral or guaranties (except as expressly provided in the
Supplemental Credit Documents) supporting any of the Tranche A Term
Loans or Tranche A Term Loan Committed Amount or Tranche B Term Loans
or Tranche B Term Loan Committed Amount in which the participant is
participating, (iii) sub-participations by the participant (except to
an Affiliate, parent company or Affiliate of a parent company of the
participant) shall be prohibited, (iv) any such participations shall be
in a minimum aggregate amount of $5,000,000 of the (A) (I) Revolving
Loans and Tranche A Term Loans or (II) the Revolving Committed Amount
and Tranche A Term Loan Committed Amount or (B) Tranche B Term Loans,
as applicable, and in integral multiples of $1,000,000 in excess
thereof and (v) unless otherwise agreed to by the Borrower and the
Agent, such selling Supplemental Credit Lender proposing to grant or
assign a participation in Tranche A Term Loans or Tranche B Term Loans
shall be required to grant or assign a participation to such
participant, in like percentage, of Tranche A Term Loans, Tranche B
Term Loans and Revolving Loan Committed Amount, as applicable, of such
Supplemental Credit Lender. In the case of any such participation, the
participant shall not have any rights under this Credit Agreement or
the other Supplemental Credit Documents (the participant's rights
against the selling Supplemental Credit Lender in respect of such
participation to be those set forth in the participation agreement with
such Supplemental Credit Lender creating such participation) and all
amounts payable by the Borrower hereunder shall be determined as if
such Supplemental Credit Lender had not sold such participation;
provided, however, that such participant shall be entitled to receive
additional amounts under Section 3.15 to the same extent that the
Supplemental Credit Lender from which such participant acquired its
participation would be entitled to the benefit of such cost protection
provisions.
(d) Registration. The Agent, acting for this purpose solely on
behalf of the Borrower, shall maintain a register (the "Register") for
the recordation of the names and addresses of the Supplemental Credit
Lenders and the principal amount of the Tranche A Term Loans and/or
Tranche B Term Loans owing to each Supplemental Credit Lender from time
to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the
Supplemental Credit Lenders shall treat each Person whose name is
recorded in the Register as the owner of a Tranche A Term Loan and/or
Tranche B Term Loan or other obligation hereunder for all purposes of
this Credit Agreement and the other Supplemental Credit Documents,
notwithstanding notice to the contrary. Any assignment of any Tranche A
Term Loan or Tranche B Term Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto
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being made in the Register. The Register shall be available for
inspection by the Borrower or any Supplemental Credit Lender at any
reasonable time and from time to time upon reasonable prior notice.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Supplemental Credit
Lender in exercising any right, power or privilege hereunder or under any other
Supplemental Credit Documents and no course of dealing between the Borrower or
any Credit Party and the Agent or any Supplemental Credit Lender shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
power or privilege hereunder or under any other Supplemental Credit Documents
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Supplemental Credit Lender would otherwise have. No notice to
or demand on any Credit Party in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or the Supplemental Credit
Lenders to any other or further action in any circumstances without notice or
demand.
11.5 Payment of Expenses; Indemnification.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs
and expenses of (i) the Agent in connection with the negotiation, preparation,
execution and delivery and administration of this Credit Agreement and the other
Supplemental Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, special counsel to the Agent and the fees and expenses of
counsel for the Agent in connection with collateral or foreign issues), and any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (ii) the Agent and the
Supplemental Credit Lenders in connection with enforcement of the Supplemental
Credit Documents and the documents and instruments referred to therein
(including, without limitation, in connection with any such enforcement, the
reasonable fees and disbursements of counsel for the Agent and each of the
Supplemental Credit Lenders) and (b) indemnify each Supplemental Credit Lender,
its officers, directors, employees, representatives and agents from and hold
each of them harmless against any and all losses, liabilities, claims, damages
or expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not any Supplemental Credit Lender is a party thereto)
related to (i) the entering into and/or performance of any Supplemental Credit
Documents or the use of proceeds of any Tranche A Term Loans or Tranche B Term
Loans (including other extensions of credit) hereunder or the consummation of
any other transactions contemplated in any Supplemental Credit Documents,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified), (ii) any Environmental
Claim and (iii) any claims for Non-Excluded Taxes.
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11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement, nor any other Credit Document, nor any
of the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the Credit Parties; provided that
no such amendment, change, waiver, discharge or termination shall
(a) without the consent of each Lender affected thereby:
(i) extend the final maturity of any Tranche A
Term Loan or Tranche B Term Loan, or any portion thereof,
(ii) reduce the rate or extend the time of
payment of interest (other than as a result of waiving the
applicability of any post-default increase in interest rates)
thereon or fees hereunder,
(iii) reduce or waive the principal amount of any
Tranche A Term Loan or Tranche B Term Loan,
(iv) increase the Commitment of a Lender over
the amount thereof in effect (it being understood and agreed
that a waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in
the terms of any Commitment of any Lender),
(v) release all or substantially all of the
Collateral securing the Credit Party Obligations hereunder
(provided that the Agent may, without consent from any other
Lender, release any Collateral that is sold or transferred by
a Credit Party in conformance with Section 8.5),
(vi) release the Borrower or substantially all
of the other Credit Parties from its obligations under the
Credit Documents,
(vii) amend, modify or waive any provision of
this Section or Section 3.7, 3.9, 3.10, 3.11, 3.12, 3.13,
3.14, 3.15, 9.1(a), 11.2, 11.3 or 11.5,
(viii) reduce any percentage specified in, or
otherwise modify, the definition of Required Lenders, or
(ix) consent to the assignment or transfer by
the Borrower (or another Credit Party) of any of its rights
and obligations under (or in respect of) the Credit Documents
except as permitted thereby; and
(b) without the consent of Lenders holding in the aggregate
more than 50% of the Tranche A Term Loans and more than 50% of the
outstanding Tranche B Term Loans, extend the time for or the amount or
the manner of application of proceeds of any mandatory prepayment
required by Section 3.3(b)(ii), (iii), (iv), (v) or (vi) hereof. No
provision of Section 11 may be amended without the consent of the
Agent.
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(c) Notwithstanding the above, the right to deliver a Payment
Blockage Notice (as defined in the Indenture) shall reside solely with
the Agent, and the Agent shall deliver such Payment Blockage Notice
only upon the direction of the Required Lenders.
(d) Notwithstanding the fact that the consent of all the
Lenders is required in certain circumstances as set forth above, (x)
each Lender is entitled to vote as such Lender sees fit on any
bankruptcy reorganization plan that affects the Tranche A Term Loans
and Tranche B Term Loans and each Lender acknowledges that the
provisions of Section 1126(c) of the Bankruptcy Code supersedes the
unanimous consent provisions set forth herein and (y) the Required
Lenders may consent to allow a Credit Party to use cash collateral in
the context of a bankruptcy or insolvency proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Defaulting Lender.
Each Supplemental Credit Lender understands and agrees that if such
Supplemental Credit Lender is a Defaulting Lender then it shall not be entitled
to vote on any matter requiring the consent of the Required Lenders or to object
to any matter requiring the consent of all the Lenders; provided, however, that
all other benefits and obligations under the Supplemental Credit Documents shall
apply to such Defaulting Lender.
11.10 Survival of Indemnification and Representations and
Warranties.
All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Tranche A Term and Tranche B Term Loans, the repayment of the
Tranche A Term and Tranche B Term Loans and other obligations and the
termination of the Tranche A Term Loan Committed Amount and Tranche B Term Loan
Committed Amount hereunder.
11.11 Governing Law; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER SUPPLEMENTAL CREDIT
DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
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ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE. Any legal action or
proceeding with respect to this Credit Agreement or any other Credit
Document may be brought in the courts of the State of North Carolina or
the State of Tennessee or of the United States for the Western District
of North Carolina or the Eastern District of Tennessee, and, by
execution and delivery of this Credit Agreement, each Credit Party
hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of such courts. Each
Credit Party further irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by
the mailing of copies thereof by registered or certified mail, postage
prepaid, to it at the address for notices pursuant to Section 11.1,
such service to become effective 30 days after such mailing. Nothing
herein shall affect the right of a Lender to serve process in any other
manner permitted by law or to commence legal proceedings or to
otherwise proceed against a Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Credit Agreement or any other Supplemental Credit Documents
brought in the courts referred to in subsection (a) hereof and hereby
further irrevocably waives and agrees not to plead or claim in any such
court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
11.12 Waiver of Jury Trial.
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OF THE OTHER SUPPLEMENTAL CREDIT DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
11.13 Time.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight Time, as the case may be, unless specified otherwise.
11.14 Severability.
If any provision of any of the Supplemental Credit Documents is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
11.15 Entirety.
This Credit Agreement together with the other Supplemental Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and
64
<PAGE>
understandings, oral or written, if any, including any commitment letters or
correspondence relating to the Supplemental Credit Documents or the transactions
contemplated herein and therein.
11.16 Binding Effect.
This Credit Agreement shall become effective at such time when all of
the conditions set forth in Section 5.1 of the New Credit Agreement have been
satisfied or waived by the Lenders and it shall have been executed by the
Borrower, the Guarantors and the Agent, and the Agent shall have received copies
hereof (telefaxed or otherwise) which, when taken together, bear the signatures
of each Supplemental Credit Lender, and thereafter this Credit Agreement shall
be binding upon and inure to the benefit of the Borrower, the Guarantors, the
Agent and each Supplemental Credit Lender and their respective successors and
assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
65
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER:
CHATTEM, INC.,
a Tennessee corporation
By:
Name:
Title
GUARANTOR: SIGNAL INVESTMENT & MANAGEMENT CO.,
a Delaware corporation
By:
Name:
Title
SUPPLEMENTAL CREDIT
LENDERS:
NATIONSBANK OF TENNESSEE, N.A.,
individually in its capacity as a
Supplemental Credit Lender and
in its capacity as Agent
By:
Name:
Title
<PAGE>
Signature page to Amended and Restated Credit Agreement dated as of March 24,
1998 among Chattem, Inc., as Borrower, each of the Borrower's Domestic
Subsidiaries, as Guarantors, the Supplemental Credit Lenders, and NationsBank of
Tennessee, N.A., as agent for the Supplemental Credit Lenders
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
CREDITANSTALT AG
By:
Name:
Title:
FIRST AMERICAN NATIONAL BANK
By:
Name:
Title:
PRIME INCOME TRUST
By:
Name:
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By:
Name:
Title:
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
<S> <C>
NAME JURISDICTION OF INCORPORATION
<CAPTION>
- ------------------------------------------------------------------------------------------------------
<S> <C>
Chattem (Canada) Inc. Canada
- ----------------------------------------------------------------------------------------------------
Chattem (U.K.) Limited United Kingdom
- ----------------------------------------------------------------------------------------------------
Signal Investment & Management Co. Delaware
- ----------------------------------------------------------------------------------------------------
HBA Insurance Ltd. Bermuda
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.
May 22, 1998
Chattanooga, Tennessee
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 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 in such Prospectus. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
- ---------------------------
PRICE WATERHOUSE LLP
New York, New York
May 26, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CHATTEM,
INC'S AUDITED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1996 NOV-30-1995
<PERIOD-START> DEC-01-1996 DEC-01-1995 DEC-01-1995
<PERIOD-END> NOV-30-1997 NOV-30-1996 NOV-30-1995
<CASH> 509 2,404 3,636
<SECURITIES> 4,349 6,850 0
<RECEIVABLES> 28,578 20,726 16,534
<ALLOWANCES> 500 450 286
<INVENTORY> 14,493 10,295 8,678
<CURRENT-ASSETS> 49,972 46,124 31,074
<PP&E> 28,925 26,241 24,461
<DEPRECIATION> 17,937 16,467 15,131
<TOTAL-ASSETS> 178,744 152,183 83,410
<CURRENT-LIABILITIES> 35,054 26,349 20,820
<BONDS> 142,394 131,344 79,689
0 0 0
0 0 0
<COMMON> 2,262 1,843 1,579
<OTHER-SE> 2,108 (7,823) (8,940)
<TOTAL-LIABILITY-AND-EQUITY> 178,744 152,183 3,410
<SALES> 143,235 118,903 100,598
<TOTAL-REVENUES> 143,235 118,983 100,598
<CGS> 39,253 35,120 89,755
<TOTAL-COSTS> 117,732 102,214 86,130
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 15,934 13,394 11,075
<INCOME-PRETAX> 11,248 5,620 3,610
<INCOME-TAX> 3,998 1,816 1,285
<INCOME-CONTINUING> 7,255 3,804 2,325
<DISCONTINUED> 0 0 10,008
<EXTRAORDINARY> (1,370) (532) (367)
<CHANGES> 0 0 0
<NET-INCOME> 5,885 3,272 11,996
<EPS-PRIMARY> .65 .40 1.64
<EPS-DILUTED> .65 .40 1.64
</TABLE>
<PAGE>
EXHIBIT 99.1
FORM OF LETTER OF TRANSMITTAL
CHATTEM, INC.
OFFER TO EXCHANGE
$200,000,000 8 7/8% SERIES B SENIOR
SUBORDINATED NOTES DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
FOR ANY AND ALL OUTSTANDING
$200,000,000 8 7/8% SERIES A SENIOR
SUBORDINATED NOTES DUE 2008,
PURSUANT TO THE PROSPECTUS, DATED [ ], 1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE
COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal
should be completed, signed and submitted to:
<TABLE>
<S> <C> <C>
BY OVERNIGHT COURIER OR BY BY FACSIMILE TRANSMISSION: TELEPHONE NUMBER:
HAND OR BY REGISTERED OR SouthTrust Bank, (205) 254-5105
CERTIFIED MAIL: National Association
SunTrust Bank, Corporate Trust Services
National Association (205) 254-4180
100 Office Park Drive
Birmingham, Alabama 35223
Attention: Corporate Trust
Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The Registration Statement on Form S-4 (File No. [ ]) of which this
Prospectus is a part was declared effective by the Securities and Exchange
Commission on [ ], 1998.
The undersigned hereby acknowledges receipt of the Prospectus dated
[ ], 1998 (the "Prospectus") of Chattem, Inc., a corporation incorporated
under the laws of the state of Tennessee (the "Company"), and this Letter of
Transmittal (the "Letter of Transmittal"), which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount (or
fraction thereof) of 8 7/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") for each $1,000 principal amount (or fraction thereof) of its
outstanding 8 7/8% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes"). The Exchange Notes and the Series A Notes are collectively referred to
as the "Notes." Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
<PAGE>
Either this Letter of Transmittal or an Agent's Message (as defined herein)
is to be completed by a holder of Series A Notes (which term, for purposes of
the Exchange Offer, includes any participant in the DTC system whose name
appears on a security position listing as the holder of such Series A Notes) in
order to tender Series A Notes. All deliveries of Series A Notes must be made
either by (i) endorsement and delivery of certificated Series A Notes registered
in the name of the Holder thereof and issued in accordance with the Indenture
("Definitive Registered Notes") or (ii) by book-entry transfer of book-entry
interests of participants ("Book-Entry Interests") of the Depository Trust
Company ("DTC") to the account maintained by the Exchange Agent at DTC pursuant
to the procedures set forth in the Prospectus under "The Exchange
Offer--Book-Entry Transfer". Holders of Series A Notes who are unable to deliver
(i) endorsed Definitive Registered Notes, (ii) confirmation of the book-entry
tender of their Series A Notes into the Exchange Agent's account at DTC (a
"Book-Entry Confirmation") or (iii) in either case all other documents required
by or pursuant to this Letter of Transmittal to the Exchange Agent on or prior
to the Expiration Date must tender their Series A Notes according to the
guaranteed delivery procedures set forth in the Prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures". See Instruction 1. Delivery of documents
to DTC or any other party does not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this Letter
of Transmittal to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
ALL TENDERING HOLDERS COMPLETE THIS BOX
List below the Series A Notes to which this Letter relates. If the space
provided is inadequate, the principal amount of Series A Notes should be listed
on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF SERIES A NOTES TENDERED
----------------------------------------------------------------------------------------------------
AGGREGATE PRINCIPAL
PRINCIPAL AMOUNT OF
NAME(S) AND ADDRESS(S) OF HOLDER(S) CERTIFICATE AMOUNT OF SERIES A NOTES
OF SERIES A NOTES NUMBER(S) SERIES A NOTES TENDERED*
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ------------------------------------------------------------------------------------------------------
</TABLE>
* The minimum permitted tender is $1,000 in principal amount of Series A
Notes. All other tenders must be in integral multiples of $1,000. Unless
otherwise indicated in this column, ALL of the Series A Notes indicated in
the preceding column of this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
/ / CHECK HERE DEFINITIVE REGISTERED NOTES ARE BEING DELIVERED WITH THIS LETTER
OF TRANSMITTAL.
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
Principal Amount of Tendered Series A Notes: _______________________________
<PAGE>
By crediting the Series A Notes to the Exchange Agent's account at DTC
in accordance with DTC's Automated Tender Offer Program ("ATOP") and by
complying with applicable ATOP procedures with respect to the Exchange
Offer, including transmitting a computer-generated message (an "Agent's
Message") to the Exchange Agent in which the holder of the Series A Notes
acknowledges and agrees to be bound by the terms of this Letter of
Transmittal and the Prospectus, the DTC participant confirms on behalf of
itself and the beneficial owners of such Series A Notes all provisions of
this Letter of Transmittal applicable to it and such beneficial owners as
fully as if it had completed the information required herein and executed
and transmitted this Letter of Transmittal to the Exchange Agent.
/ / CHECK HERE IF TENDERED SERIES A NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Holder(s): ______________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Eligible Institution that Guaranteed Delivery: _____________________
If Definitive Registered Notes are being tendered:
Name of Holder(s): _________________________________________________________
Certificate Number(s): _____________________________________________________
If Book-Entry Interests are being tendered:
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name: ______________________________________________________________________
Address: ___________________________________________________________________
You are entitled to as many copies as you may reasonably request and if you
need more than 10 copies, please so indicate by a notation below.
Total number of copies needed: _____________________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Chattem, Inc.
1715 West 38th Street
Chattanooga, Tennessee 37409
Attention: President and Chief Operating Officer
SouthTrust Bank, National Association
100 Office Park Drive
Birmingham, Alabama 35223
Attention: Corporate Trust Services
Re: Tender of Series A Notes for Exchange Notes
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer described
in the Prospectus and this Letter of Transmittal, the undersigned hereby tenders
to Chattem, Inc. the principal amount of Series A Notes indicated in Box 1 above
(the "Tendered Notes"). Subject to, and effective upon, the acceptance for
exchange of the Tendered Notes, the undersigned hereby exchanges, assigns, and
transfers to, or upon the order of, Chattem, Inc., all right, title, and
interest in, to and under the Tendered Notes and agrees to be bound by the terms
and conditions of the Exchange Offer as set forth in the Prospectus and this
Letter of Transmittal. Each DTC participant transmitting by means of DTC a
computer generated message forming part of a Book-Entry Confirmation, on behalf
of itself and the beneficial owner of the Series A Notes tendered thereby,
acknowledges receipt of the Prospectus and this Letter of Transmittal and agrees
to be bound by the terms and conditions of the Exchange Offer as set forth in
the Prospectus and this Letter of Transmittal.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered Notes
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, and adverse claims when
the Tendered Notes are acquired by the Company as contemplated herein. The
undersigned and each beneficial owner of Series A Notes tendered by the
undersigned will, upon request, execute and deliver any additional documents
reasonably requested by the Company as necessary or desirable to complete and
give effect to the transactions contemplated hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, and deliver all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to which the undersigned is entitled upon the acceptance by
the Company of the Tendered Notes pursuant to the Exchange Offer, and (ii)
receive all benefits and otherwise exercise all rights of beneficial ownership
of the Tendered Notes, all in accordance with the terms of the Exchange Offer.
<PAGE>
The undersigned also acknowledges that this Exchange Offer is being made by
the Company in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "Commission"), as set forth in certain no-action
letters to third parties, that the Exchange Notes issued in exchange for the
Series A Notes pursuant to the Exchange Offer may be offered for resale, resold
and otherwise transferred by holders thereof (other than a broker-dealer, as set
forth below, or any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act")), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holders have
no arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of such Exchange Notes. By tendering, each holder
of Series A Notes represents to the Company that (i) the Exchange Notes or
Book-Entry Interests therein to be acquired by such holder and any beneficial
owner(s) of such Series A Notes or interests therein ("Beneficial Owner(s)") in
connection with the Exchange Offer are being acquired by such holder and any
Beneficial Owner(s) in the ordinary course of business of any Beneficial
Owner(s), (ii) the holder and each Beneficial Owner are not participating, do
not intend to participate, and have no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes, (iii) if the
holder is a resident of the State of California, it falls under the
self-executing institutional investor exemption set forth under Section 25102(i)
of the Corporate Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of
the California Blue Sky Regulations, (iv) if the undersigned is a resident of
the Commonwealth of Pennsylvania, it falls under the self-executing
institutional investor exemption set forth under Section 203(c), 102(d) and (k)
of the Pennsylvania Securities Act of 1972, Section 102.111 of the Pennsylvania
Blue Sky Regulations and an interpretive opinion dated November 16, 1985, (v)
the holder and each Beneficial Owner acknowledge and agree that any person who
is a broker-dealer registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or is participating in the Exchange Offer for the
purpose of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction of the Exchange Notes or interests therein acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (vi) the holder and each Beneficial
Owner understands that a secondary resale transaction described in clause (v)
above and any resales of Exchange Notes or interests therein obtained by such
holder in exchange for Series A Notes or interests therein originally acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) neither the holder nor any Beneficial Owner(s) is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Company.
Upon a request by the Company, a holder or Beneficial Owner will deliver to the
Company a legal opinion confirming its representation made in clause (vii)
above. By tendering, each holder of Series A Notes that is a broker-dealer
(whether or not it is also an "affiliate") that will receive Exchange Notes for
its own account pursuant to the Exchange Offer, represents that the Series A
Notes to be exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities, and acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the holder will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that tendering the Series A Notes pursuant to
the procedures described under the captions "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Exchange Offer, subject only to withdrawal of
such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offer--Withdrawal of Tenders." All authority herein conferred or agreed
to be conferred shall survive the death or incapacity of the undersigned and any
Beneficial Owner(s), and every obligation of the undersigned or any Beneficial
Owners hereunder shall be binding upon the heirs, representatives, successors,
and assigns of the undersigned and such Beneficial Owner(s).
The undersigned acknowledges and understands that Exchange Notes will be
issued in exchange for Tendered Notes (i) as Definitive Registered Notes
registered in the name(s) of the undersigned and sent to the address(es) shown
above in Box 1 or, if applicable, Box 2 if Definitive Registered Notes were
tendered or (ii) as Book Entry Interests delivered by book-entry transfer to the
account of the undersigned shown above under Box 1 or, if applicable, Box 2 if
Book-Entry Interests were tendered.
Unless otherwise indicated in Box 2 below, please deliver Exchange Notes as
specified in Box 1. The undersigned, by completing Box 1 above and signing this
letter, will be deemed to have tendered the Series A Notes as set forth in such
Box above.
<PAGE>
<TABLE>
<CAPTION>
BOX 2
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
To be completed ONLY if the Exchange Notes exchanged for Series A Notes and/or if untendered Series A
Notes or Series A Notes that are not accepted for exchange are to be delivered to someone other than
the undersigned, or to the undersigned at an address or an account maintained at DTC other than that
shown above under Box 1.
<S> <C> <C>
Please issue Exchange Notes and/or any unexchanged or unaccepted Series A Notes to:
Name(s): ---------------------------------
(please type or print)
Address: ---------------------------------
---------------------------------
---------------------------------
(include Zip Code)
Tax Identification or
Social Security No.: ---------------------------------
Credit Book-Entry Interests in Exchange Notes and/or unexchanged or unaccepted Series A Notes to the
DTC account set forth below:
---------------------------------
---------------------------------
---------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BOX 3
USE OF GUARANTEED DELIVERY
<S> <C>
/ / CHECK HERE ONLY IF SERIES A NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
See Instruction 2. If this box is checked, please provide the following information:
Name(s) of
Holder(s): ---------------------------------
Date of Execution of Notice of Guaranteed
Delivery: ---------------------------------
Name of Institution which Guaranteed
Delivery: ---------------------------------
</TABLE>
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE (TOGETHER
WITH A BOOK-ENTRY CONFIRMATION AND ANY OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY, AS APPLICABLE) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON OR PRIOR TO THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE.
<PAGE>
<TABLE>
<S> <C>
BOX 4
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
X ------------------------------------------------------------------- --------------------------
Date
X ------------------------------------------------------------------- --------------------------
(Signature of Owner(s)) Date
The above lines must be signed by the person in whose name such Series A Notes are (i) registered in the
case of Definitive Registered Notes being tendered or (ii) registered on the security position listing
maintained by DTC or, in each case, by an person(s) authorized to become holder(s) by documents
transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer, or other person acting in a fiduciary or representative capacity, such person must set forth is
or her full title below. See Instruction 5.
Name(s): ---------------------------------
Capacity: ---------------------------------
Title: ---------------------------------
Street Address: ---------------------------------
(include Zip Code) ---------------------------------
Area Code and Telephone Number: ---------------------------------
Tax Identification or Social Security
Number: ---------------------------------
</TABLE>
<PAGE>
SIGNATURE GUARANTEE
(If required by Instruction 5)
Authorized Signature
X
- --------------------------------------
Title:
- ------------------------------------
Name of Firm:
- ------------------------------------
Address, include Zip Code:
- ------------------------------------
Area Code and Telephone Number:
- ------------------------------------
Dated:
- ------------------------------------
<PAGE>
TO BE COMPLETED BY ALL
TENDERING HOLDERS
(See Instruction 16 Below)
<TABLE>
<S> <C> <C>
PAYOR'S NAME: CHATTEM, INC.
SUBSTITUTE Name (if joint names, list first and circle
the name of the person or entry whose number you
enter in Part 1 below. See instructions if your
name has changed.)
Form W-9 Address
Department of the Treasury City, State and ZIP Code
List account number(s) here
(optional)
Internal Revenue Service Part 1--PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATION NUMBER ("TIN") IN THE Number or TIN
BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
Part 2--Check the box if you are NOT subject to backup
withholding under the provisions of section 3408(a)(1)(C) of
the Internal Revenue Code because (1) you have not been
notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified you that you are no
longer subject to backup withholding. / /
Payor's Request for TIN CERTIFICATION--UNDER THE PENALTIES Part 3--AWAITING TIN
OF PERJURY, I CERTIFY THAT THE
INFORMATION PROVIDED ON THIS FORM IS / /
TRUE, CORRECT AND COMPLETE.
SIGNATURE> DATE>
Note
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS
MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
</TABLE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THE SERIES A NOTES AND THIS LETTER OF TRANSMITTAL.
(A) If the holder is tendering Definitive Registered Notes, such holder must
deliver (i) the certificate(s) representing the Series A Notes tendered, (ii) a
properly completed and duly executed copy of this Letter of Transmittal and
(iii) any other documents required by or pursuant to this Letter of Transmittal,
all of which must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date.
(B) If the holder is tendering Book-Entry Interests, such holder must (i)
utilize DTC's ATOP system to tender such holder's Book-Entry Interests to an
account established at DTC by the Exchange Agent, (ii) make the Agent's Message
and cause a Book-Entry Confirmation to be issued to the Exchange Agent or
deliver a properly completed and duly executed copy of this Letter of
Transmittal and (iii) deliver any other documents required by this Letter of
Transmittal, all of which must be received by the Exchange Agent at its DTC
account or address set forth herein prior to the Expiration Date.
<PAGE>
The method of delivery of certificates for Series A Notes and all other
required documents is at the election and risk of the tendering holder and
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. Instead of delivery by mail, it is recommended that the
holder use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure timely delivery. In no event should any Series A
Notes or related documentation be sent to the Company. Neither the Company nor
the Exchange Agent is under any obligation to notify any tendering holder of the
Company's acceptance of Tendered Notes prior to the Expiration Date.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Series
A Notes but who cannot deliver their Series A Notes, Letter of Transmittal or
any other documents required by the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date must tender their Series A Notes according to the
guaranteed delivery procedures set forth below, including completion of Box 3
(if this Letter of Transmittal is being delivered). Pursuant to such procedures:
(i) such tender must be made by or through a firm that is a member of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., or is a commercial bank or trust company having an
office or correspondent in the United States, or is otherwise an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (an "Eligible Institution"), and the Notice of
Guaranteed Delivery must be signed by the holder; (ii) prior to the Expiration
Date, the Exchange Agent must have received from the holder and the Eligible
Institution a properly completed and duly executed Notice of Guaranteed Delivery
(by facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, in the case of Definitive Registered Notes, the
certificate number or numbers of the Tendered Notes, and, in each case, the
principal amount of Tendered Notes, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange ("NYSE")
trading days after the Expiration Date, either a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) or a properly
transmitted Agent's Message, together with the Tendered Notes and any other
required documents will be deposited by the Eligible Institution with the
Exchange Agent; and (iii) such Agent's Message or Letter of Transmittal, such
properly completed and executed documents required by this Letter of Transmittal
and such Tendered Notes in proper form for transfer must be received by the
Exchange Agent within five NYSE trading days after the Expiration Date. Failure
to complete the guaranteed delivery procedures outlined above will not, of
itself, affect the validity or effect a revocation of any Letter of Transmittal
form properly completed and executed by an Eligible Holder who attempted to use
the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Definitive Registered Notes are registered on the books of the
Registrar (or the legal representative or attorney-in-fact of such registered
holder) or who is a DTC participant who owns a Book-Entry Interest in the Series
A Notes through a security position maintained by DTC may execute and deliver
this Letter of Transmittal. Any Beneficial Owner of Series A Notes who is not
the registered holder or who is not a DTC participant who has a security
position in the Series A Notes maintained by DTC in its name must arrange
promptly with the registered holder or a DTC participant, as the case may be, to
execute and deliver this Letter of Transmittal or an Agent's Message on his or
her behalf through the execution and delivery to the registered holder or DTC
participant of the "Instruction to Registered Holder or DTC Participant from
Beneficial Owner" form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. If less than the entire number of Series A Notes are
tendered, the tendering holder should fill in the number of Series A Notes
tendered in the column labeled "Principal Amount of Series A Notes Tendered" of
Box 1 above. The entire number of Series A Notes delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. If the entire
number of all Series A Notes indicated in Box 1 above is not tendered, Series A
Notes in a principal amount equal to Series A Notes not tendered as well as
Exchange Notes exchanged for any Series A Notes tendered will be delivered to
the address or account, as applicable, indicated in Box 1, unless a different
address or account, as applicable, is provided in Box 2 of this Letter of
Transmittal.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; ENDORSEMENTS; GUARANTEE OF
SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s)
of the Tendered Notes (in the case of Definitive Registered Notes), the
signature must correspond with the name(s) as written on the face of the
Tendered Notes without alteration, enlargement, or any change whatsoever. If
this Letter of Transmittal is signed by the DTC participant whose name appears
on a security position maintained by DTC (in the case of Book-Entry Interests),
the signature must correspond exactly with such participant's name as it appears
on a security position maintained by DTC listing such participant as the owner
of the Series A Notes, without any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names on several Series A Notes, it will be
necessary to complete, sign, and submit as many separate copies of the Letter of
Transmittal documents as there are names in which Tendered Notes are held.
<PAGE>
When this Letter of Transmittal is signed by the holders of the Series A
Notes specified herein and tendered hereby, no separate bond powers are
required. If, however, the Exchange Notes are to be issued, or any untendered or
unaccepted Series A Notes are to be reissued, to a person other than the holder,
then separate bond powers are required. Signatures on such bond powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Series A Notes are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
Signatures on bond powers required by this Instruction 5 must be guaranteed
by an Eligible Institution. Signatures on this Letter of Transmittal need not be
guaranteed by an Eligible Institution if: (i) this Letter of Transmittal is
signed by the registered holder of Definitive Registered Notes tendered hereby,
(ii) this Letter of Transmittal is signed by any participant in DTC whose name
appears on a security position listing maintained by DTC as the owner of the
Series A Notes tendered and such person has not completed Box 2 of this Letter
of Transmittal or (iii) the Series A Notes are tendered for the account of an
Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders of Series A Notes
should indicate in Box 2 (i) the name and address to which Definitive Registered
Notes representing Exchange Notes and/or substitute Definitive Registered Notes
representing Series A Notes in a principal amount equal to the Series A Notes
not tendered or not accepted for exchange are to be sent or (ii) the DTC account
to which Book-Entry Interests in the Exchange Notes issued pursuant to the
Exchange Offer and/or substitute Book-Entry Interests in the Series A Notes not
tendered or not accepted for exchange are to be issued, in each case only if the
recipient of such Exchange Notes or substitute Series A Notes is different from
the person signing this Letter of Transmittal. The employer identification
number or social security number of the person named must also be indicated. If
no such instructions are given, such Exchange Notes and/or Series A Notes not
tendered or not accepted for exchange will be credited to the registered holder
or DTC account of the person(s) signing this Letter of Transmittal.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Series A Notes to it or its order and the issuance
of Exchange Notes to the holder thereof pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer of
Series A Notes to the Company or its order and the issuance of Exchange Notes to
the holder thereof pursuant to the Exchange Offer, then the amount of any such
transfer taxes (whether imposed on the registered holder or on any other person)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption from taxes therefrom is not submitted with this Letter
of Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
8. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Tendered Notes will
be determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Series A
Notes not validly tendered or any Series A Notes the Company's acceptance of
which would, in the opinion of the Company or its counsel, be unlawful. The
Company also reserves the right to waive any conditions of the Exchange Offer or
defects or irregularities in tenders of Series A Notes as to any ineligibility
of any holder who seeks to tender Series A Notes in the Exchange Offer. The
interpretation of the terms and conditions of the Exchange Offer (including this
Letter of Transmittal and the instructions hereto) by the Company shall be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Series A Notes must be cured within such time as the
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Series A
Notes, but shall not incur any liability for failure to give such notification.
9. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive, or modify specified conditions of the Exchange Offer as enumerated in the
Prospectus or this Letter of Transmittal in the case of any Tendered Notes.
10. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Series A Notes or transmittal of this Letter of Transmittal
will be accepted.
11. MUTILATED, LOST, STOLEN OR DESTROYED SERIES A NOTES. Any tendering
holder whose Series A Notes have been mutilated, lost, stolen, or destroyed
should contact the Exchange Agent as soon as possible at the address indicated
above for further instruction.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE>
13. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
SERIES A NOTES. Subject to the terms and conditions of the Exchange Offer, the
Company will accept for exchange all validly tendered Series A Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Company
shall be deemed to have accepted tendered Series A Notes when, as and if the
Company has given written or oral notice thereof (such oral notice being
promptly confirmed in writing) to the Exchange Agent. If any Tendered Notes are
not exchanged pursuant to the Exchange Offer for any reason, such unexchanged
Series A Notes will be returned, without expense, to the signatory of Box 4 at
the address or DTC account shown above or at a different address or DTC account
as may be indicated herein under Box 2.
14. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offer--Withdrawal of Tenders".
15. INCORPORATION OF LETTER OF TRANSMITTAL. This Letter of Transmittal
shall be deemed to be incorporated in and acknowledged and accepted by any
tender through DTC's ATOP procedures by any DTC participant on behalf of itself
and the beneficial owners of any Book-Entry Interests representing Series A
Notes so tendered.
16. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Private Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which , in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by Internal Revenue Service. (If
withholding results in an over-payment of taxes, a refund may be obtained).
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Private Notes are registered in more than one name or are not in the name
of the actual owner, see the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
<PAGE>
EXHIBIT 99.2
FORM OF NOTICE OF GUARANTEED DELIVERY
FOR
8 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
OF
CHATTEM, INC.
As set forth in the Prospectus dated [ ], 1998 (the "Prospectus") of
Chattem, Inc. (the "Company") and in the accompanying Letter of Transmittal and
instructions thereto (the "Letter of Transmittal"), this form or one
substantially equivalent hereto must be used to accept the Company's Exchange
Offer (the "Exchange Offer") to exchange new 8 7/8% Series B Senior Subordinated
Notes due 2008 (the "Exchange Notes") that have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), for all of its
outstanding 8 7/8% Series A Senior Subordinated Notes due 2008 (the "Series A
Notes").
If the Letter of Transmittal or any other documents required thereby cannot
be delivered to the Exchange Agent, or Definitive Registered Notes (as defined
in the Letter of Transmittal) cannot be delivered or the procedure for
book-entry transfer cannot be completed, prior to 5:00 p.m., New York City Time,
on the Expiration Date (as defined in the Prospectus). This form may be
delivered by an Eligible Institution (as defined in the Letter of Transmittal)
by hand or transmitted by facsimile transmission, overnight courier or mail to
the Exchange Agent as set forth below. Capitalized terms not defined herein have
the meanings ascribed to them in the Prospectus or the Letter of Transmittal.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1998 (AS SUCH DATE AND TIME MAY BE EXTENDED BY THE
COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
To: SouthTrust Bank, National Association, as Exchange Agent
<TABLE>
<S> <C> <C>
BY REGISTERED OR CERTIFIED MAIL BY FACSIMILE: CONFIRM BY TELEPHONE:
OR BY OVERNIGHT COURIER OR HAND SouthTrust Bank, (205) 254-5105
DELIVERY: National Association
SouthTrust Bank, Attention: Corporate Trust
National Association Services
100 Office Park Drive (205) 254-4180
Birmingham, Alabama 35223
Attention: Corporate Trust
Services
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN THAT SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal to be used to tender Series A Notes is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the Letter
of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the principal amount of Series A Notes specified below pursuant to
the guaranteed delivery procedures set forth in the Prospectus and in
Instruction 2 of the Letter of Transmittal.
The undersigned understands that tenders of Series A Notes pursuant to the
Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the
Expiration Date. Tenders of Series A Notes may also be withdrawn if the Exchange
Offer is terminated without any such Series A Notes being purchased thereunder
or as otherwise provided in the Prospectus.
All authority thereto conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
The undersigned hereby tenders the Series A Notes listed below:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S)
(IF KNOWN) OF SERIES A AGGREGATE PRINCIPAL PRINCIPAL AMOUNT
NOTES OR ACCOUNT NUMBER AMOUNT OF OF SERIES A
AT THE BOOK-ENTRY FACILITY SERIES A NOTES NOTES TENDERED
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW
SIGN HERE
<TABLE>
<S> <C>
Name(s) of --------------------------------------------------------------------------------
Holder(s):
--------------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Telephone Number: --------------------------------------------------------------------------------
Signature(s): --------------------------------------------------------------------------------
Date: --------------------------------------------------------------------------------
</TABLE>
DTC Account Number (if applicable):
- ------------------------------------------------------------------
<PAGE>
This Notice of Guaranteed Delivery must be signed by (i) the holder(s) of
Series A Notes exactly as its/their name(s) appear on Definitive Registered
Notes, (ii) the holder(s) of Series A Notes exactly as its/their name(s) appear
on a security position listing maintained by DTC as the owner of Series A Notes
or (iii) by person(s) authorized to become holder(s) by documents transmitted
with this Notice of Guaranteed Delivery. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer or other person acting in a
fiduciary or representative capacity, such person must provide the following
information and, unless waived by the Company, submit evidence satisfactory to
the Company of their authority to act:
Please print name(s) and addresses of person signing above
<TABLE>
<S> <C>
Name(s): --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Capacity: --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Address(es): --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
THE FOLLOWING MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national securities
exchange of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") hereby (a) represents that the above named person(s) "own(s)"
the Series A Notes tendered hereby within the meaning of Rule 14e-4 under the
Exchange Act, (b) represents that such tender of Series A Notes complies with
Rule 14e-4 under the Exchange Act (c) guarantees that delivery to the Exchange
Agent of the Letter of Transmittal (or facsimile thereof), either Definitive
Registered Notes in proper form for transfer or a confirmation of the book-entry
transfer of Book-Entry Interests representing such Series A Notes into the
Exchange Agent's account at DTC, pursuant to the procedures for book-entry
transfer set forth in the Prospectus, and delivery of either a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof) with any required signatures and any other documents required by the
Letter of Transmittal or an Agent's Message, will be received by the Exchange
Agent by 5.00 p.m., New York City time, on the fifth New York Stock Exchange
trading day after the Expiration Date.
The undersigned acknowledges that it must deliver the Letter of Transmittal
or Agent's Message and Series A Notes tendered hereby to the Exchange Agent
within the time period set forth therein and that failure to do so could result
in financial loss to the undersigned.
SIGN HERE
<TABLE>
<S> <C>
Name of Firm: --------------------------------------------------------------------------------
Authorized --------------------------------------------------------------------------------
Signature:
Name (please print): --------------------------------------------------------------------------------
Address: --------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Zip Code)
Telephone Number: --------------------------------------------------------------------------------
Date: --------------------------------------------------------------------------------
</TABLE>
DO NOT SEND ANY DEFINITIVE REGISTERED NOTES WITH THIS FORM. ACTUAL SURRENDER OF
DEFINITIVE REGISTERED NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN
EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedure, see Instruction 2 of the Letter of
Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Series A Notes
to be tendered (in the case of Definitive Registered Notes), the Series A Notes
without alteration, enlargement, or any change whatsoever. If this Notice of
Guaranteed Delivery is signed by the DTC participant whose name appears on a
security position maintained by DTC (in the case of Book-Entry Interests), the
signature must correspond exactly with such participant's name as it appears on
a security position maintained by DTC listing such participant as the owner of
the Series A Notes, without any change whatsoever.
If any of the Series A Notes to be tendered are owned of record by two or
more joint owners, all such owners must sign this Notice of Guaranteed Delivery.
If any Series A Notes to be tnedered are held in different names on several
Series A Notes, it will be necessary to complete, sign, and submit as many
separate copies of the Notice of Guaranteed Delivery documents as there are
names in which Series A Notes to be tendered are held.
If this Notice of Guaranteed Delivery or any Series A Notes are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fuduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Notice of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OF ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus my be directed
to the Exchange Agent at the address specified in the Prospectus. Holders also
may contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
<PAGE>
EXHIBIT 99.3
INSTRUCTION TO REGISTERED HOLDER OR DTC
PARTICIPANT FROM BENEFICIAL OWNER
FOR
8 7/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2008
OF
CHATTEM, INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
[ ], 1998 (the "Prospectus"), of Chattem, Inc., a company incorporated
under the laws of Tennessee (the "Company"), and the accompanying Letter of
Transmittal (the "Letter of Transmittal") that together constitute the Company's
offer (the "Exchange Offer"). Capitalized terms used but not defined herein have
the meanings assigned to them in the Prospectus and the Letter of Transmittal.
This will instruct you as to the action to be taken by you relating to the
Exchange Offer with respect to the 8 7/8% Series A Senior Subordinated Notes due
2008, (the "Series A Notes") held by you for the account of the undersigned.
The principal amount of the Series A Notes held by you for the account of
the undersigned is (fill in amount): $ principal amount of Series A
Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/ / To TENDER the following principal amount of Series A Notes held by you
for the account of the undersigned (insert amount of Series A Notes to be
tendered, if any): $ principal amount of Series A Notes.
/ / NOT to TENDER any Series A Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Series A Notes held by you
for the account of the undersigned, it is understood that you are authorized:
(a) to make, on behalf of the undersigned (and the undersigned, by its
signature below, hereby makes to you), the representations and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a beneficial owner, including but not limited to the
representations that (i) the Exchange Notes or Book Entry Interests therein to
be acquired by the undersigned (the "Beneficial Owner(s)") in connection with
the Exchange Offer are being acquired by the undersigned in the ordinary course
of business of the undersigned, (ii) the undersigned is not participating, does
not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the Exchange Notes, (iii) the
undersigned acknowledges and agrees that any person who is a broker-dealer
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or is participating in the Exchange Offer for the purpose of distributing
the Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the Exchange Notes or interests therein acquired by such person
and cannot rely on the position of the staff of the Commission set forth in
certain no-action letters, (iv) the undersigned understands that a secondary
resale transaction described in clause (iii) above and any resales of Exchange
Notes or interests therein obtained by such holder in exchange for Series A
Notes or interests therein originally acquired by such holder directly from the
Company should be covered by an effective registration statement containing the
selling security holder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and (v) the undersigned is not
an "affiliate," as defined in Rule 405 under the Securities Act, of the Company.
Upon a request by the Company, a holder or beneficial owner will deliver to the
Company a legal opinion confirming its representation made in clause (v) above.
If the undersigned is a broker-dealer (whether or not it is also an "affiliate")
that will receive Exchange Notes for its own account pursuant to the Exchange
Offer, the undersigned represents that the Series A Notes to be exchanged for
the Exchange Notes were acquired by it as a result of market making activities
or other trading activities, and acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
prospectus, the undersigned does not and will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act;
<PAGE>
(b) to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and
(c) to take such other action as necessary under the Prospectus or the
Letter of Transmittal to effect the valid tender of such Series A Notes.
SIGN HERE
<TABLE>
<S> <C>
Name of Beneficial --------------------------------------
Owner(s):
Signature(s): --------------------------------------
Name(s) (please print): --------------------------------------
Address: --------------------------------------
--------------------------------------
Telephone Number: --------------------------------------
Taxpayer Identification
or Social Security --------------------------------------
number:
Date: --------------------------------------
</TABLE>
