AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 5, 1997
Registration No.
------
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NBTY, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2834 11-2228617
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------------
90 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
TELEPHONE: (516) 567-9500
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
---------------------
SCOTT RUDOLPH
PRESIDENT
NBTY, INC.
90 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
TELEPHONE: (516) 567-9500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
MICHAEL C. DUBAN THOMAS F. COONEY, III
MICHAEL C. DUBAN, P.C. SIMON M. NADLER
81 MAIN STREET KIRKPATRICK & LOCKHART LLP
WHITE PLAINS, NEW YORK 10601 1800 MASSACHUSETTS AVENUE, N.W.
(914) 681-0606 SECOND FLOOR
WASHINGTON, D.C. 20036
(202) 778-9000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered in this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ] _________.
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______________.
CALCULATION OF REGISTRATION FEE
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<CAPTION>
- --------------------------------------------------- -------------- -------------------- ---------------------- ------------------
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT (1) PRICE REGISTRATION FEE
- --------------------------------------------------- -------------- -------------------- ---------------------- ------------------
8-5/8% Senior Subordinated Notes due 2007, Series B $150,000,000 100% $150,000,000 $45,455
- --------------------------------------------------- -------------- -------------------- ---------------------- ------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE
DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL
THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 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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</TABLE>
<PAGE>
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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.
- --------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 1997
<PAGE>
PROSPECTUS
- --------------------
NBTY, INC.
OFFER TO EXCHANGE 8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
FOR ALL OUTSTANDING 8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
OF NBTY, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ________________, UNLESS EXTENDED.
NBTY, Inc., a Delaware corporation ("NBTY"), hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its 8-5/8% Senior
Subordinated Notes due 2007, Series B (the "Exchange Notes"), registered under
the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement of which this Prospectus is a part, for each $1,000
principal amount of its outstanding 8-5/8% Senior Subordinated Notes due 2007
(the "Original Notes"), of which $150,000,000 principal amount is outstanding.
The form and terms of the Exchange Notes are the same as the form and terms of
the Original Notes except that (i) the Exchange Notes will bear a Series B
designation and a different CUSIP number from the Original Notes, (ii) the
issuance of the Exchange Notes will have been registered under the Securities
Act and, therefore, will not bear legends restricting the transfer thereof, and
(iii) holders of the Exchange Notes will not be entitled to certain rights of
holders of Original Notes under the Exchange and Registration Rights Agreement
(as defined). The Original Notes and the Exchange Notes are referred to herein
collectively as the "Notes." The Exchange Notes will evidence the same debt as
the Original Notes (which they replace) and will be issued under and be entitled
to the benefits of that certain Indenture, dated as of September 23, 1997 (the
"Indenture"), by and between NBTY, as issuer, and IBJ Schroder Bank & Trust
Company, as trustee, governing the Notes. See "The Exchange Offer" and
"Description of the Exchange Notes."
NBTY will accept for exchange any and all Original Notes validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
____________________, unless extended by NBTY in its sole discretion (the
"Expiration Date"). Tenders of Original Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
subject to certain customary conditions. See "The Exchange Offer."
The Original Notes were sold by NBTY on September 23, 1997, to Chase
Securities Inc. (the "Initial Purchaser") in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act (the
"Initial Offering"). The Initial Purchaser subsequently placed the Original
Notes with qualified institutional buyers in reliance upon Rule 144A under the
Securities Act ("Rule 144A"). Accordingly, the Original Notes may not be
reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The Exchange Notes
are being offered hereunder to satisfy the obligations of NBTY under that
certain Exchange and Registration Rights Agreement, dated as of September 23,
1997, by and between NBTY and the Initial Purchaser (the "Exchange and
Registration Rights Agreement"), entered into in connection with the Initial
Offering. See "The Exchange Offer - Purpose and Effect of the Exchange Offer."
Interest on the Exchange Notes will accrue from the last interest
payment on which interest was paid on the Original Notes surrendered in exchange
therefor or, if no interest has been paid on the Original Notes, from the Issue
Date (as defined), and will be payable semi-annually on September 15 and March
15 of each year, commencing on March 15, 1998. The Notes will mature on
<PAGE>
September 15, 2007. Except as described below, NBTY may not redeem the Notes
prior to September 15, 2002. On or after such date, NBTY may redeem the Notes,
in whole or in part, at the redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time and from time to time on or prior to September 15, 2000, NBTY may,
subject to certain requirements, redeem up to 33-1/3% of the aggregate principal
amount of the Notes with the Net Cash Proceeds (as defined) from one or more
Public Equity Offerings (as defined) by NBTY at a price equal to 108.625% of the
principal amount to be redeemed, together with accrued and unpaid interest, if
any, to the date of redemption, provided that at least 66-2/3% of the original
aggregate principal amount of the Original Notes remains outstanding after each
such redemption. The Notes will not be subject to any sinking fund requirement.
Upon the occurrence of a Change of Control (as defined), NBTY will be required
to make an offer to repurchase the Notes at a price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest, if any, to
the date of repurchase. See "Description of the Exchange Notes."
The Notes will be unsecured and subordinated in right of payment to all
existing and future Senior Indebtedness (as defined) of NBTY. The Notes will
rank PARI PASSU in right of payment with any future senior subordinated
indebtedness of NBTY and will rank senior to all Subordinated Indebtedness (as
defined) of NBTY. The Indenture under which the Notes will be issued permits
NBTY to incur additional indebtedness, including Senior Indebtedness, subject to
certain restrictions. See "Description of the Exchange Notes." As of June 30,
1997, on a pro forma basis after giving effect to the Transaction (as defined),
the aggregate principal amount of NBTY's outstanding Senior Indebtedness would
have been approximately $31.1 million (exclusive of unused commitments) and NBTY
would have had no senior subordinated indebtedness outstanding other than the
Notes and no Subordinated Indebtedness. See "Description of the Exchange Notes"
and "Capitalization."
The common stock of NBTY is listed on the Nasdaq Stock Market under the
symbol "NBTY." There has not previously been any public market for the Original
Notes or the Exchange Notes. NBTY does not intend to list the Exchange Notes on
any securities exchange, but the Original Notes are eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market. There can be no assurance that an active market for the Exchange Notes
will develop. See "Risk Factors - Absence of Public Market." Moreover, to the
extent that the Original Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Original Notes
could be adversely affected.
--------------------------------------------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
--------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
--------------------------------------------------------------------------
Based upon an interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in certain no-action letters
issued to third parties, NBTY believes that the Exchange Notes issued pursuant
to the Exchange Offer in exchange for Original Notes may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that is an "affiliate" of NBTY within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes. See "The Exchange Offer - Resale of the Exchange Notes."
Holders of Original Notes wishing to accept the Exchange Offer must represent to
ii
<PAGE>
NBTY, as required by the Exchange and Registration Rights Agreement, that such
conditions have been met.
Each broker-dealer that receives Exchange Notes for its own account (an
"Exchanging Dealer") 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 states that by so acknowledging and by delivering a
prospectus, an Exchanging 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 an Exchanging
Dealer in connection with resales of Exchange Notes received in exchange for
Original Notes where such Original Notes were acquired by such Exchanging Dealer
as a result of market making activities or other trading activities. NBTY has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus available to any Exchanging Dealer for use in connection with
any such resale. See "Plan of Distribution."
NTBY will not receive any proceeds from the Exchange Offer. NBTY has
agreed to bear the expenses of the Exchange Offer. No underwriter is being used
in connection with the Exchange Offer. Holders of Original Notes not tendered
and accepted in the Exchange Offer will continue to hold such Original Notes and
will be entitled to all the rights and benefits and will be subject to the
limitations applicable thereto under the Indenture and with respect to transfer
under the Securities Act. The Exchange Offer is intended to satisfy certain
exchange and registration rights of holders of Original Notes under the Exchange
and Registration Rights Agreement. Such rights shall terminate upon consummation
of the Exchange Offer. See "The Exchange Offer - Purpose and Effect of the
Exchange Offer."
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF ORIGINAL 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 ANY OFFERING HEREBY 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 _________________ (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE
OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
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.
The Exchange Notes will be available initially only in book-entry form.
Except as may be described under "Book-Entry; Delivery and Form," NBTY expects
that the Exchange Notes issued pursuant to the Exchange Offer will be
represented by one or more duly registered Global Notes (as defined), that will
be deposited with, or on behalf of, the Depository Trust Company ("DTC") and
registered in its name or in the name of Cede & Co., its nominee. Beneficial
interests in the Global Note representing the Exchange Notes will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. After the initial issuance of the Global Note, Exchange
Notes in certificated form will be issued in exchange for the Global Note only
in accordance with the terms and conditions set forth in the Indenture. See
"Book-Entry; Delivery and Form."
This Prospectus incorporates documents by reference which are not
iii
<PAGE>
presented herein or delivered herewith. These documents are available upon
request from Harvey Kamil, Secretary, NBTY, Inc., 90 Orville Drive, Bohemia, New
York 11716, (516) 567-9500. In order to ensure timely delivery of the documents,
any request should be made by _______ (five days before Expiration Date).
THE CONTENTS OF THIS PROSPECTUS ARE NOT TO BE CONSTRUED AS LEGAL,
BUSINESS OR TAX ADVICE. EACH PROSPECTIVE PARTICIPANT IN THE EXCHANGE OFFER
SHOULD CONSULT ITS OWN ATTORNEY, BUSINESS ADVISOR OR TAX ADVISOR AS TO LEGAL,
BUSINESS OR TAX ADVICE. PROSPECTIVE INVESTORS MAY OBTAIN ADDITIONAL INFORMATION
UPON REQUEST FROM THE INITIAL PURCHASER OR THE COMPANY WHICH THEY MAY REASONABLY
REQUIRE IN CONNECTION WITH THE DECISION TO PARTICIPATE IN THE EXCHANGE OFFER.
iv
<PAGE>
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH RESPECT TO
THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF THE COMPANY,
INCLUDING STATEMENTS UNDER THE CAPTIONS "SUMMARY," "UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" AND "BUSINESS." ALL OF THESE FORWARD LOOKING
STATEMENTS ARE BASED ON ESTIMATES AND ASSUMPTIONS MADE BY MANAGEMENT OF THE
COMPANY WHICH, ALTHOUGH BELIEVED TO BE REASONABLE, ARE INHERENTLY UNCERTAIN.
THEREFORE, UNDUE RELIANCE SHOULD NOT BE PLACED UPON SUCH ESTIMATES AND
STATEMENTS. NO ASSURANCE CAN BE GIVEN THAT ANY OF SUCH ESTIMATES OR STATEMENTS
WILL BE REALIZED AND IT IS LIKELY THAT ACTUAL RESULTS WILL DIFFER MATERIALLY
FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS. FACTORS THAT MAY
CAUSE SUCH DIFFERENCES INCLUDE: (1) ADVERSE PUBLICITY REGARDING THE CONSUMPTION
OF NUTRITIONAL SUPPLEMENTS; (2) ADVERSE FEDERAL, STATE OR FOREIGN LEGISLATION OR
REGULATION OR ADVERSE DETERMINATIONS BY REGULATORS; (3) SLOW OR NEGATIVE GROWTH
IN THE NUTRITIONAL SUPPLEMENT INDUSTRY; (4) INABILITY OF THE COMPANY TO
SUCCESSFULLY IMPLEMENT ITS BUSINESS STRATEGY; (5) INCREASED COMPETITION; (6)
INCREASED COSTS; (7) LOSS OR RETIREMENT OF KEY MEMBERS OF MANAGEMENT; (8)
INCREASES IN THE COMPANY'S COST OF BORROWINGS OR INABILITY OR UNAVAILABILITY OF
ADDITIONAL DEBT OR EQUITY CAPITAL; AND (9) CHANGES IN GENERAL ECONOMIC
CONDITIONS IN THE MARKETS IN WHICH THE COMPANY MAY, FROM TIME TO TIME, COMPETE.
MANY OF SUCH FACTORS WILL BE BEYOND THE CONTROL OF THE COMPANY AND ITS
MANAGEMENT. FOR FURTHER INFORMATION OR OTHER FACTORS WHICH COULD AFFECT THE
FINANCIAL RESULTS OF THE COMPANY AND SUCH FORWARD LOOKING STATEMENTS, SEE "RISK
FACTORS."
v
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE
READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION, RISK FACTORS AND
HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA, INCLUDING THE RELATED NOTES,
APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED IN THIS PROSPECTUS, UNLESS THE
CONTEXT OTHERWISE REQUIRES, (i) "NBTY" REFERS TO NBTY, INC. AND ITS SUBSIDIARIES
AS CONSTITUTED PRIOR TO THE ACQUISITION, (ii) "H&B" REFERS TO HOLLAND & BARRETT
HOLDINGS LTD. AND ITS SUBSIDIARIES AS CONSTITUTED PRIOR TO THE ACQUISITION, AND
(III) THE "COMPANY" REFERS TO NBTY, INC. AND ITS SUBSIDIARIES (INCLUDING H&B)
AFTER GIVING EFFECT TO THE ACQUISITION. UNLESS OTHERWISE INDICATED, ALL
FINANCIAL STATEMENTS IN THIS PROSPECTUS HAVE BEEN PREPARED IN ACCORDANCE WITH
U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("U.S. GAAP") AND ALL DOLLAR
REFERENCES ARE IN U.S. DOLLARS. FINANCIAL INFORMATION OF H&B HAS BEEN DERIVED
FROM THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS OF H&B PREPARED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IN THE UNITED KINGDOM
("U.K. GAAP"). H&B FINANCIAL DATA, WHICH IS STATED IN U.S. DOLLARS, HAS BEEN
ADJUSTED TO REFLECT U.S. GAAP AND IS BASED ON AN EXCHANGE RATE OF ONE POUND
STERLING TO 1.665 U.S. DOLLARS. REFERENCES IN THIS PROSPECTUS TO FISCAL YEARS
ARE TO NBTY'S FISCAL YEARS ENDING SEPTEMBER 30 OR H&B'S FISCAL YEARS ENDING JUNE
30, AS THE CASE MAY BE. UNLESS OTHERWISE NOTED, ALL MARKET DATA PRESENTED IN
THIS PROSPECTUS IS BASED ON THE COMPANY'S RESEARCH AND ESTIMATES. NATURE'S
BOUNTY(REGISTERED TRADEMARK), GOOD `N NATURAL(REGISTERED TRADEMARK),
HUDSON(REGISTERED TRADEMARK), AMERICAN HEALTH(REGISTERED TRADEMARK), NATURAL
WEALTH(REGISTERED TRADEMARK), PURITAN'S PRIDE(REGISTERED TRADEMARK), VITAMIN
WORLD(REGISTERED TRADEMARK) AND HOLLAND & BARRETT ARE REGISTERED TRADEMARKS OF
THE COMPANY.
THE COMPANY
OVERVIEW
NBTY, founded in 1971, is one of the leading manufacturers and
distributors of nutritional supplements in the U.S., marketing a complete line
of vitamins, minerals and other nutritional supplements offered at value prices
to its customers. NBTY markets its multi-branded products primarily through (i)
one of the industry's leading mail order programs under its PURITAN'S PRIDE
brand name to its proprietary list of over two million active customers, (ii)
115 Vitamin World retail stores strategically located primarily in factory
outlet malls across the U.S., and (iii) wholesale distribution to drug store
chains, supermarkets, independent pharmacies and health food stores such as
Eckerd, Osco and Albertson's under the NATURE'S BOUNTY, NATURAL WEALTH, HUDSON,
AMERICAN HEALTH and GOOD `N NATURAL brand names. Management believes that this
unique three-tiered distribution system enables NBTY to most effectively market
its products and lends stability, when compared to certain of its competitors,
to its revenues and EBITDA. NBTY's revenues from mail order, retail and
wholesale sales were approximately 42%, 16% and 42%, respectively, of total NBTY
revenues for the nine month period ended June 30, 1997. NBTY's revenues and
EBITDA for the nine month period ended June 30, 1997 were approximately $184
million and $33 million, respectively, and same store sales growth for the same
period was approximately 15%.
NBTY acquired (the "Acquisition") Holland & Barrett Holdings Ltd.
("H&B"), one of the leading nutritional supplement retailers in the United
Kingdom ("U.K.") with 410 locations, on August 7, 1997. The Acquisition provides
the Company with significant strategic opportunities to enhance H&B's revenues
and profitability and increase its market share. H&B markets a broad line of
nutritional supplement products, including vitamins, minerals and other
nutritional supplements (approximately 58% of H&B's revenues for fiscal year
1997), and food products, including fruits and nuts, confectionery and other
items (approximately 42% of H&B's revenues for fiscal year 1997). H&B's
strategic retail locations in prime shopping areas and broad product offering
have enabled it to become one of the U.K.'s largest nutritional supplement
retailers. H&B's revenues and EBITDA for the fiscal year ended June 30, 1997
were approximately $171 million and $18 million, respectively, and same store
sales growth for the same period was approximately 3%.
The Company expects to derive substantial opportunities from the
combination of NBTY's and H&B's operations. Pro forma for the Acquisition, the
Company's revenues for mail order, retail and wholesale sales would have been
approximately 25%, 50% and 25%, respectively, of total Company revenues for the
nine month period ended June 30, 1997. Management believes that cross-selling an
expansive selection of NBTY-manufactured products into H&B's 410 retail stores
<PAGE>
will enable H&B to offer a broader product selection at lower prices than its
competitors and, at the same time, enhance H&B's margins. In addition,
management expects to reduce per unit production costs in NBTY's manufacturing
facilities through increased capacity utilization derived from this vertical
integration. The Company also plans to increase the efficiency of its H&B
operations by integrating NBTY's state-of-the-art point of sale ("POS") system
throughout H&B's retail stores that will allow for more effective management of
inventory and purchasing. The Company's vertically integrated structure and
three-tiered distribution system, combined with its breadth of well recognized,
value oriented brand names, position it to pursue continued growth and
competitive success in each of its distribution channels.
The U.S. retail market for vitamins, minerals and other nutritional
supplements has grown at a compound annual rate of approximately 15%, from $3.7
billion in 1992 to $6.5 billion in 1996, according to the 1997 Packaged Facts
Survey ("Packaged Facts"). According to the Simmons Market Research Bureau, 54%
of the U.S. adult population uses vitamins, minerals or supplements. Further,
based on U.S. Bureau of the Census data, the 45-and-older age group, which
accounted for approximately 32% of the U.S. population in 1990, is expected to
grow to 40% of the U.S. population by 2010. Management believes this industry
growth is expected to continue based on the following factors: (i) the aging
population, (ii) the growing body of research suggesting the benefits of certain
nutritional supplements, and (iii) the favorable regulatory environment that
allows for new product development, thereby stimulating total demand.
COMPETITIVE STRENGTHS
The Company believes that the following competitive strengths provide
it with a solid foundation to further enhance growth, profitability and the
Company's position as an industry leader:
o VERTICALLY INTEGRATED OPERATIONS. As a result of the Acquisition, the
Company will increase its degree of vertical integration by manufacturing
nutritional supplements in NBTY facilities for sale through H&B's retail
stores. Due to NBTY's existing level of vertical integration, NBTY is
able to price its products at its stores approximately 20-40% lower than
its largest competitor yet still maintain gross margins in excess of
approximately 50%. The Acquisition will allow the Company to further
increase its margins by providing NBTY-manufactured products throughout
H&B retail stores.
o EFFICIENT, MULTI-CHANNEL DISTRIBUTION NETWORK. NBTY's three-tiered U.S.
distribution network (mail order, retail and wholesale), supplemented by
H&B's strong retail position in the U.K. nutritional supplement market,
allows the Company to access a broader base of nutritional supplement
buyers and is unique among the Company's competitors. Management believes
this diverse network lowers distribution risk and lends stability, when
compared to certain of its competitors, to both revenues and EBITDA.
o STRONG PORTFOLIO OF RETAIL STORES. NBTY's 115 Vitamin World stores, in
combination with H&B's 410 stores, comprise a retail network that is
strategically located in the high growth U.S. and U.K. markets. These
stores delivered approximately 15% and 4% same store sales growth during
the nine month period ended June 30, 1997 in the U.S. and the U.K.,
respectively. In addition to providing a platform for growth, management
believes the Company's established retail stores pose significant
barriers to entry for new competitors due to the Company's penetration of
U.S. factory outlet malls and prime U.K. locations.
o LEADING MAIL ORDER SUPPLIER. Management believes NBTY is the industry
leader in the U.S. mail order nutritional supplement market with over two
million active customers and response rates that management believes to
be in excess of the mail order industry average. The Company's position
as a leading mail order nutritional supplement distributor allows the
Company to lower its per customer distribution costs, thereby enhancing
margins. The Company plans to further expand its mail order operations in
the U.K. by utilizing its mail order distribution warehouse in
Southampton, England, which became fully operational in January 1997.
o INNOVATIVE NEW PRODUCT DEVELOPMENT. NBTY continually pursues new product
development in response to customer demand. In 1997 alone, NBTY
2
<PAGE>
introduced more than 100 new stock keeping units ("SKUs") through its
product development and merchandising groups working directly with
managers at the retail level. Management believes its retail stores
provide the Company with rapid access to customer demand information and
allow the Company to test market new products before initiating a
complete product launch across all distribution channels.
o EXPERIENCED MANAGEMENT TEAM. Scott Rudolph, Chairman of the Board,
President and Chief Executive Officer, has 11 years of experience with
NBTY and 21 years in the nutritional supplement industry. Mr. Rudolph's
skilled management team averages over 14 years of industry experience
(primarily with NBTY) in the mail order, retail and wholesale
distribution channels.
BUSINESS STRATEGY
The Company's strategy is to target the growing value-conscious
consumer segment in order to increase sales and improve profitability, thereby
strengthening its position as an industry leader through the following key
initiatives:
o INCREASE HIGH MARGIN RETAIL SALES. As a result of the Acquisition, NBTY's
115 retail stores have been augmented by H&B's 410 U.K. stores. In the
U.S., the Company plans to open approximately 80 new stores per year,
substantially increasing its penetration of the factory outlet mall base.
By increasing overall foot traffic through its growing base of stores,
the Company expects to increase its revenues and profitability, and
enhance its market share. In the U.K., the Company expects to increase
nutritional supplement sales by offering its products at lower prices
than its competitors.
o INCREASE HIGH MARGIN MAIL ORDER SALES. Management believes NBTY's
PURITAN'S PRIDE mail order operation is the industry's leader with
approximately two million active mail order customers. NBTY is currently
in the process of automating its mail order shipping department, which
will enable NBTY to fulfill mail order requests with greater speed and
efficiency. NBTY expects to continue to strengthen its mail order sales
through frequent promotions in order to further improve its response
rate, which management believes is already above the mail order industry
average. NBTY also expects to continue to add customers through the
selective acquisition of companies that have similar or complementary
products. In addition, NBTY's recently increased manufacturing capability
will enable it to successfully compete for additional mail order
customers through its ability to quickly introduce and deliver new
products in response to consumer demand.
o EMPHASIZE HIGHER MARGIN PRODUCTS. In addition to manufacturing and
distributing high sales volume products (such as vitamins C and E), the
Company also manufactures and distributes higher margin, specialty
products. These popular specialty products, such as melatonin and St.
John's Wort, are targeted primarily at dedicated nutritional supplement
users and typically provide higher margins than more established products
and broaden the Company's product line.
o ENHANCE OPERATING EFFICIENCIES. The Acquisition will enable the Company
to increase its level of vertical integration by selling nutritional
supplements manufactured by NBTY through the H&B retail stores in the
U.K. Management expects to supply approximately 75% of H&B's nutritional
supplements from NBTY's U.S. manufacturing operations, thereby increasing
NBTY's manufacturing margins and increasing H&B's margins while reducing
per unit production costs in NBTY's manufacturing facilities through
increased capacity utilization. Additionally, the Company intends to
achieve significant operating efficiencies from the integration of its
POS system into the H&B stores, which will significantly improve
inventory management, production scheduling and administrative functions.
o RAPID NEW PRODUCT INTRODUCTION. Management believes that NBTY is among
the leaders in its industry in the timely introduction of products in
response to consumer demands. During 1997 alone, NBTY introduced more
than 100 new SKUs. Given the changing nature of consumer demands for new
products and the growing publicity of the value of vitamins, minerals and
other nutritional supplements in the promotion of general health,
3
<PAGE>
management believes that NBTY will continue to attract new customers
based upon its ability to rapidly respond to consumer demands with high
quality, value oriented products. As a result of the Company's ongoing
manufacturing expansion, the Company will be poised to further develop
new products that meet consumers' demand.
THE TRANSACTION
On August 7, 1997, NBTY acquired all of the issued and outstanding
capital stock of Holland & Barrett Holdings Ltd. from Lloyds Chemists plc
("Lloyds") for an aggregate purchase price of approximately $169.0 million.
Prior to the Acquisition, H&B operated as a subsidiary of Lloyds. Lloyds was
acquired by GEHE AG ("GEHE") in January 1997 and, pursuant to GEHE's strategy of
divesting Lloyds of non-core assets, GEHE determined to divest the H&B
subsidiary. NBTY issued to Lloyds two promissory notes (the "Promissory Notes")
totaling approximately $169.0 million as consideration for the purchase of the
capital stock of H&B.
In connection with the Acquisition, NBTY (i) entered into a $50.0
million revolving credit facility (the "Revolving Credit Facility"), which
provides for borrowings for working capital and general corporate purposes, and
(ii) issued $150.0 million of Original Notes (the "Initial Offering," and
together with the Revolving Credit Facility, the "Financing"). The Acquisition
and the Financing are, together, referred to as the Transaction. On a pro forma
basis, after giving effect to the Transaction, the Company's unused availability
under the Revolving Credit Facility was approximately $37.5 million. See
"Capitalization" and "Description of the Revolving Credit Facility." NBTY paid
in full the Promissory Notes on October 17, 1997, using proceeds from the
Initial Offering and the Financing.
The sources and uses of funds for the Transaction, which assume that
the Transaction had occurred on June 30, 1997, are as follows:
SOURCES: (DOLLARS IN MILLIONS)
Cash on hand......................................... $ 15.2
Revolving Credit Facility(a)......................... 12.5
Original Notes....................................... 148.8
-----
Total Sources of Funds............................ $176.5
======
USES:
Payment of Promissory Notes.......................... $169.0
Transaction fees and expenses........................ 7.5
------
Total Uses of Funds............................... $176.5
======
- ----------
(a) Following consummation of the Transaction, the Company had available $37.5
million under the Revolving Credit Facility that may be drawn for working
capital and general corporate purposes, including capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
4
<PAGE>
THE INITIAL OFFERING
Original Notes......................... The Original Notes were sold by NBTY
on September 23, 1997 (the "Initial
Offering"), to Chase Securities Inc.
(the "Initial Purchaser") pursuant to
a Purchase Agreement, dated as of
September 17, 1997, by and between
NBTY and the Initial Purchaser (the
"Purchase Agreement"). The Initial
Purchaser subsequently resold the
Original Notes to qualified
institutional buyers pursuant to Rule
144A under the Securities Act ("Rule
144A").
Exchange and Registration Rights
Agreement.............................. Pursuant to the Purchase Agreement,
NBTY and the Initial Purchaser
entered into an Exchange and
Registration Rights Agreement (the
"Exchange and Registration Rights
Agreement"), dated as of September
23, 1997 (the "Issue Date"), which
grants the holders of the Original
Notes certain exchange and
registration rights. The Exchange
Offer is intended to satisfy such
exchange and registration rights,
which rights shall terminate upon
consummation of the Exchange Offer.
See "The Exchange Offer - Purpose and
Effect of the Exchange Offer."
THE EXCHANGE OFFER
Securities Offered..................... $150,000,000 aggregate principal
amount of 8-5/8% Senior Subordinated
Notes due 2007, Series B, of NBTY
(the "Exchange Notes").
The Exchange Offer..................... $1,000 principal amount of Exchange
Notes in exchange for each $1,000
principal amount of Original Notes.
As of the date hereof, $150,000,000
aggregate principal amount of
Original Notes are outstanding. NBTY
will issue the Exchange Notes to
holders as promptly as practicable
after the Expiration Date.
Based on an interpretation by the
staff of the Securities and Exchange
Commission (the "Commission") set
forth in no-action letters issued to
third parties, NBTY believes that
Exchange Notes issued pursuant to the
Exchange Offer in exchange for
Original Notes may be offered for
resale, resold and otherwise
transferred by any holder thereof
(other than any such holder that is
an "affiliate" of NBTY 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 that such holder does
not intend to participate and has no
arrangement or understanding with any
person to participate in the
distribution of such Exchange Notes.
Any participating broker-dealer (an
"Exchanging Dealer") that acquired
Original Notes for its own account as
a result of market making activities
or other trading activities may be a
5
<PAGE>
statutory underwriter. Each
Exchanging 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 states that by
so acknowledging and by delivering a
prospectus, an Exchanging 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 an
Exchanging Dealer in connection with
resales of Exchange Notes received in
exchange for Original Notes where
such Original Notes were acquired by
such Exchanging Dealer as a result of
market making activities or other
trading activities. NBTY has agreed
that, for a period of 180 days after
the Expiration Date, it will make
this Prospectus available to any
Exchanging Dealer for use in
connection with any such resale. See
"Plan of Distribution."
Any holder who tenders in the
Exchange Offer with the intention to
participate, or for the purpose of
participating, in a distribution of
the Exchange Notes could not rely on
the position of the staff of the
Commission enunciated in no-action
letters and, in the absence of an
exemption therefrom, must comply with
the registration and prospectus
delivery requirements of the
Securities Act in connection with any
resale transaction. Failure to comply
with such requirements in such
instance may result in such holder
incurring liability under the
Securities Act for which the holder
is not indemnified by NBTY.
Expiration Date........................ 5:00 p.m., New York City time, on
_________________, unless the
Exchange Offer is extended, in which
case the term "Expiration Date" means
the latest date and time to which the
Exchange Offer is extended.
Accrued Interest on the Exchange
Notes and the Original Notes........... Interest on the Exchange Notes issued
pursuant to the Exchange Offer will
accrue from the last interest payment
date on which interest was paid on
the Original Notes surrendered in
exchange therefor or, if no interest
has been paid on the Original Notes,
from the Issue Date. Holders whose
Original Notes are accepted for
exchange will be deemed to have
waived the right to receive any
interest accrued on the Original
Notes.
Conditions to the Exchange Offer....... The Exchange Offer is subject to
certain customary conditions, which
may be waived by NBTY. See "The
Exchange Offer - Conditions."
Procedures for Tendering Original
Notes.................................. Each holder of Original Notes wishing
to accept the Exchange Offer must
complete, sign and date the
accompanying Letter of Transmittal,
or a facsimile thereof (or, in the
case of a book-entry transfer,
transmit an Agent's Message (as
defined) in lieu thereof), in
accordance with the instructions
contained herein and therein, and
mail or otherwise deliver such Letter
6
<PAGE>
of Transmittal, or such facsimile (or
Agent's Message), together with the
Original Notes and any other required
documentation to the Exchange Agent
(as defined) at the address set forth
herein. By executing the Letter of
Transmittal (or transmitting an
Agent's Message), each holder will
represent to NBTY that, among other
things, the Exchange Notes acquired
pursuant to the Exchange Offer are
being obtained in the ordinary course
of business of the person receiving
such Exchange Notes, whether or not
such person is the holder, that
neither the holder nor any such other
person has any arrangement or
understanding with any person to
participate in the distribution of
such Exchange Notes and that neither
the holder nor any such other person
is an "affiliate," as defined under
Rule 405 of the Securities Act, of
NBTY. See "The Exchange Offer -
Purpose and Effect of the Exchange
Offer" and "- Procedures for
Tendering."
Untendered Original Notes.............. Following the consummation of the
Exchange Offer, holders of Original
Notes eligible to participate but who
do not tender their Original Notes
will not have any further exchange or
registration rights and such Original
Notes will continue to be subject to
certain restrictions on transfer.
Accordingly, the liquidity of the
market for such Original Notes could
be adversely affected. See "Risk
Factors - Absence of Public Market."
Consequences of Failure to
Exchange............................... Original Notes that are not exchanged
pursuant to the Exchange Offer will
remain restricted securities.
Accordingly, such Original Notes may
be resold only (i) to NBTY, (ii)
pursuant to Rule 144A or Rule 144
under the Securities Act or pursuant
to some other exemption under the
Securities Act, (iii) outside the
United States to a foreign person
pursuant to the requirements of Rule
904 under the Securities Act, or (iv)
pursuant to an effective registration
statement under the Securities Act.
See "The Exchange Offer -
Consequences of Failure to Exchange."
Shelf Registration Statement........... If any holder of Original Notes
(other than any such holder which is
an "affiliate" of NBTY within the
meaning of Rule 405 under the
Securities Act) is not eligible under
applicable securities laws to
participate in the Exchange Offer and
such holder has satisfied certain
conditions relating to the provision
of information to NBTY for use
therein, and under certain other
circumstances, NBTY has agreed to use
its reasonable best efforts to file
with the Commission a shelf
registration statement (the "Shelf
Registration Statement"), and to use
its reasonable best efforts to have
such Shelf Registration Statement
declared effective. NBTY has agreed
to maintain the effectiveness of the
Shelf Registration Statement for,
under certain circumstances, a
maximum of two years, to cover
resales of the Original Notes held by
any such holders.
7
<PAGE>
Special Procedures for Beneficial
Owners................................. Any beneficial owner whose Original
Notes are registered in the name of a
broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender 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 its
Original Notes, either make
appropriate arrangements to register
ownership of the Original 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.
Guaranteed Delivery Procedures......... Holders of Original Notes who wish to
tender their Original Notes and whose
Original Notes are not immediately
available or who cannot deliver their
Original Notes (or comply with the
procedures for book-entry transfer),
the Letter of Transmittal or any
other documents required by the
Letter of Transmittal to the Exchange
Agent (or transmit an Agent's Message
in lieu thereof) prior to the
Expiration Date must tender their
Original 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., New York City
time, on the Expiration Date.
Acceptance of Original Notes and
Delivery of Exchange Notes............. NBTY will accept for exchange any
and all Original Notes that are
properly tendered in the Exchange
Offer prior to 5:00 p.m., New York
City time, on the Expiration Date.
The Exchange Notes issued pursuant to
the Exchange Offer will be delivered
as promptly as practicable following
the Expiration Date. See "The
Exchange Offer - Terms of the
Exchange Offer."
Use of Proceeds........................ There will be no cash proceeds to
NBTY from the exchange pursuant to
the Exchange Offer.
Exchange Agent......................... IBJ Schroder Bank & Trust Company.
THE EXCHANGE NOTES
General................................ The form and terms of the Exchange
Notes are the same as the form and
terms of the Original Notes (which
they replace) except that (i) the
8
<PAGE>
Exchange Notes bear a Series B
designation and a different CUSIP
number from the Original Notes, (ii)
the issuance of the Exchange Notes
will have been registered under the
Securities Act and, therefore, will
not bear legends restricting the
transfer thereof, and (iii) the
holders of Exchange Notes will not be
entitled to certain rights under the
Exchange and Registration Rights
Agreement, including the provisions
providing for an increase in the
interest rate on the Original Notes
in certain circumstances relating to
the timing of the Exchange Offer,
which rights will terminate when the
Exchange Offer is consummated. See
"The Exchange Offer - Purpose and
Effect of the Exchange Offer." The
Exchange Notes will evidence the same
debt as the Original Notes and will
be entitled to the benefits of the
Indenture. See "Description of the
Exchange Notes." The Original Notes
and the Exchange Notes are referred
to herein collectively as the
"Notes."
Issuer................................. NBTY, Inc.
Securities Offered..................... $150 million aggregate principal
amount of 8-5/8% Senior Subordinated
Notes due 2007, Series B.
Maturity............................... September 15, 2007.
Interest Payment Dates................. September 15 and March 15 of each
year, commencing March 15, 1998.
Sinking Fund........................... None.
Optional Redemption.................... Except as described below, NBTY may
not redeem the Exchange Notes prior
to September 15, 2002. On or after
such date, NBTY may redeem the
Exchange Notes, in whole or in part,
at the redemption prices set forth
herein, together with accrued and
unpaid interest, if any, to the date
of redemption. In addition, at any
time and from time to time on or
prior to September 15, 2000, NBTY may
redeem up to 33-1/3% of the aggregate
principal amount of the Exchange
Notes with the net cash proceeds of
one or more Public Equity Offerings
(as defined) by NBTY, at a redemption
price equal to 108.625% of the
principal amount to be redeemed,
together with accrued and unpaid
interest, if any, to the date of
redemption, provided that at least
66-2/3% of the originally issued
aggregate principal amount of the
Exchange Notes remains outstanding
after each such redemption. See
"Description of the Exchange Notes -
Optional Redemption."
Change of Control...................... Upon the occurrence of a Change of
Control, NBTY will be required to
make an offer to repurchase the
Exchange Notes at a price equal to
101% of the principal amount thereof,
together with accrued and unpaid
interest, if any, to the date of
repurchase. See "Description of the
Exchange Notes - Change of Control."
9
<PAGE>
Ranking................................ The Exchange Notes will be unsecured
and will be subordinated in right of
payment to all existing and future
Senior Indebtedness (as defined) of
NBTY. The Exchange Notes will rank
PARI PASSU in right of payment with
any future senior subordinated
indebtedness of NBTY and will rank
senior to all Subordinated
Indebtedness (as defined) of NBTY. As
of June 30, 1997, on a pro forma
basis after giving effect to the
Transaction, the aggregate principal
amount of NBTY's outstanding Senior
Indebtedness would have been
approximately $31.1 million. NBTY
would have had no senior subordinated
indebtedness outstanding other than
the Notes. See "Description of the
Exchange Notes - Ranking" and "-
Subordination of the Exchange Notes."
Restrictive Covenants.................. The indenture under which the
Exchange Notes will be issued (the
"Indenture") will limit, among other
things, (i) the incurrence of
additional indebtedness by NBTY and
its Subsidiaries, (ii) the payment of
dividends on, and redemption of,
capital stock of NBTY and its
Subsidiaries, (iii) investments, (iv)
sales of assets and Subsidiary stock,
(v) transactions with affiliates and
(vi) consolidations, mergers and
transfers of all or substantially all
of NBTY's assets. The Indenture will
also prohibit certain restrictions on
distributions from Subsidiaries.
However, all of these limitations and
prohibitions are subject to a number
of important qualifications and
exceptions. See "Description of the
Exchange Notes - Certain Covenants."
Use of Proceeds........................ NBTY will not receive any proceeds
from the Exchange Offer. NBTY used
the net proceeds from the Initial
Offering, together with amounts drawn
under the Revolving Credit Facility,
to pay the Promissory Notes issued in
connection with the Acquisition and
to pay related fees and expenses. See
"Use of Proceeds."
RISK FACTORS
See "Risk Factors" for a discussion of certain factors that should be
considered before tendering Original Notes in exchange for Exchange Notes. These
risk factors are generally applicable to the Original Notes as well as the
Exchange Notes.
--------------------------------------------
The principal executive offices of the Company are located at 90
Orville Drive, Bohemia, New York 11716, and the Company's telephone number is
(516) 567-9500.
10
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
THE COMPANY
The following table sets forth certain unaudited summary pro forma
combined financial data of the Company for the periods ended and as of the dates
indicated as described in the Unaudited Pro Forma Combined Financial Data. The
unaudited summary pro forma combined statement of income data give effect to the
Transaction as if it had occurred at the beginning of the periods indicated. The
unaudited summary pro forma combined balance sheet data give effect to the
Transaction as if it had occurred on June 30, 1997. "Other Data" below, not
directly derived from the Unaudited Pro Forma Combined Financial Data, or the
NBTY or H&B historical consolidated financial statements, have been presented to
provide additional analysis. The consolidated financial statements of H&B
prepared in accordance with U.K. GAAP used in preparing the Unaudited Pro Forma
Combined Financial Data have been adjusted to present such information in
accordance with U.S. GAAP and translated into U.S. dollar equivalent financial
statements using the exchange rate in effect at June 30, 1997, which was one
pound sterling to 1.665 U.S. dollars. For further information regarding the
effect, if any, of the difference between U.K. GAAP and U.S. GAAP, see Note 3 of
H&B's Consolidated Financial Statements included elsewhere in this Prospectus.
The Summary Pro Forma Combined Financial Data do not purport to represent what
the Company's results of operations or financial condition would have actually
been had the Transaction been consummated as of such dates or to project the
Company's results of operations or financial condition for any future period.
The Summary Pro Forma Combined Financial Data have been derived from and should
be read in conjunction with the Unaudited Pro Forma Combined Financial Data and
the notes thereto, the separate historical consolidated financial statements of
NBTY and H&B and the notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 SEPTEMBER 30, 1996
------------- ------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales....................................... $ 311.8 $ 345.3
Gross profit (a)................................ 157.3 169.8
Income from operations.......................... 33.5 29.3
Interest expense, net........................... 12.5 17.2
Net income...................................... 11.6 6.1
Net income per share............................ $ 0.58 $ 0.31
OTHER DATA:
EBITDA (b)...................................... $ 47.3 $ 45.9
EBITDA margin (b)............................... 15.2% 13.3%
Capital expenditures............................ $ 18.8 $ 27.1
Number of retail stores (at end of period)...... 516 444
Ratio of total debt to EBITDA................... - -
Ratio of EBITDA to interest expense............. 3.8x 2.7x
Ratio of earnings to fixed charges (c).......... 2.1x 1.5x
BALANCE SHEET DATA (END OF PERIOD):
Working capital................................. $ 47.6
Total assets.................................... 370.5
Total debt...................................... 179.5
Stockholders' equity............................ 113.3
</TABLE>
- --------------
(a) Gross profit is defined as net sales less cost of sales.
(b) EBITDA is defined as net income before interest expense, income taxes and
depreciation and amortization. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity. EBITDA margin is computed as EBITDA as a percentage of net
sales.
(c) For the purposes of computing these ratios, earnings consist of income
before income taxes and fixed charges. Fixed charges consist of interest
expense, amortization of debt financing costs and one-third of rental
expenses.
11
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
NBTY, INC.
The following table sets forth summary financial data of NBTY for each
of the five fiscal years in the period ended September 30, 1996 and for the
nine month periods ended June 30, 1997 and 1996. The statement of income
data for the five fiscal years in the period ended September 30, 1996 are
derived from NBTY's audited historical financial statements included
elsewhere in this Prospectus. The statement of income data for the nine
month periods ended June 30, 1997 and 1996 has been derived from the
unaudited financial statements of NBTY. "Other Data" below, not directly
derived from NBTY's historical financial statements, have been presented to
provide additional analysis. In the opinion of management, the unaudited
data includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for such periods. Interim
results for the nine month period ended June 30, 1997 are not necessarily
indicative of results that can be expected in future periods. The summary
financial data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Historical Results of Operations -- NBTY," "Selected Historical Financial
Data -- NBTY" and the historical financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales ................... $ 184.1 $ 142.1 $ 194.4 $ 178.8 $ 156.1 $ 138.4 $ 100.9
Gross Profit (a) ............ 95.9 70.0 98.8 84.9 76.2 70.4 50.3
Catalog printing, postage and
promotion ............... 14.6 13.2 17.6 19.3 14.8 11.5 7.5
Selling, general and
administrative .......... 53.9 42.8 58.6 56.7 49.2 42.8 35.5
Income from operations ...... 27.4 14.0 22.6 8.9 12.2 16.1 7.3
Interest expense, net ....... 1.3 1.0 1.4 1.1 0.9 1.2 1.3
Net income .................. 16.1 8.1 13.4 5.1 7.8 9.7 3.7
Net income per share ........ $ 0.80 $ 0.41 $ 0.67 $ 0.26 $ 0.38 $ 0.53 $ 0.25
OTHER DATA:
EBITDA (b) ..................... $ 32.7 $ 18.6 $ 29.4 $ 14.3 $ 17.7 $ 20.8 $ 10.2
EBITDA margin (b) .............. 17.8% 13.1% 15.1% 8.0% 11.3% 15.0% 10.1%
Capital expenditures ........... $ 11.1 $ 11.5 $ 15.8 $ 11.5 $ 11.6 $ 13.9 $ 4.6
Same store sales growth ........ 15.1% 23.1% 31.0% 16.0% 7.5% 31.9% --
Number of retail stores (at
end of period)................. 106 58 55 19 7 3 2
Ratio of earnings to fixed
charges (c).................... 14.4x 10.7x 11.7x 6.6x 10.7x 10.8x 4.6x
</TABLE>
- ------------
(a) Gross profit is defined as net sales less cost of sales.
(b) EBITDA is defined as net income before interest expense, income taxes and
depreciation and amortization. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity. EBITDA margin is computed as EBITDA as a percentage of net
sales.
(c) For the purposes of computing these ratios, earnings consist of income
before income taxes and fixed charges. Fixed charges consist of interest
expense, amortization of debt financing costs and one-third of rental
expenses.
12
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
HOLLAND & BARRETT HOLDINGS LTD.
The following table sets forth summary financial data of H&B for each of
the three fiscal years in the period ended June 30, 1997. The statement of
income data for the three fiscal years in the period ended June 30, 1997 are
derived from H&B's audited historical consolidated financial statements included
elsewhere in this Prospectus. The Summary Historical Financial Data have been
presented in accordance with U.K. GAAP in pounds sterling. "Other Data," not
directly derived from the H&B historical consolidated financial statements, have
been presented to provide additional analysis. In the opinion of management, the
unaudited data includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the data for such periods. The summary
financial data below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Historical
Results of Operations--H&B," "Selected Historical Financial Data--H&B" and the
historical consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------------
1997 1996 1995
---- ---- ----
(POUNDS STERLING IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Turnover (a)...................................... (Pound (Pound (Pound
Sterling)102.9 Sterling)90.6 Sterling)77.1
Gross profit...................................... 49.3 42.7 36.0
Distribution costs................................ 39.4 33.9 28.7
Administrative expense............................ 2.2 1.5 1.5
Operating profit.................................. 7.7 7.3 5.8
Interest payable and other similar charges (b).... 0.3 0.4 0.6
Profit on ordinary activities after taxation (c).. 4.8 4.4 3.5
OTHER DATA:
EBITDA (d)........................................ (Pound (Pound (Pound
Sterling) 11.0 Sterling)10.0 Sterling) 7.4
EBITDA margin (d)................................. 10.7% 11.0% 9.6%
Capital expenditures.............................. (Pound (Pound (Pound
Sterling) 6.8 Sterling) 6.8 Sterling) 6.1
Same store sales growth........................... 2.8% 8.0% -
Number of retail stores (at end of period)........ 410 389 347
</TABLE>
- ------------
(a) Turnover represents net sales.
(b) Interest payable and other similar charges includes non-operating charges.
(c) Profit on ordinary activities after taxation represents net income.
(d) EBITDA is defined as net income before interest expense, income taxes,
depreciation and amortization and other non-operating charges. Management
believes that EBITDA is a measure commonly used by analysts and investors
to determine a company's ability to service and incur debt. Accordingly,
this information has been presented to permit a more complete analysis.
EBITDA should not be considered a substitute for net income or cash flow
data prepared in accordance with generally accepted accounting principles
or as a measure of profitability or liquidity. EBITDA margin is computed as
EBITDA as a percentage of turnover.
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK
FACTORS IN ADDITION TO THE OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE
TENDERING ORIGINAL NOTES IN EXCHANGE FOR EXCHANGE NOTES. THE RISK FACTORS SET
FORTH BELOW ARE GENERALLY APPLICABLE TO THE ORIGINAL NOTES AS WELL AS THE
EXCHANGE NOTES.
EFFECT OF UNFAVORABLE PUBLICITY
The Company believes the nutritional supplement market is affected by
national media attention regarding the consumption of nutritional supplements.
There can be no assurance that future scientific research or publicity will be
favorable to the nutritional supplement market or any particular product, or
consistent with earlier favorable research or publicity. Future research reports
or publicity that are perceived as less favorable or that question such earlier
research or publicity could have a material adverse effect on the Company.
Because of the Company's dependence upon consumer perceptions, adverse
publicity, whether or not accurate, associated with illness or other adverse
effects resulting from the consumption of the Company's products or any similar
products distributed by other companies could have a material adverse effect on
the Company. Such adverse publicity could arise even if the adverse effects
associated with such products resulted from consumers' failure to consume such
products appropriately. See "Business -- Litigation."
GOVERNMENT REGULATION
UNITED STATES. The manufacturing, packaging, labeling, advertising,
distribution and sale of the Company's products are subject to regulation by
Federal, state and local agencies, the most active of which is the U.S. Food and
Drug Administration ("FDA"). The FDA regulates the Company's dietary
supplements, principally under amendments to the Federal Food, Drug, and
Cosmetic Act embodied in the Dietary Supplement Health and Education Act
("DSHEA"). Under DSHEA, new dietary ingredients (those not used in dietary
supplements marketed before October 15, 1994) require premarket submission to
the FDA of evidence of a history of their safe use, or other evidence
establishing that they are reasonably expected to be safe. There can be no
assurance that the FDA will accept the evidence of safety for any new dietary
ingredient that the Company may decide to use, and the FDA's refusal to accept
such evidence could result in regulation of such dietary ingredients as food
additives, requiring the FDA pre-approval based on newly conducted, costly
safety testing. Also, while DSHEA authorizes the use of statements of
nutritional support in the labeling of dietary supplements, the FDA is required
to be notified of such statements, and there can be no assurance that the FDA
will deem a given statement of nutritional support made by the Company to be
adequately substantiated as required by DSHEA, or that the FDA will not consider
such a statement to be a drug claim rather than acceptable statements of
nutritional support, necessitating approval of a costly new drug application,
either of which findings could result in relabeling to delete or modify such a
statement.
DSHEA also authorizes the FDA to promulgate good manufacturing practice
regulations ("GMP") for dietary supplements, which would require special quality
controls for the manufacture, packaging, storage and distribution of
supplements. There can be no assurance, if such GMP rules are issued, that the
Company will be able to comply with them without incurring material expense to
do so. DSHEA further authorizes the FDA to promulgate regulations governing the
labeling of dietary supplements, including claims for supplements pursuant to
recommendations made by the Presidential Commission on Dietary Supplement
Labels. Such rules are expected to be issued, which will require relabeling of
the Company's dietary supplements, and may require additional record keeping and
claim substantiation testing, and even reformulation, recall or discontinuance
of certain of the Company's supplements, and there can be no assurance that such
requirements will not involve material expenses to the Company. Moreover, there
can be no assurance that new laws or regulations imposing more stringent
regulatory requirements on the dietary supplement industry will not be enacted
or issued.
NBTY is currently subject to a Federal Trade Commission ("FTC") consent
decree and a U.S. Postal Service consent order, prohibiting certain advertising
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<PAGE>
claims for certain of the Company's products. Violations of these orders could
result in substantial monetary penalties, which could have a material effect on
the Company's business. See "Business--Government Regulation."
UNITED KINGDOM. In the U.K., the manufacture, advertising, sale and
marketing of food products is regulated by a number of government agencies
including the Ministry of Agriculture, Fisheries and Food ("MAFF") and the
Department of Health. In addition, there are various independent committees and
agencies that report to the government, such as the Food Advisory Committee,
which reports to MAFF and suggests appropriate courses of action by the relevant
government department where there are areas of concern relating to food, and the
Committee on Toxicity, which reports to the Department of Health. The relevant
legislation governing the sale of food includes the Food Safety Act 1990, which
sets out general provisions relating to the sale of food; for example, this law
makes it unlawful to sell food that is harmful to human health. In addition,
there are various statutory instruments and EC regulations governing specific
areas such as the use of sweeteners, coloring and additives in food. Trading
standards officers under the control of the Department of Trade and Industry
also regulate matters such as the cleanliness of the properties on which food is
produced and sold. There can be no assurance that more stringent regulations
will not be promulgated or that, if more stringent regulations are promulgated,
the Company will be able to meet such regulations without incurring material
expense to do so.
Food that has medicinal properties may fall under the jurisdiction of
the Medicines Control Agency ("MCA"), a regulatory authority whose
responsibility is to ensure that all medicines sold or supplied for human use in
the U.K. meet acceptable standards of safety, quality and efficacy. These
standards are determined by the 1968 Medicines Act together with an increasing
number of European Commission ("E.C.") regulations and directives laid down by
the European Union ("E.U."). The latter take precedence over national law. The
MCA has a "borderline department" that determines when food should be treated as
a medicine and should therefore fall under the relevant legislation relating to
medicines. The MCA operates as the agent of the licensing authority (the United
Kingdom Health Ministers) and its activities cover every facet of medicines
controlled in the U.K., including involvement in the development of common
standards of medicines controlled in Europe. The MCA is responsible, for
example, for licensing, inspection and enforcement to ensure that legal
requirements concerning manufacture, distribution, sale, labeling, advertising
and promotion are upheld. Although the general tendency has been to liberalize
restrictions on nutritional products and consider them food supplements rather
than medicines, there can be no assurance that all new U.K. or E.U. regulations
will be favorable for the Company. Any move by the U.K. or E.U. to restrict
existing products or potencies, as well as the development of new products or
potencies, could have a material adverse effect on the Company. Further, the
Company is unable to predict what effect, if any, the Labour Party's victory in
the 1997 U.K. elections will have on the Company, nor can the Company predict
what effect, if any, the regulations of the E.U. will have on the Company.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS
The Company may experience difficulty entering new international
markets due to greater regulatory barriers, the necessity of adapting to new
regulatory systems, and problems related to entering new markets with different
cultural bases and political systems. Giving effect to the Acquisition,
approximately 45% of the Company's pro forma net sales for the nine months ended
June 30, 1997 would have been generated outside the U.S. Operating in
international markets exposes the Company to certain risks, including, among
other things: (i) changes in or interpretations of foreign regulations that may
limit the Company's ability to sell certain products or repatriate profits to
the U.S.; (ii) exposure to currency fluctuations; (iii) the potential imposition
of trade or foreign exchange restrictions or increased tariffs; and (iv)
political instability. As the Company continues to expand its international
operations, these and other risks associated with international operations are
likely to increase. See "Business--Business Strategy" and "--Government
Regulation."
RETAIL STORE ROLL-OUT
The Company is currently pursuing an aggressive retail store roll-out
schedule, pursuant to which the Company anticipates opening an additional 80
Vitamin World stores per year. This strategy relies on the Company's ability to
continue to increase its comparable store sales figures as well as the continued
15
<PAGE>
growth in the retail segment of the Company's business. There can be no
assurance that the Company's roll-out strategy will be successful, or that
circumstances beyond the Company's control, such as unforeseen delays in the
construction process for new stores, will not hinder the Company's strategy. See
"Business--Business Strategy."
LEVERAGE; RESTRICTIVE COVENANTS
The Company has significant debt service obligations. As of June 30,
1997, after giving effect to the Transaction, the Company would have had
outstanding debt of approximately $179.9 million and stockholders' equity of
approximately $113.3 million. See "The Transaction," "Use of Proceeds" and
"Capitalization." For the nine months ended June 30, 1997, the Company's ratio
of earnings to fixed charges, on a pro forma basis, would have been 2.1x.
The degree to which the Company is leveraged could have important
consequences to the holders of the Exchange Notes, including: (i) the Company's
ability to obtain additional financing for working capital, capital expenditures
or acquisitions may be limited; (ii) a portion of the Company's cash flow from
operations will be dedicated to the payment of the principal of, premium, if
any, and interest on its indebtedness, thereby reducing funds available for
investments; (iii) certain of the Company's borrowings, including all borrowings
under the Company's Revolving Credit Facility, are and will continue to be at
variable rates of interest, which exposes the Company to the risk of increased
interest rates; and (iv) the Company may be more vulnerable to economic
downturns and be limited in its ability to withstand competitive pressures.
Certain of the Company's competitors may currently operate on a less leveraged
basis and therefore could have significantly greater operating and financing
flexibility than the Company. The Company's ability to make scheduled payments
of the principal of, premium, if any, or interest on, or to refinance, its
indebtedness will depend on its future operating performance and cash flow,
which are subject to prevailing economic conditions, prevailing interest rate
levels, and financial, competitive, business and other factors, many of which
are beyond its control. See "--Risks Associated with International Markets."
The Company believes that, based upon current levels of operations, it
will be able to meet its debt service obligations, including payments of the
principal of, premium, if any, and interest on the Exchange Notes when due.
However, if the Company cannot generate sufficient cash flow from operations to
meet its debt service obligations, then the Company may be required to refinance
its indebtedness and may be forced to adopt an alternative strategy that could
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness, or seeking additional
equity capital. There is no assurance that refinancings would be permitted by
the terms of the Revolving Credit Facility or the Indenture or, along with the
alternative strategies, could be effected on satisfactory terms. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Revolving Credit Facility and the Indenture contain numerous
restrictive covenants that limit the discretion of the Company's management with
respect to certain business matters. These covenants place significant
restrictions on, among other things, the ability of the Company to incur
additional indebtedness, to create liens or other encumbrances, to pay dividends
or make certain other payments, investments, loans and guarantees and to sell or
otherwise dispose of assets and merge or consolidate with another entity. The
Revolving Credit Facility contains a number of financial covenants that require
the Company to meet certain financial ratios and financial condition tests. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Description of the Revolving Credit Facility" and "Description of
the Exchange Notes--Certain Covenants." The Company's ability to meet these
financial ratios and financial condition tests can be affected by events beyond
its control, and there can be no assurance that the Company will meet such
ratios or such tests. A failure to comply with the obligations in the Revolving
Credit Facility or the Indenture could result in an event of default under the
Revolving Credit Facility or an Event of Default (as defined) under the
Indenture which, if not cured or waived, could permit acceleration of the
relevant indebtedness and acceleration of indebtedness under other instruments
that may contain cross-acceleration or cross-default provisions. If the
indebtedness under the Revolving Credit Facility were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
in full that indebtedness and the other indebtedness of the Company, including
the Exchange Notes. Other indebtedness of the Company and its subsidiaries that
16
<PAGE>
may be incurred in the future may contain financial or other covenants more
restrictive than those applicable to the Exchange Notes.
SUBORDINATION
The Exchange Notes will be general unsecured obligations of the
Company. The payment of principal of, premium, if any, and interest on, and any
other amounts owing in respect of, the Exchange Notes will be subordinated to
the prior payment in full of all existing and future Senior Indebtedness of the
Company. In addition, repayment of the Revolving Credit Facility, but not the
Exchange Notes, is secured by the pledge of all tangible and intangible assets
of the Company. In the event of the bankruptcy, liquidation, dissolution,
reorganization and other winding up of the Company, the assets of the Company
will be available to pay obligations on the Exchange Notes only after all Senior
Indebtedness has been paid in full; accordingly, there may not be sufficient
assets remaining to pay amounts due on any or all of the Exchange Notes then
outstanding. In addition, under certain circumstances, the Company may not pay
principal of, premium, if any, or interest on, or pay other amounts owing in
respect of, the Exchange Notes, or purchase, redeem or otherwise retire the
Exchange Notes, in the event of certain defaults with respect to certain classes
of Senior Indebtedness. As of June 30, 1997, after giving pro forma effect to
the Transaction, there would have been approximately $31.1 million of Senior
Indebtedness outstanding (excluding unused commitments). Additional Senior
Indebtedness may be incurred by the Company from time to time, subject to
certain restrictions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of the Exchange
Notes--Certain Covenants--Limitation on Indebtedness."
LIMITATIONS ON CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be
required to make an offer for cash to repurchase the Exchange Notes at a price
equal to 101% of the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase. If a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds to
pay the purchase price for all of the Exchange Notes that the Company might be
required to purchase. Certain events involving a Change of Control may result in
an event of default under the Revolving Credit Facility or other indebtedness of
the Company that may be incurred in the future. In the event a Change of Control
occurs at a time when the Company is prohibited from purchasing the Exchange
Notes, the Company could seek the consent of its lenders to purchase the
Exchange Notes or could attempt to refinance the borrowings that contain such
prohibition. There can be no assurance that such consent or refinancing would be
obtained, or, if obtained, would be available on terms favorable to the Company.
If the Company does not obtain such consent or repay such borrowings, the
Company would remain prohibited from purchasing the Exchange Notes. In such
case, the Company's failure to purchase tendered Exchange Notes would constitute
an Event of Default under the Indenture. See "Description of the Exchange
Notes--Subordination" and "--Change of Control."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will largely depend on the efforts and
abilities of its executive officers and certain other key employees, including
key H&B personnel. The Company's operations could be adversely affected if, for
any reason, such officers or employees did not remain with NBTY or H&B, as
applicable. See "Management."
RELIANCE ON CERTAIN SUPPLIERS
The Company purchases from third party suppliers certain important
ingredients and raw materials that the Company cannot manufacture. The principal
raw materials used in the manufacturing process are natural and synthetic
vitamins, purchased from bulk manufacturers in the United States, Japan and
Europe. Although raw materials are available from numerous sources, one supplier
currently provides approximately 10% of the Company's purchases; an unexpected
interruption of supply could cause the Company's results of operations to be
adversely affected. No other supplier accounts for 10% or more of the Company's
raw material purchases.
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<PAGE>
COMPETITION
The market for vitamins and other nutritional supplements is highly
competitive in all of the Company's channels of distribution. Numerous companies
compete with the Company in the development, manufacture and marketing of
vitamins and nutritional supplements. In the U.S., the Company's NATURE'S BOUNTY
and NATURAL WEALTH brands compete for sales to drug store chains and
supermarkets with heavily advertised national brands manufactured by large
pharmaceutical companies, as well as Your Life, Nature Made and Sundown, sold by
Leiner Health Products, Inc., Pharmavite Corp. and Rexall Sundown, Inc.,
respectively. The Vitamin World stores compete with specialty vitamin stores,
such as General Nutrition Centers ("GNC") stores, health food stores and other
retail stores. With respect to mail order sales, management believes PURITAN'S
PRIDE is the largest mail order supplier of vitamins and other nutritional
supplements in the U.S. and competes with a large number of smaller, usually
less geographically diverse, mail order companies, some of which manufacture
their own products and some of which sell products manufactured by others.
Increased competition from companies that distribute through the wholesale
channel could have a material adverse effect on the Company as they may have
greater financial and other resources available to them and possess extensive
manufacturing, distribution and marketing capabilities far greater than those of
the Company. See "Business--Competition."
As in the U.S., the market for sales of vitamins, minerals and other
nutritional supplements in the U.K. is highly competitive. H&B's principal
competitors are large pharmacy chains, including Superdrug, Boots and Lloyds,
and major supermarket chains such as Tesco, Sainsbury's and ASDA. There are also
approximately 1,300 independent retailers of health foods and nutritional
supplements in the U.K. market. In addition, GNC has recently entered the U.K.
market and currently operates approximately 30 stores in the U.K. The Company
expects other large U.S.-based companies to enter the U.K. market as well. There
can be no assurance that H&B will be able to effectively compete with such other
companies, nor can there be any assurance that unfavorable market trends in the
U.K. will not develop.
ABILITY TO IMPLEMENT BUSINESS STRATEGY
Implementation of the Company's business strategy involves certain
risks, including risks associated with integrating and operating H&B's business,
the expansion of retail locations in the U.S., increased manufacturing demands
to supply products for H&B distribution and the manufacture and sale of new
products. There can be no assurance that the Company will be successful in
implementing its business strategy. The failure of the Company to successfully
implement its business strategy could have a material adverse effect on its
financial performance and its ability to pay principal of, premium, if any, and
interest on the Notes and meet its other obligations under the Indenture.
PROTECTION OF TRADEMARKS
The Company owns trademarks registered with the United States Patent
and Trademark Office and many foreign jurisdictions for its NATURE'S BOUNTY,
GOOD `N NATURAL, HUDSON, AMERICAN HEALTH, PURITAN'S Pride, VITAMIN WORLD and
NATURAL WEALTH brands, among others, and with the appropriate U.K. authorities
for its HOLLAND & BARRETT trademark, among others, and has rights to use other
names essential to its business. The Company's policy is to pursue registrations
for all trademarks associated with its key products. U.S. registered trademarks
have a perpetual life, as long as they are renewed on a timely basis and used
properly as trademarks, subject to the rights of third parties to seek
cancellation of the trademarks if they claim priority or confusion of usage. The
Company regards its trademarks and other proprietary rights as valuable assets
and believes they have significant value in the marketing of its products. The
Company vigorously protects its trademarks against infringement. There can be no
assurance that, to the extent the Company does not have patents or trademarks on
its products, another company will not replicate one or more of the Company's
products. Further, there can be no assurance that in those foreign jurisdictions
in which the Company conducts business the protection available to the Company
will be as extensive as the protection available to the Company in the U.S. See
"Business--Trademarks."
ABSENCE OF PUBLIC MARKET
The Original Notes were issued to, and the Company believes are
currently owned by, a relatively small number of beneficial owners. Prior to the
18
<PAGE>
Exchange Offer, there has not been any public market for the Original Notes. The
Original Notes have not been registered under the Securities Act and will be
subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in the
Exchange Offer. The market for Original Notes not tendered for exchange in the
Exchange Offer is likely to be more limited than the existing market for
Original Notes. The holders of Original Notes (other than any such holder that
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who are not eligible to participate in the Exchange Offer are
entitled to certain registration rights, and the Company is required to file a
Shelf Registration Statement with respect to such Original Notes. See "The
Exchange Offer -- Purpose and Effect of the Exchange Offer."
The Exchange Notes are new securities for which there currently is no
market. Although the Initial Purchaser has informed the Company that it
currently intends to make a market in the Exchange Notes, it is not obligated to
do so and any such market making may be discontinued at any time without notice.
In addition, such market making activity may be limited during the effectiveness
of the Shelf Registration Statement (if filed). Accordingly, there can be no
assurance as to the development or liquidity of any market for the Exchange
Notes. The Original Notes have been designated for trading in the PORTAL market.
The Company does not intend to apply for listing of the Exchange Notes on any
securities exchange or for their quotation through an automated dealer quotation
system.
The liquidity of, and trading market for, the Exchange Notes also may
be adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
FAILURE TO EXCHANGE ORIGINAL NOTES FOR EXCHANGE NOTES
Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. See "The Exchange Offer - Procedures for Tendering." Therefore,
holders of Original Notes desiring to tender such Original 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 Original Notes for
exchange. Original 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 and, upon consummation of the
Exchange Offer, certain registration rights under the Exchange and Registration
Rights Agreement will terminate. In addition, any holder of Original Notes who
tenders in the Exchange Offer for the purpose of participating in the
distribution of the Exchange Notes may be deemed to have received restricted
securities and, if so, will be required to comply with the registration and
prospectus delivery requirement of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, where such Original Notes were acquired
by such activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. To the extent that Original
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Original Notes could be adversely
affected due to the limited amount, or "float," of the Original Notes that are
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 Original Notes are not tendered or are
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."
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Prospectus includes "forward looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). All statements other than
statements of historical facts included in this Prospectus, including those
regarding financial position, business strategy, projected costs, and plans and
objectives of management for future operations, are forward looking statements.
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<PAGE>
Although the Company believes that the expectations reflected in such forward
looking statements are reasonable, there can be no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed herein under "Risk Factors" and elsewhere in this
Prospectus including under "Forward Looking Statements" on page (iv) hereof. All
subsequent written and oral forward looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on September 23, 1997, to
the Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser
subsequently resold the Original Notes to qualified institutional buyers (as
defined in Rule 144A) ("QIBs") in reliance on Rule 144A. As a condition to the
Purchase Agreement, the Company and the Initial Purchaser entered into the
Exchange and Registration Rights Agreement on the date of the Initial Offering
(the "Issue Date").
The following description of the Exchange and Registration Rights
Agreement is a summary only, does not purport to be complete and is qualified in
its entirety by reference to all provisions of the Exchange and Registration
Rights Agreement, a copy of which has been filed as an exhibit to the Exchange
Offer Registration Statement (as defined). See "Available Information."
Pursuant to the Exchange and Registration Rights Agreement, the Company
agreed to (i) file with the Securities and Exchange Commission (the
"Commission") on or prior to 60 days after the Issue Date a registration
statement (the "Exchange Offer Registration Statement") relating to the Exchange
Offer and (ii) use its reasonable best efforts to cause the Exchange Offer
Registration Statement to be declared effective under the Securities Act within
150 days after the Issue Date. As soon as practicable after the effectiveness of
the Exchange Offer Registration Statement, the Company will offer to the holders
of Transfer Restricted Securities (as defined) who are not prohibited by any law
or policy of the Commission from participating in the Exchange Offer the
opportunity to exchange their Transfer Restricted Securities for the Exchange
Notes. The Company will keep the Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date notice of the Exchange
Offer is mailed to the holders of the Original Notes. If a change in law or
applicable interpretations of the staff of the Commission do not permit the
Company to effect the Exchange Offer or do not permit any holder of the Original
Notes (including the Initial Purchaser) to participate in the Exchange Offer,
the Company will use its reasonable best efforts to file with the Commission a
shelf registration statement (the "Shelf Registration Statement") to cover
resales of Transfer Restricted Securities by such holders who satisfy certain
conditions relating to the provision of information in connection with the Shelf
Registration Statement. For purposes of the foregoing, "Transfer Restricted
Securities" means each Original Note until (i) the date on which such Original
Note has been exchanged for a freely transferable Exchange Note in the Exchange
Offer; (ii) the date on which such Original Note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement; or (iii) the date on which such Original Note is
distributed to the public in accordance with Rule 144 under the Securities Act
or is salable pursuant to Rule 144(k) under the Securities Act.
The Company will use its reasonable best efforts to have the Exchange
Offer Registration Statement or, if applicable, the Shelf Registration Statement
(each, a "Registration Statement") declared effective by the Commission as
promptly as practicable after the filing thereof. Unless the Exchange Offer
would not be permitted by a policy of the Commission, the Company will commence
the Exchange Offer and will use its reasonable best efforts to consummate the
Exchange Offer as promptly as practicable, but in any event prior to 185 days
after the Issue Date. If applicable, the Company will use its best efforts to
keep the Shelf Registration Statement effective for a period of two years after
the Issue Date, or such shorter period as may be required to permit holders to
sell the Original Notes in accordance with Rule 144 under the Securities Act. If
(i) either an Exchange Offer Registration Statement or Shelf Registration
Statement is not filed with the Commission on or prior to 60 days after the
Issue Date; (ii) either an Exchange Offer Registration Statement or a Shelf
Registration Statement is not declared effective within 150 days after the Issue
Date; or (iii) the Exchange Offer is not consummated on or prior to 185 days
after the Issue Date in respect of tendered Original Notes and a Shelf
Registration Statement has not been declared effective or a Shelf Registration
Statement is filed and declared effective within 150 days after the Issue Date
but shall thereafter cease to be effective (at any time that the Company is
obligated to maintain the effectiveness thereof) without being succeeded within
60 days by an additional Registration Statement filed and declared effective
(each such event referred to in clauses (i) through (iii), a "Registration
Default"), the Company will pay liquidated damages ("Liquidated Damages") to
each holder of Transfer Restricted Securities, during the period of one or more
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such Registration Defaults, in an amount equal to $0.192 per week per $1,000
principal amount of the Original Notes constituting Transfer Restricted
Securities held by such holder until a Registration Statement is filed, an
Exchange Offer Registration Statement or Shelf Registration Statement is
declared effective or the Exchange Offer is consummated or the Shelf
Registration Statement is declared effective or again becomes effective, as the
case may be. All accrued Liquidated Damages shall be paid to holders in the same
manner as interest payments on the Original Notes on semi-annual payment dates
which correspond to interest payment dates for the Original Notes. Following the
cure of all Registration Defaults, the accrual of Liquidated Damages will cease.
The Exchange and Registration Rights Agreement also provides that the
Company (i) shall make available for a period of 180 days after the consummation
of the Exchange Offer a prospectus meeting the requirements of the Securities
Act to any broker-dealer for use in connection with any resale of any such
Exchange Notes and (ii) shall pay all expenses incident to the Exchange Offer
(including the expense of one counsel to the holders of the Original Notes) and
will indemnify certain holders of the Original Notes (including any
broker-dealer) against certain liabilities, including liabilities under the
Securities Act. A broker-dealer which delivers such a prospectus to purchasers
in connection with such resales will be subject to certain of the civil
liability provisions under the Securities Act and will be bound by the
provisions of the Exchange and Registration Rights Agreement (including certain
indemnification rights and obligations).
Each holder of Original Notes who wishes to exchange such Original
Notes for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business; (ii) it
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes; and (iii) it is not an affiliate of the
Company or an Exchanging Dealer (as defined) not complying with the requirements
of the next paragraph, or if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
If the holder is not a broker-dealer, it will be required to represent
that it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Original Notes, where such Original Notes were acquired
by such broker-dealer as a result of market making activities or other trading
activities (an "Exchanging Dealer"), must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
Holders of the Original Notes will be required to make certain
representations to the Company (as described above) in order to participate in
the Exchange Offer and will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have their Original
Notes included in the Shelf Registration Statement and benefit from the
provisions regarding Liquidated Damages set forth in the preceding paragraphs. A
holder who sells Original Notes pursuant to the Shelf Registration Statement
generally will be required to be named as a selling securityholder in the
related prospectus and to deliver a prospectus to purchasers, will be subject to
certain of the civil liability provisions under the Securities Act in connection
with such sales and will be bound by the provisions of the Exchange and
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification obligations).
Following the consummation of the Exchange Offer, holders of the
Original Notes who were eligible to participate in the Exchange Offer but who
did not tender their Original Notes will not have any further registration
rights and such Original Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of the market for such
Original Notes could be adversely affected. See "Risk Factors - Absence of
Public Market."
22
<PAGE>
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
Original Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date. The Company will issue $1,000 principal
amount of Exchange Notes in exchange for each $1,000 principal amount of
outstanding Original Notes accepted in the Exchange Offer. Holders may tender
some or all of their Original Notes pursuant to the Exchange Offer. However,
Original Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and
terms of the Original Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Original Notes, (ii) the
issuance of the Exchange Notes will have been registered under the Securities
Act and, therefore, will not bear legends restricting the transfer thereof, and
(iii) the holders of the Exchange Notes will not be entitled to certain rights
under the Exchange and Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Original Notes in certain
circumstances relating to the timing of the Exchange Offer, all of which rights
terminate upon consummation of the Exchange Offer. The Exchange Notes will
evidence the same debt as the Original Notes and will be entitled to the
benefits of the Indenture.
As of the date of this Prospectus, $150,000,000 aggregate principal
amount of Original Notes are outstanding. The Company has fixed the close of
business on ___________ as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus and the Letter of Transmittal
will be mailed initially.
Holders of Original Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. The Company intends to conduct the Exchange
Offer in accordance with the applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original
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 for the purpose of receiving the Exchange Notes from the Company.
If any tendered Original Notes are not accepted for exchange because of
an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Original 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
Original Notes pursuant to the Exchange Offer. The Company will pay all charges
and expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
______________ 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 notify the
Exchange Agent of any extension by written notice and will mail to the
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<PAGE>
registered holders of Original Notes an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent, or (ii) to amend the terms of
the Exchange Offer in any manner. 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.
INTEREST ON THE EXCHANGE NOTES
Interest on the Exchange Notes issued pursuant to the Exchange Offer
will accrue from the last interest payment date on which interest was paid on
the Original Notes surrendered in exchange therefor or, if no interest has been
paid on the Original Notes, from the Issue Date. Holders whose Original Notes
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Original Notes.
Interest on the Exchange Notes is payable semi-annually in arrears on
each March 15 and September 15, commencing on March 15, 1998.
PROCEDURES FOR TENDERING
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. For a holder to validly tender Original Notes pursuant to the
Exchange Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantee, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
and any other required documents must be received by the Exchange Agent at the
address set forth under "Exchange Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date. In addition, prior to 5:00 p.m., New York City time, on
the Expiration Date, either (a) certificates for tendered Original Notes must be
received by the Exchange Agent at such address or (b) such Original Notes must
be transferred pursuant to the procedures for book-entry transfer described
below (and a confirmation of such tender received by the Exchange Agent,
including an Agent's Message if the tendering holder has not delivered a Letter
of Transmittal). The term "Agent's Message" means a message transmitted by the
book-entry transfer facility, The Depository Trust Company (the "Book-Entry
Transfer Facility"), to and received by the Exchange Agent and forming a part of
a book-entry confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the tendering participant that such
participant has received and agrees to be bound by the Letter of Transmittal and
that the Company may enforce such Letter of Transmittal against such
participant.
By executing the Letter of Transmittal (or transmitting an Agent's
Message in lieu thereof), each holder will make to the Company the
representations set forth above under the heading "-- Purpose and Effect of the
Exchange Offer."
The tender of Original Notes by a holder and the acceptance thereof by
the Company will constitute 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 ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH
TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
24
<PAGE>
DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL 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 whose Original 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. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
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 Original
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "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 Original Notes listed therein, such Original 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 Original
Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Original 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 evidence
satisfactory to the Company or their authority to so act must be submitted with
the Letter of Transmittal.
The Company understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect to
the Original Notes at the Book-Entry Transfer Facility for the purpose of
facilitating the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Original Notes by causing such
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account with respect to the Original Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Original Notes may be effected through book-entry transfer into the
Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate
Letter of Transmittal properly completed and duly executed with any required
signature guarantee (or, in the case of book-entry transfer, an Agent's Message
in lieu thereof) and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Original Notes and withdrawal of tendered
Original 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 Original Notes not properly tendered or any Original Notes
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right in its sole discretion
25
<PAGE>
to waive any defects, irregularities or conditions of tender as to particular
Original 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 Original Notes must be cured prior to the
Expiration Date. Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Notes, nor shall any of them incur any liability for failure
to give any such notice. Tenders of Original Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Original Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available, (ii) who cannot deliver their Original
Notes, the Letter of Transmittal (or, in the case of book-entry transfer, an
Agent's Message) or any other required documents to the Exchange Agent, or (iii)
who cannot complete the procedures for book-entry transfer (including delivery
of an Agent's Message), 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 (i) an Agent's Message with respect to guaranteed delivery
that is accepted by the Company, or (ii) 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, the certificate number(s) of
such Original Notes and the principal amount of Original Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within three New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Original Notes (or a confirmation of book-entry transfer of such Original
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility),
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 completed and executed Letter of Transmittal or
facsimile thereof (or, in the case of book-entry transfer, an Agent's Message),
as well as the certificate(s) representing all tendered Original Notes in proper
form for transfer (or a confirmation of book-entry transfer of such Original
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility),
and all other documents required by the Letter of Transmittal are received by
the Exchange Agent within three 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 Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Original Notes in the Exchange Offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Original Notes to
be withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn
(including the certificate number(s) and principal amount of such Original
Notes, or, in the case of Original Notes transferred by book-entry transfer, the
26
<PAGE>
name and number of the account at the Book-Entry Transfer Facility to be
credited), (iii) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Original Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee with respect to the
Original Notes register the transfer of such Original Notes into the name of the
person withdrawing the tender, and (iv) specify the name in which any such
Original Notes are to be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Original 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 Original
Notes so withdrawn are validly retendered. Any Original Notes which have been
tendered but which are not accepted for exchange will be retendered to the
holder thereof without cost to such holder as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Original Notes may be retendered by following one of the procedures
described above under "-- Procedures for Tendering" at any time prior to the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall
not be required to accept for exchange, or exchange Exchange Notes for, any
Original Notes, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the sole judgment of the Company, might materially impair the ability
of the Company to proceed with the Exchange Offer, or any material adverse
development has occurred in any existing action or proceeding with respect to
the Company or any of its subsidiaries;
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole judgment
of the Company, might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation of
the Exchange Offer as contemplated hereby.
If the Company determines in its sole discretion that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Original Notes (see "-- Withdrawal of Tenders"), or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. The Company is
not aware of any federal or state consents that must be obtained, other than
obtaining the effectiveness of the Exchange Offer Registration Statement, prior
to consummation of the Exchange Offer.
EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent
(the "Exchange Agent") for the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
BY OVERNIGHT DELIVERY: BY MAIL: BY HAND:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
One State Street P.O. Box 84 One State Street
New York, NY 10004 Bowling Green Station New York, NY 10004
Attn: Securities Processing Window New York, NY 10274-0084 Attn: Securities Processing Window
Subcellar One (SC-1) Attn: Reorganization Operations Subcellar One (SC-1)
Department
FACSIMILE TRANSMISSION NUMBER:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
</TABLE>
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, telecopy, 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. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs, among
others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, less the original issue discount (net of
amortization) as reflected in the Company's accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. Certain expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes that are not exchanged for Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Original Notes may be resold only (i) to the Company (upon redemption thereof or
otherwise), (ii) so long as the Original Notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller reasonably
believes is a qualified institutional buyer within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A, in accordance with Rule 144
under the Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an effective registration statement under
the Securities Act, in each case in accordance with any applicable securities
laws of any state of the United States.
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RESALE OF THE EXCHANGE NOTES
With respect to resales of Exchange Notes, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, the Company believes that a holder or other person who receives
Exchange Notes, whether or not such person is the holder (other than a person
who is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) who receives Exchange Notes in exchange for Original Notes in
the ordinary course of business and who 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, will be allowed to
resell the 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.
However, if any holder acquired Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive 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. Further, each Exchanging Dealer that
receives Exchange Notes for its own account in exchange for Original Notes,
where such Original Notes were acquired by such Exchanging 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.
See "Plan of Distribution."
As contemplated by these no-action letters and the Exchange and
Registration Rights Agreement, each holder accepting the Exchange Offer is
required to represent to the Company in the Letter of Transmittal that (i) the
Exchange Notes are to be acquired by the holder or the person receiving such
Exchange Notes, whether or not such person is the holder, in the ordinary course
of business, (ii) the holder or any such other person (other than a
broker-dealer referred to in the next sentence) is not engaging, and does not
intend to engage, in the distribution of the Exchange Notes, (iii) the holder or
any such other person has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iv) neither the holder
nor any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act, and (v) the holder or any such other person
acknowledges that if such holder or other person participates in the Exchange
Offer for the purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those
no-action letters. As indicated above, each Exchanging Dealer that receives an
Exchange Note for its own account in exchange for Original Notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. For a description of the procedures for such resales by
Exchanging Dealers, see "Plan of Distribution."
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<PAGE>
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Exchange and Registration
Rights Agreement. The Company will not receive any proceeds from the issuance of
the Exchange Notes offered hereby. In consideration for issuing the Exchange
Notes contemplated in this Prospectus, the Company will receive Original Notes
in like principal amount, the form and terms of which are the same as the form
and terms of the Exchange Notes (which replace the Original Notes), except as
otherwise described herein. The Original Notes surrendered in exchange for
Exchange Notes will be retired and canceled and cannot be reissued. Accordingly,
issuance of the Exchange Notes will not result in any increase or decrease in
the indebtedness of the Company. As such, no effect has been given to the
Exchange Offer in the pro forma statements or capitalization tables.
The $148.8 million of gross proceeds from the Initial Offering (before
deductions of underwriting discounts and other expenses of the Initial
Offering), together with cash on hand of $15.2 million and borrowings under the
Revolving Credit Facility, estimated to be approximately $12.5 million, were
used to pay (i) the Promissory Notes and (ii) fees and expenses, estimated to be
approximately $7.5 million, incurred in connection with the Transaction. See
"Description of the Revolving Credit Facility."
THE TRANSACTION
On August 7, 1997, NBTY acquired all of the issued and outstanding
capital stock of H&B from Lloyds for an aggregate purchase price of
approximately $169.0 million. Prior to the Acquisition, H&B operated as a
subsidiary of Lloyds. Lloyds was acquired by GEHE in January 1997 and, pursuant
to GEHE's strategy of divesting Lloyds of non-core assets, GEHE determined to
divest the H&B subsidiary. NBTY issued to Lloyds the Promissory Notes totaling
approximately $169.0 million as consideration for the purchase of the capital
stock of H&B.
In connection with the Acquisition, NBTY (i) entered into a $50.0
million Revolving Credit Facility, which provides for borrowings for working
capital and general corporate purposes, and (ii) issued $150.0 million of
Original Notes pursuant to the Initial Offering. On a pro forma basis, after
giving effect to the Transaction, the Company's unused availability under the
Revolving Credit Facility was approximately $37.5 million. See "Capitalization"
and "Description of the Revolving Credit Facility." NBTY paid in full the
Promissory Notes on October 17, 1997, using proceeds from the Initial Offering
and the Financing.
The sources and uses of funds for the Transaction, which assume that
the Transaction had occurred on June 30, 1997, are as follows:
(DOLLARS IN MILLIONS)
SOURCES:
Cash on hand.......................................... $ 15.2
Revolving Credit Facility(a).......................... 12.5
Original Notes........................................ 148.8
-----
Total Sources of Funds............................ $176.5
======
USES:
Payment of Promissory Notes........................... $169.0
Transaction fees and expenses......................... 7.5
------
Total Uses of Funds............................... $176.5
======
- ------------
(a) Upon consummation of the Transaction, the Company had available $37.5
million under the Revolving Credit Facility that may be drawn for working
capital and general corporate purposes, including capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
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CAPITALIZATION
The following table sets forth the unaudited historical capitalization
of each of NBTY and H&B as of June 30, 1997 and as adjusted to give pro forma
effect to the Transaction as if it had been consummated on June 30, 1997. See
"Use of Proceeds" and "The Transaction." This table should be read in
conjunction with the Unaudited Pro Forma Consolidated Balance Sheet as of June
30, 1997 and the related notes thereto and the separate historical financial
statements and related notes thereto of NBTY and H&B, all included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------------------------------------------
PRO FORMA PRO FORMA
NBTY H&B(a) ADJUSTMENTS(b) COMBINED
---- ------ -------------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Current portion of long-term debt $ 1.0 $ 17.1 $ (17.1) $ 1.0
and capital leases.............
Long-term debt:....................
Existing indebtedness(c)....... 17.6 -- -- 17.6
Revolving Credit Facility(d)... -- -- 12.5 12.5
Notes offered hereby........... -- -- 148.8 148.8
------- -------
Total debt..................... 18.6 17.1 144.2 179.9
-------- -------- ------- -------
Stockholders' equity:..............
Common stock................... 0.1 1.7 (1.7) 0.1
Additional paid-in capital..... 56.3 7.6 (7.6) 56.3
Retained earnings.............. 60.1 21.2 (21.2) 60.1
Treasury shares and other...... (3.2) -- -- (3.2)
--------- --------- -------- --------
Total stockholders' equity..... 113.3 30.5 (30.5) 113.3
-------- -------- ------- --------
Total capitalization............ $ 131.9 $ 47.6 $ 113.7 $ 293.2
======== ========= ======== ========
</TABLE>
- ------------
(a) The capitalization of H&B as of June 30, 1997 has been adjusted to present
such information in accordance with U.S. GAAP and translated into the U.S.
dollar equivalent using the exchange rate in effect at June 30, 1997 of
1.665 U.S. dollars to each pound sterling. For further information regarding
the effect of the difference between U.K. GAAP and U.S. GAAP, see Note 3 of
H&B's Consolidated Financial Statements included elsewhere in this
Prospectus.
(b) The pro forma adjustments reflect the purchase price of the Acquisition and
related fees and expenses associated with the Transaction totaling $176.5
million, of which $15.2 million was paid with available cash and $161.3
million was paid through the Financing.
(c) Existing indebtedness relates primarily to capital lease obligations and
mortgages on NBTY's manufacturing facilities.
(d) Upon consummation of the Transaction, the Company had available $37.5
million under the Revolving Credit Facility that may be drawn for working
capital and general corporate purposes, including capital expenditures. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
NBTY, INC.
The following table sets forth selected financial data of NBTY as of
and for each of the five fiscal years in the period ended September 30, 1996 and
for the nine month periods ended June 30, 1997 and 1996. The statement of income
and balance sheet data as of and for each of the five fiscal years in the period
ended September 30, 1996 are derived from NBTY's audited historical consolidated
financial statements included elsewhere in this Prospectus. The statement of
income and balance sheet data as of and for the nine month periods ended June
30, 1997 and 1996 have been derived from the unaudited historical financial
statements of NBTY. In the opinion of management, the unaudited data includes
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the data for such periods. Interim results for the nine month
period ended June 30, 1997 are not necessarily indicative of results that can be
expected in future periods. "Other Data," not directly derived from NBTY's
financial statements, have been presented to provide additional analysis. The
Selected Historical Financial Data below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Historical Results of Operations -- NBTY," "Summary Historical
Financial Data -- NBTY" and the historical financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
JUNE 30, SEPTEMBER 30,
----------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales...................... $ 184.1 $ 142.1 $194.4 $ 178.8 $ 156.1 $ 138.4 $100.9
Cost of sales.................. 88.2 72.1 95.6 93.9 79.9 68.0 50.6
------- ------- ------ ------- ------ ------- ------
Gross profit................... 95.9 70.0 98.8 84.9 76.2 70.4 50.3
Catalog printing, postage and
promotion 14.6 13.2 17.6 19.3 14.8 11.5 7.5
Selling, general and
administrative 53.9 42.8 58.6 56.7 49.2 42.8 35.5
------- ------- ------ ------- ------ ------- -------
Income from operations......... 27.4 14.0 22.6 8.9 12.2 16.1 7.3
Interest expense, net.......... 1.3 1.0 1.4 1.1 0.9 1.2 1.3
Miscellaneous income (expense),
net ........................ 0.7 0.6 1.2 0.6 1.3 0.7 (0.2)
------- ------- ------ ------- ------- ------- -------
Income before income taxes..... 26.8 13.6 22.4 8.4 12.6 15.6 5.8
Income taxes................... 10.7 5.5 9.0 3.3 4.8 5.9 2.1
------- ------- ------ ------- ------- ------- -------
Net income.................... $ 16.1 $ 8.1 $ 13.4 $ 5.1 $ 7.8 $ 9.7 $ 3.7
======= ======= ======= ======= ======= ======= ======
Net income per share......... $ 0.80 $ 0.41 $ 0.67 $ 0.26 $ 0.38 $ 0.53 $ 0.25
======== ======= ======= ======== ======== ======== =======
OTHER DATA:
EBITDA(a)..................... $ 32.7 $ 18.6 $ 29.4 $ 14.3 $ 17.7 $ 20.8 $ 10.2
EBITDA margin(a).............. 17.8% 13.1% 15.1% 8.0% 11.3% 15.0% 10.1%
Capital expenditures.......... $ 11.1 $ 11.5 $ 15.8 $ 11.5 $ 11.6 $ 13.9 $ 4.6
Same store sales growth....... 15.1% 23.1% 31.0% 16.0% 7.5% 31.9% --
Number of retail stores (at
end of period)................ 106 58 55 19 7 3 2
Ratio of earnings to fixed 14.4x 10.7x 11.7x 6.6x 10.7x 10.8x 4.6x
charges (b) ..................
BALANCE SHEET DATA (END OF PERIOD):
Working capital............... $ 61.9 $ 49.8 $ 52.3 $ 40.7 $ 39.5 $ 42.9 $ 13.1
Total assets.................. 173.7 138.6 145.6 123.5 115.1 102.6 58.3
Total debt.................... 18.6 19.6 19.3 11.3 13.3 8.5 21.2
Stockholders' equity.......... 113.3 91.6 96.9 82.6 78.0 70.0 16.5
</TABLE>
- ------------
(a) EBITDA is defined as net income before interest expense, income taxes and
depreciation and amortization. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales.
(b) For the purposes of computing these ratios, earnings consist of income
before income taxes and fixed charges. Fixed charges consist of interest
expense, amortization of debt financing costs and one-third of rental
expenses.
32
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
HOLLAND & BARRETT HOLDINGS LTD.
The following table sets forth selected financial data of H&B as of and
for each of the three fiscal years in the period ended June 30, 1997. The
statement of income and balance sheet data set forth below are derived from
H&B's audited historical consolidated financial statements included elsewhere in
this Prospectus. Such Statements and the Selected Historical Financial Data have
been presented in accordance with U.K. GAAP in pounds sterling. "Other Data"
below, not directly derived from the H&B historical consolidated financial
statements, have has been presented to provide additional analysis. The Selected
Historical Financial Data below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Historical Results of Operations--H&B," "Summary Historical
Financial Data--H&B" and the historical consolidated financial statements and
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------
1997 1996 1995
(POUNDS STERLING IN MILLIONS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Turnover(a)....................................... (Pound (Pound (Pound
Sterling) Sterling) Sterling)
102.9 90.6 77.1
Cost of sales..................................... 53.6 47.9 41.1
------ ----- ------
Gross profit...................................... 49.3 42.7 36.0
Distribution costs................................ 39.4 33.9 28.7
Administrative expense ........................... 2.2 1.5 1.5
------- ------ -------
Operating profit.................................. 7.7 7.3 5.8
Interest payable and other similar charges(b)..... 0.3 0.4 0.6
------- ------ -------
Profit on ordinary activities before taxation..... 7.4 6.9 5.2
Taxation and profit on ordinary activities ....... 2.6 2.5 1.7
------- ------ -------
Profit on ordinary activities after taxation(c)... (Pound (Pound (Pound
Sterling) Sterling) Sterling)
4.8 4.4 3.5
======== ======= ========
OTHER DATA:
EBITDA(d)......................................... (Pound (Pound (Pound
Sterling) Sterling) Sterling)
11.0 10.0 7.4
EBITDA margin(d).................................. 10.7% 11.0% 9.6%
Capital expenditures.............................. (Pound (Pound (Pound
Sterling) Sterling) Sterling)
6.8 6.8 6.1
Same store sales growth........................... 2.8% 8.0% --
Number of retail stores (at end of period)........ 410 389 347
BALANCE SHEET DATA (END OF PERIOD):
Working capital(e)................................ (Pound -- --
Sterling)
0.6
Total assets ..................................... 50.8 -- --
Total debt........................................ 11.1 -- --
Shareholders' funds............................... 16.9 -- --
</TABLE>
- ----------------
(a) Turnover represents net sales.
(b) Interest payable and other similar charges includes non-operating charges.
(c) Profit on ordinary activities after taxation represents net income.
(d) EBITDA is defined as net income before interest expense, income taxes,
depreciation and amortization and other non-operating charges. EBITDA is a
measure commonly used by analysts and investors to determine a company's
ability to service and incur debt. Accordingly, this information has been
presented to permit a more complete analysis. EBITDA should not be
considered a substitute for net income or cash flow data prepared in
accordance with generally accepted accounting principles or as a measure of
profitability or liquidity. EBITDA margin is computed as EBITDA as a
percentage of turnover.
(e) Working capital is presented in accordance with U.K. GAAP. As such, cash on
hand, non-trading intercompany receivables and payables, and corporation
taxes payable are excluded from the calculation of working capital.
33
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following Unaudited Pro Forma Combined Financial Data of the
Company are based on, and should be read in conjunction with, the Consolidated
Financial Statements of NBTY and H&B and the notes thereto included elsewhere in
this Prospectus, and have been adjusted to give pro forma effect to the
Transaction.
The Unaudited Pro Forma Combined Statement of Income of the Company for
the nine months ended June 30, 1997 and for the year ended September 30, 1996
give pro forma effect to the Transaction as if it had occurred on October 1,
1995. The Unaudited Pro Forma Combined Income Statement for the nine month
period ended June 30, 1997 has been prepared by combining the Consolidated
Statement of Income of NBTY for the nine month period ended June 30, 1997 with
the Consolidated Profit and Loss Account of H&B for the nine month period ended
March 31, 1997. The Unaudited Pro Forma Combined Statement of Income for the
year ended September 30, 1996 has been prepared by combining the Consolidated
Statement of Income of NBTY for the year ended September 30, 1996 with the
Consolidated Profit and Loss Account of H&B for the year ended June 30, 1996.
The Unaudited Pro Forma Combined Balance Sheet as of June 30, 1997 has
been prepared by combining the June 30, 1997 consolidated balance sheets of NBTY
and H&B and give pro forma effect to the Transaction as if it had occurred on
such date.
The pro forma adjustments are based upon available information and
certain assumptions that NBTY believes are reasonable. Other data included on
the pro forma statements of income have been presented to provide additional
analysis. The Acquisition has been accounted for using the purchase method of
accounting. Allocations of the purchase price have been determined based upon
preliminary information and estimates of fair value and are subject to change.
Differences between the amounts included herein and the final allocations are
not expected to have a material effect on the Unaudited Pro Forma Combined
Financial Data. The Unaudited Pro Forma Combined Financial Data do not purport
to represent what the Company's results of operations would have been if such
events had occurred at the dates indicated, nor do such statements purport to
project the results of the Company's operations for any future period.
34
<PAGE>
NBTY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTH PERIOD ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NBTY H&B ADJUSTMENTS CONSOLIDATED
---- --- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales ............................ $ 184,108 $ 127,659 -- $ 311,767
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales ..................... 88,205 66,245 -- 154,450
Catalog printing, postage and
promotion ...................... 14,581 -- -- 14,581
Selling, general and administrative 53,885 51,357 $ 3,996(b) 109,238
------------ ------------ ------------ ------------
156,671 117,602 3,996 278,269
Income from operations ............... 27,437 10,057 (3,996) 33,498
Other income (expense):
Interest, net ..................... (l,294) 103 (11,325)(c)(d) (12,516)
Miscellaneous, net ................ (80) -- 532
------------ ------------ ------------ ------------
612
(682) 23 (11,325) (11,984)
Income before income taxes ........... 26,755 10,080 (15,321) 21,514
Income taxes ......................... 10,702 3,698 (4,530)(e) 9,870
------------ ------------ ------------ ------------
Net income ........................... $ 16,053 $ 6,382 $ (10,791) $ 11,644
============ ============ ============ ============
Net income per share ................. $ 0.80 $ 0.58
============ ============
Weighted average common shares
outstanding ....................... 20,052,391 20,052,391
========== ============
Other Data:
EBITDA(f) ......................... $ 47.3
EBITDA margin(f) .................. 15.2%
Capital expenditures .............. $ 18.8
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data.
35
<PAGE>
<TABLE>
<CAPTION>
NBTY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED SEPTEMBER 30, 1996
PRO FORMA PRO FORMA
NBTY H&B ADJUSTMENTS CONSOLIDATED
---- --- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales........................... $ 194,403 $ 150,902 -- $ 345,305
--------- --------- ----------
Costs and expenses:
Cost of sales.................... 95,638 79,867 -- 175,505
Catalog printing, postage and
promotion 17,635 -- -- 17,635
Selling, general and administrative 58,515 58,999 5,328(b) 122,842
--------- --------- ----------- ----------
171,788 138,866 5,328 315,982
Income from operations.............. 22,615 12,036 (5,328) 29,323
Other income (expense):
Interest, net.................... (1,445) (654) (15,100)(c)(d) (17,199)
Miscellaneous, net............... 1,203 -- -- 1,203
---------- ---------- ----------- ----------
(242) (654) (15,100) (15,996)
Income before income taxes.......... 22,373 11,382 (20,428) 13,327
Income taxes........................ 9,021 4,236 (6,040)(e) 7,217
---------- ---------- ----------- ----------
Net income.......................... $ 13,352 $ 7,146 $ (14,388) $ 6,110
========== ========== =========== ==========
Net income per share................ $ 0.67 $ 0.31
========== ==========
Weighted average common shares
outstanding...................... 19,975,678 19,975,678
=========== ==========
Other Data:
EBITDA(f)........................................................................ $ 45.9
EBITDA margin(f)................................................................. 13.3%
Capital expenditures............................................................. $ 27.1
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data.
36
<PAGE>
<TABLE>
<CAPTION>
NBTY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1997
PRO FORMA PRO FORMA
NBTY H&B ADJUSTMENTS(a)(g) CONSOLIDATED
---- --------- ----------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents .................. $ 2,915 $ 9,437 $ (9,437) $ 2,915
Short term investments ..................... 15,541 -- (15,238) 303
Accounts receivable, net ................... 13,012 163 -- 13,175
Accounts receivable, other ................. -- 4,739 (4,545) 194
Inventories ................................ 58,682 19,113 -- 77,795
Deferred income taxes ...................... 3,155 -- -- 3,155
Prepaid catalog and other current assets ... 7,649 12,887 -- 20,536
--------- --------- --------- ---------
Total current assets .................. 100,954 46,339 (29,220) 118,073
Property, plant and equipment, net ............ 68,448 38,275 -- 106,723
Intangible assets, net ........................ 3,748 2,207 133,189 139,144
Deferred financing costs ...................... -- -- 6,000 6,000
Other assets .................................. 515 -- -- 515
--------- --------- --------- ---------
Total assets .......................... $ 173,665 $ 86,821 $ 109,969 $ 370,455
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt and
capital lease obligations ............. $ 995 $ 17,131 $ (17,131) $ 995
Accounts payable ........................... 22,807 26,429 -- 49,236
Taxes payable .............................. -- 5,144 (3,643) 1,501
Accrued expenses ........................... 15,259 3,500 -- 18,759
--------- --------- --------- ---------
Total current liabilities ............. 39,061 52,204 (20,774) 70,491
Long-term debt ................................ 14,782 -- $ 161,262 176,044
Obligations under capital leases .............. 2,864 -- -- 2,864
Deferred income taxes ......................... 2,827 4,098 -- 6,925
Other liabilities ............................. 793 -- -- 793
--------- --------- --------- ---------
Total liabilities ..................... 60,327 56,302 140,488 257,117
Commitments and contingencies
Stockholders' equity:
Common stock .............................. 161 1,748 (1,748) 161
Capital in excess of par .................. 56,304 7,637 (7,637) 56,304
Retained earnings ......................... 60,062 21,134 (21,134) 60,062
--------- --------- --------- ---------
116,527 30,519 (30,519) 116,527
Less treasury shares at cost .................. 2,663 -- -- 2,663
Stock subscriptions receivable ................ 526 526
--------- --------- --------- ---------
Total stockholders' equity ............... 113,338 30,519 (30,519) 113,338
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 173,665 $ 86,821 $ 109,969 $ 370,455
========= ========= ========= =========
</TABLE>
See Notes to Unaudited Pro Forma Combined Financial Data.
37
<PAGE>
NBTY INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(a) On August 7, 1997 NBTY, Inc. and Subsidiaries ("NBTY") acquired Holland &
Barrett Holdings Ltd. ("H&B") for approximately $169,000. Prior to the
Acquisition, H&B operated as a subsidiary of Lloyds Chemists plc, ("Lloyds")
which was recently acquired by GEHE AG. NBTY completed the acquisition by
issuing two promissory notes (the "Promissory Notes") for approximately
$169,000 at an interest rate of 4.5% to Lloyds. NBTY paid the Promissory
Notes and Transaction costs of $7,500 through proceeds of $148,762 realized
from the Initial Offering, borrowings under the Revolving Credit Facility of
$12,500 and available cash of $15,238. Pursuant to the terms of the
Acquisition agreement, NBTY will not be receiving cash and certain
receivables aggregating $13,982 and will not be assuming approximately
$20,774 in liabilities of H&B.
(b) Represents amortization of the excess purchase price over the net assets
acquired of $3,996 and $5,328 for the nine months and year end periods,
respectively, which are amortized over a twenty-five year period on a
straight-line basis.
(c) Reflects the amortization of $450 and $600 for the nine month and year end
periods, respectively, of the deferred financing costs of $6,000, which are
amortizable over the life of the debt.
(d) Reflects (i) additional interest expense relating to the Notes of $9,703 and
$12,938 for the nine month and year end periods, respectively, at an annual
interest rate of 8.625%, (ii) additional interest expense on the Revolving
Credit Facility of $704 and $938 for the nine month and year end periods,
respectively, at an annual interest rate of 7.5%, (iii) amortization of $93
and $124 for the nine month and year end periods, respectively, of the
original issue discount of $1,238, and (iv) a decrease in interest income of
$375 and $500 for the nine month and year end periods, respectively, earned
on cash utilized to pay for the Acquisition.
(e) Represents the tax effect of the pro forma adjustments, excluding the
amortization of goodwill which is not deductible for tax purposes.
(f) EBITDA is defined as net income before interest expense, income taxes and
depreciation and amortization. Management believes that EBITDA is a measure
commonly used by analysts and investors to determine a company's ability to
service and incur debt. Accordingly, this information has been presented to
permit a more complete analysis. EBITDA should not be considered a
substitute for net income or cash flow data prepared in accordance with
generally accepted accounting principles or as a measure of profitability or
liquidity. EBITDA margin is computed as EBITDA as a percentage of net sales.
(g) To reflect the use of $15,238 of available cash and the proceeds of $148,762
from the issuance of $150,000 of the Notes and borrowings of $12,500 under
the Revolving Credit Facility in order to fund the acquisition of H&B,
related acquisition costs of approximately $1,500 and financing costs of
approximately $6,000. Pursuant to the terms of the Acquisition agreement,
NBTY will not be receiving cash and certain receivables aggregating $13,982
and will not be assuming approximately $20,774 in liabilities of H&B.
(h) The historical consolidated financial statements of H&B used in the
Unaudited Pro Forma Combined Financial Data have been adjusted to present
such information in accordance with U.S. GAAP and translated into U.S.
dollar equivalent financial statements using the exchange rate in effect at
June 30, 1997 which was one pound sterling to 1.665 U.S. dollars. For
further information regarding the effect of the difference between U.K. GAAP
and U.S. GAAP, see Note 3 of the H&B Historical Consolidated Financial
Statements included elsewhere in this Prospectus. Certain reclassifications
have been made to the historical consolidated financial statements of H&B to
conform to the NBTY presentation.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the historical results of
operations and financial condition of NBTY and H&B cover periods before
completion of the Transaction. Accordingly, the discussion and analysis of such
historical periods does not reflect the significant impact that the Transaction
will have on the Company. See "Unaudited Pro Forma Combined Financial Data."
This discussion and analysis should be read in conjunction with the historical
financial statements of NBTY and H&B and the notes thereto included elsewhere in
this Prospectus.
HISTORICAL RESULTS OF OPERATIONS--NBTY
GENERAL
NBTY, founded in 1971, is one of the leading manufacturers and
distributors of nutritional supplements in the U.S., marketing a complete line
of vitamins, minerals and other nutritional supplements offered at value prices
to its customers. NBTY markets its multi-branded products primarily through (i)
one of the industry's leading mail order programs under its PURITAN'S PRIDE
brand name to its proprietary list of over two million active customers, (ii)
115 Vitamin World retail stores strategically located primarily in factory
outlet malls across the U.S., and (iii) wholesale distribution to drug store
chains, supermarkets, independent pharmacies and health food stores such as
Eckerd, Osco and Albertson's under the NATURE'S BOUNTY, NATURAL WEALTH, HUDSON,
AMERICAN HEALTH and GOOD `N NATURAL brand names. Management believes that this
unique three-tiered distribution system enables NBTY to most effectively market
its products and lends stability, when compared to certain of its competitors,
to its revenues and EBITDA. NBTY's revenues from mail order, retail and
wholesale sales were approximately 42%, 16% and 42%, respectively, of total NBTY
revenues for the nine month period ended June 30, 1997. NBTY's revenues and
EBITDA for the nine month period ended June 30, 1997 were approximately $184
million and $33 million, respectively, and same store sales growth for the same
period was approximately 15%.
The following table sets forth certain historical operating results of
NBTY as a percentage of sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
JUNE 30, SEPTEMBER 30,
------------------- -----------------------------
1997 1996 1996 1995 1994
--- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales............................ 47.9 50.7 49.2 52.5 51.2
Catalog printing, postage and promotion.. 7.9 9.3 9.1 10.8 9.5
Selling, general and administrative...... 29.3 30.1 30.1 31.7 31.5
---- ---- ----- ----- -----
85.1 90.1 88.4 95.0 92.2
---- ---- ----- ----- -----
Income from operations...................... 14.9 9.9 11.6 5.0 7.8
Interest expense and other.................. (0.4) (0.3) (0.1) (0.3) 0.2
------ ------ ------ ------- -----
Income before income taxes.................. 14.5 9.6 11.5 4.7 8.0
Income taxes................................ 5.8 3.9 4.6 1.8 3.0
----- ----- ----- ----- -----
Net income.................................. 8.7% 5.7% 6.9% 2.9% 5.0%
====== ====== ====== ====== ======
NINE MONTHS ENDED JUNE 30, 1997 COMPARED TO NINE MONTHS ENDED JUNE 30, 1996
</TABLE>
Net sales in the nine months ended June 30, 1997 were $184.1 million,
compared with $142.1 million for the nine months ended June 30, 1996, an
increase of $42.0 million or 29.6%. Sales increases were across all channels of
distribution. Mail order sales were $78.0 million, compared to $62.9 million for
the prior comparable period (an increase of $15.1 million or 24.0%) due to
increased response to promotional efforts; wholesale sales were $77.4 million,
39
<PAGE>
compared to $64.4 million for the prior comparable period (an increase of $13.0
million or 20.2%) due to increased shelf space and consumer demand; and retail
sales were $28.7 million, compared to $14.8 million (an increase of $13.9
million or 93.9%) due to an increase in the number of retail stores for the
prior comparable period. Comparable same store sales for stores open for more
than one year were up $1.8 million (or 15.1%) over the nine months ended June
30, 1996. Approximately 70 new SKUs were introduced over the past nine months.
Sales for NBTY's new mail order operation in the U.K. were $1.6 million in 1997
and $0.5 million in 1996.
Cost of sales for the nine months ended June 30, 1997 was $88.2 million
(or 47.9% of sales), compared to $72.1 million for the prior comparable period
(or 50.7% of sales). The decrease was associated with lower raw material costs
due to discounts obtained for long-term purchase commitments, manufacturing
efficiencies, and changes in product mix due to the introduction of new higher
margin products.
Catalog printing, postage and promotion expenses were $14.6 million for
the nine months ended June 30, 1997 (an increase of $1.4 million or 10.6%) from
$13.2 million for the nine months ended June 30, 1996. As a percentage of sales,
catalog printing, postage and promotion expenses were 7.9% for the nine months
ended June 30, 1997 and 9.3% for the prior comparable nine months. The increase
in expenditures was primarily attributable to national television advertising
and the increased number of catalogs printed and mailed for the mail order
division.
Selling, general and administrative expenses were $53.9 million, or
29.3% as a percentage of sales for the nine months ended June 30, 1997, compared
with $42.8 million, or 30.1% as a percentage of sales for the prior comparable
period, an increase of $11.1 million (or 26.0%). This increase was primarily due
to increases in indirect salaries, building, freight and outside services
expenses. These expenses increased due to the retail store expansion and the
opening of the international mail order operations.
NBTY's net income was $16.1 million for the nine month period ended
June 30, 1997, and $8.1 million for the nine months ended June 30, 1996.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995
Net sales for fiscal year 1996 were $194.4 million, an increase of
$15.6 million or 8.7% over fiscal year 1995. Of the $15.6 million increase, $8.8
million was attributable to increased retail sales; $1.8 million was
attributable to increased wholesale sales; and $13.2 million was attributable to
mail order sales, less a decrease of $8.2 million from Beautiful Visions, a
cosmetic catalog which was sold in October 1995.
Cost of sales for fiscal year 1996 was $95.6 million, an increase of
$1.9 million or 2.0% over fiscal year 1995. Gross profit increased to 50.8% in
fiscal year 1996 from 47.5% in fiscal year 1995. This increase was due to
various factors, including lower raw material costs due to discounts obtained
for long-term purchase commitments, manufacturing efficiencies, and changes in
product mix due to the introduction of new higher margin products.
Catalog printing, postage and promotion expenses for 1996 were $17.6
million, a decrease of $1.7 million over 1995. Such costs, as a percentage of
net sales, were 9.1% in 1996 compared with 10.8% in 1995. The decrease was
mainly due to the discontinuance of the Beautiful Visions mail order operation.
Selling, general and administrative expenses for fiscal year 1996 were
$58.6 million, an increase of $1.9 million over fiscal year 1995. As a
percentage of net sales, these costs were 30.1% in fiscal year 1996 as compared
to 30.7% in fiscal year 1995. Decreases in fringe benefits and other
miscellaneous costs were offset by increases due to the retail store expansion
and professional fees.
NBTY's net income was $13.4 million for fiscal year 1996, and $5.1
million for fiscal year 1995.
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO YEAR ENDED SEPTEMBER 30, 1994
Net sales for fiscal year 1995 were $178.8 million, an increase of
$22.7 million or 14.5% over fiscal year 1994. Of the $22.7 million increase,
$12.5 million was attributable to wholesale and retail sales and $10.2 million
was attributable to mail order sales. In October 1995, Beautiful Visions, a
cosmetic catalog operation, was sold. Sales for such operation in fiscal year
1995 were $8.2 million, a decrease of $5.0 million from the prior fiscal year.
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Cost of sales for fiscal year 1995 was $93.9 million, an increase of
$14.0 million or 17.5% over fiscal year 1994. Gross profit decreased to 47.5% in
fiscal year 1995 from 48.8% in fiscal year 1994. This decrease as a percentage
of net sales was due to various factors which included pricing pressures and
write-downs for labels and unsold Beautiful Visions inventory.
Catalog printing, postage and promotion for fiscal year 1995 was $19.3
million, an increase of $4.5 million or 30.3% over fiscal year 1994. This cost,
as a percentage of net sales, was 10.8% in fiscal year 1995 compared with 9.5%
in fiscal year 1994. The increase was mainly due to expanded trade advertising
and costs associated with promotional programs to independent stores and chain
stores.
Selling, general and administrative expenses for fiscal year 1995 was
$56.7 million, an increase of $7.5 million or 15.3% over fiscal year 1994. As a
percentage of net sales, these costs remained relatively constant at 31.7% in
fiscal year 1995 and 31.5% in fiscal year 1994. The increase was primarily a
result of increases in salaries, wages, fringe benefits and professional
services.
NBTY's net income was $5.1 million for fiscal year 1995, and $7.8
million for fiscal year 1994.
HISTORICAL RESULTS OF OPERATIONS--H&B
GENERAL
H&B markets a broad line of nutritional supplement products, including
vitamins, minerals and other nutritional supplements (approximately 58% of
revenues for fiscal year 1997), and food products, including fruits and nuts,
confectionery and other items (approximately 42% of revenues for fiscal year
1997). H&B's strategic retail locations in prime shopping areas and broad
product offering have enabled it to become one of the U.K.'s largest nutritional
supplement retailers. The Consolidated Financial Statements of H&B have been
prepared in accordance with U.K. GAAP. For further information regarding the
effect of the difference between U.S. GAAP and U.K. GAAP, see note 3 of the
Consolidated Financial Statements of H&B included elsewhere in this Prospectus.
The following table sets forth certain historical operating results of
H&B in accordance with U.K. GAAP as a percentage of sales:
YEAR ENDED JUNE 30,
-------------------
1997 1996
---- ----
Turnover.......................................... 100.0% 100.0%
Cost of sales..................................... 52.1 52.9
----- ------
Gross profit...................................... 47.9 47.1
Distribution costs................................ 38.3 37.4
Administrative expenses........................... 2.1 1.7
------ ------
Operating profit.................................. 7.5 8.0
------ ------
Profit on ordinary activities after taxation...... 4.7% 4.8%
====== =======
YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996 (DOLLARS AND
POUNDS STERLING IN MILLIONS)
For the fiscal years ended June 30, 1997 and 1996, sales were (Pound
Sterling) 102.9 (or $171.3) and (Pound Sterling) 90.6 (or $150.9), respectively,
an increase of 13.5%. The number of retail stores operating at the end of fiscal
years 1997 and 1996 was 410 and 389, respectively. For the fiscal year ended
June 30, 1997, same store sales for comparable stores increased 3%.
Gross profit for the fiscal year ended 1997 was (Pound Sterling) 49.3
(or $82.1) or 47.9% as a percentage of sales, and for the fiscal year ended June
30, 1996, gross profit was (Pound Sterling) 42.7 (or $71.0) or 47.1% as a
percentage of sales.
Payroll costs for the fiscal year ended June 30, 1997 were (Pound
Sterling) 13.8 (or $23.0) and (Pound Sterling) 11.5 (or $19.1) for the fiscal
year ended June 30, 1996. Payroll costs increased mainly due to the increased
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number of employees. Operating profits for the fiscal year ended June 30, 1997
were (Pound Sterling) 7.7 (or $12.8) and (Pound Sterling) 7.3 (or $12.2) for the
fiscal year ended June 30, 1996. As a percentage of sales, operating profits
were 7.5% for the fiscal year ended June 30, 1997, and 8.0% for the fiscal year
ended June 30, 1996. Profit on ordinary activities before taxation was (Pound
Sterling) 7.4 (or $12.4) for the fiscal year ended June 30, 1997, and (Pound
Sterling) 6.9 (or $11.5) for the fiscal year ended June 30, 1996.
Capital expenditures for the years ended June 30, 1997 and 1996
remained constant at (Pound Sterling) 6.8 (or $11.3).
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Transaction, interest payments on the Notes and on
the Revolving Credit Facility represent significant liquidity requirements for
the Company. The Company anticipates that the Notes will require annual interest
payments of approximately $12.9 million. See "Unaudited Pro Forma Combined
Financial Data."
In addition to its debt service obligations, the Company will require
liquidity for capital expenditures and working capital needs. Total capital
expenditures for the Company are expected to be approximately $23.0 million for
fiscal year 1998, of which $7.0 million will be related to maintenance capital
expenditures.
The Company believes that the cash flow generated from its operations,
together with amounts available under the Revolving Credit Facility, should be
sufficient to fund its debt service requirements, working capital needs,
anticipated capital expenditures and other operating expenses for the
foreseeable future. The Revolving Credit Facility provides the Company with
available borrowings up to an aggregate principal amount of $50.0 million. On a
pro forma basis, after giving effect to the Transaction, the Company's unused
availability under the Revolving Credit Facility would have been $37.5 million.
The Company's future operating performance and ability to service or refinance
the Notes and to refinance the Revolving Credit Facility will be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control. See "Risk Factors."
The Revolving Credit Facility and the Notes impose certain restrictions
on the Company's ability to make capital expenditures and limit the Company's
ability to incur additional indebtedness. Such restrictions could limit the
Company's ability to respond to market conditions, to provide for unanticipated
capital investments or to take advantage of business or acquisition
opportunities. The covenants contained in the Revolving Credit Facility and the
Notes also, among other things, limit the ability of the Company to dispose of
assets, repay indebtedness or amend other debt instruments, pay distributions,
create liens on assets, enter into sale and leaseback transactions, make
investments, loans or advances and make acquisitions.
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BUSINESS
OVERVIEW
NBTY, founded in 1971 by Arthur Rudolph, is one of the leading
manufacturers and distributors of nutritional supplements in the U.S., marketing
a complete line of vitamins, minerals and other nutritional supplements offered
at value prices to its customers. NBTY markets its multi-branded products
primarily through (i) one of the industry's leading mail order programs under
its PURITAN'S PRIDE brand name to its proprietary list of over two million
active customers, (ii) 115 Vitamin World retail stores strategically located
primarily in factory outlet malls across the U.S., and (iii) wholesale
distribution to drug store chains, supermarkets, independent pharmacies and
health food stores such as Eckerd, Osco and Albertson's under the NATURE'S
BOUNTY, NATURAL WEALTH, HUDSON, AMERICAN HEALTH and GOOD `N NATURAL brand names.
Management believes that this unique three-tiered distribution system enables
NBTY to most effectively market its products and lends stability, when compared
to certain of its competitors, to its revenues and EBITDA. NBTY's revenues from
mail order, retail and wholesale sales were approximately 42%, 16% and 42%,
respectively, of total NBTY revenues for the nine month period ended June 30,
1997. NBTY's revenues and EBITDA for the nine month period ended June 30, 1997
were approximately $184 million and $33 million, respectively, and same store
sales growth for the same period was approximately 15%.
NBTY acquired H&B, one of the leading nutritional supplement retailers
in the U.K. with 410 locations, on August 7, 1997. The Acquisition provides the
Company with significant strategic opportunities to enhance H&B's revenues and
profitability and increase its market share. H&B markets a broad line of
nutritional supplement products, including vitamins, minerals and other
nutritional supplements (approximately 58% of H&B's revenues for fiscal year
1997) and food products, including fruits and nuts, confectionery and other
items (approximately 42% of H&B's revenues for fiscal year 1997). H&B's
strategic retail locations in prime shopping areas and broad product offering
have enabled it to become one of the U.K.'s largest nutritional supplement
retailers. H&B's revenues and EBITDA for the fiscal year ended June 30, 1997
were approximately $171 million and $18 million, respectively, and same store
sales growth for the same period was approximately 3%.
The Company expects to derive substantial opportunities from the
combination of NBTY's and H&B's operations. Pro forma for the Acquisition, the
Company's revenues for mail order, retail and wholesale sales would have been
approximately 25%, 50% and 25%, respectively, of total Company revenues for the
nine month period ended June 30, 1997. Management believes that cross-selling an
expansive selection of NBTY-manufactured products into H&B's 410 retail stores
will enable H&B to offer a broader product selection at lower prices than its
competitors and, at the same time, enhance H&B's margins. In addition,
management expects to reduce per unit production costs in NBTY's manufacturing
facilities through increased capacity utilization derived from this vertical
integration. The Company also plans to increase the efficiency of its H&B
operations by integrating NBTY's state-of-the-art POS system throughout H&B's
retail stores that will allow for more effective management of inventory and
purchasing. The Company's vertically integrated structure and three-tiered
distribution system, combined with its breadth of well recognized, value
oriented brand names, position it to pursue continued growth and competitive
success in each of its distribution channels.
COMPETITIVE STRENGTHS
The Company believes that the following competitive strengths provide
it with a solid foundation to further enhance growth, profitability and the
Company's position as an industry leader:
o VERTICALLY INTEGRATED OPERATIONS. As a result of the Acquisition, the
Company will increase its degree of vertical integration by manufacturing
nutritional supplements in NBTY facilities for sale through H&B's retail
stores. Due to NBTY's existing level of vertical integration, NBTY is
able to price its products at its stores approximately 20-40% lower than
its largest competitor yet still maintain gross margins in excess of
approximately 50%. The Acquisition will allow the Company to further
increase its margins by providing NBTY-manufactured products throughout
all 410 H&B retail stores.
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o EFFICIENT, MULTI-CHANNEL DISTRIBUTION NETWORK. NBTY's three-tiered U.S.
distribution network (mail order, retail and wholesale), supplemented by
H&B's strong retail position in the U.K. nutritional supplement market,
allows the Company to access a broader base of nutritional supplement
buyers and is unique among the Company's competitors. Management believes
this diverse network lowers distribution risk and lends stability to both
revenues and EBITDA.
o STRONG PORTFOLIO OF RETAIL STORES. NBTY's 115 Vitamin World stores, in
combination with H&B's 410 stores, comprise a retail network that is
strategically located in the high growth U.S. and U.K. markets. These
stores delivered approximately 15% and 4% same store sales growth during
the nine month period ended June 30, 1997 in the U.S. and the U.K.,
respectively. In addition to providing a platform for growth, management
believes the Company's established retail stores pose significant
barriers to entry for new competitors due to the Company's penetration of
U.S. factory outlet malls and prime U.K. locations.
o LEADING MAIL ORDER SUPPLIER. Management believes NBTY is the industry
leader in the U.S. mail order nutritional supplement market with over two
million active customers and response rates that management believes to
be in excess of the mail order industry average. The Company's position
as a leading mail order nutritional supplement distributor allows the
Company to lower its per customer distribution costs, thereby enhancing
margins. The Company plans to further expand its mail order operations in
the U.K. by utilizing its mail order distribution warehouse in
Southampton, England, which became fully operational in January 1997.
o INNOVATIVE NEW PRODUCT DEVELOPMENT. NBTY continually pursues new product
development in response to customer demand. In 1997 alone, NBTY
introduced 100 new SKUs through its product development and merchandising
groups working directly with managers at the retail level. Management
believes its retail stores provide the Company with rapid access to
customer demand information and allow the Company to test market new
products before initiating a complete product launch across all
distribution channels.
o EXPERIENCED MANAGEMENT TEAM. Scott Rudolph, Chairman of the Board,
President and Chief Executive Officer, has 11 years of experience with
NBTY and 21 years in the nutritional supplement industry. Mr. Rudolph's
skilled management team averages over 14 years of industry experience
(primarily with NBTY) in the mail order, retail and wholesale
distribution channels.
BUSINESS STRATEGY
The Company's strategy is to target the growing value-conscious
consumer segment in order to increase sales and improve profitability, thereby
strengthening its position as an industry leader through the following key
initiatives:
o INCREASE HIGH MARGIN RETAIL SALES. As a result of the Acquisition, NBTY's
115 retail stores have been augmented by H&B's 410 U.K. stores. In the
U.S., the Company plans to open approximately 80 new stores per year
under its proven store format, substantially increasing its penetration
of the factory outlet mall base. By increasing overall foot traffic
through its growing base of stores, the Company expects to increase its
revenues and profitability, and enhance its market share. In the U.K, the
Company expects to increase nutritional supplement sales by offering its
products at lower prices than its compeititors.
o INCREASE HIGH MARGIN MAIL ORDER SALES. Management believes NBTY's
PURITAN'S PRIDE mail order operation is the industry's leader with
approximately two million active mail order customers. NBTY is currently
in the process of automating its mail order shipping department, which
will enable NBTY to fulfill mail order requests with greater speed and
efficiency. NBTY expects to continue to strengthen its mail order sales
through frequent promotions in order to further improve its response
rate, which management believes is already above the mail order industry
average. NBTY also expects to continue to add customers through the
selective acquisition of companies that have similar or complementary
products. In addition, NBTY's recently increased manufacturing capability
will enable it to successfully compete for additional mail order
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customers through its ability to quickly introduce and deliver new
products in response to consumer demand.
o EMPHASIZE HIGHER MARGIN PRODUCTS. In addition to manufacturing and
distributing high sales volume products (such as vitamins C and E), the
Company also manufactures and distributes higher margin, specialty
products. These popular specialty products, such as melatonin and St.
John's Wort, are targeted primarily at dedicated nutritional supplement
users and typically provide higher margins than more established products
and broaden the Company's product line.
o ENHANCE OPERATING EFFICIENCIES. The Acquisition will enable the Company
to increase its level of vertical integration by selling nutritional
supplements manufactured by NBTY through the H&B retail stores in the
U.K. Management expects to supply approximately 75% of H&B's nutritional
supplements from NBTY's U.S. manufacturing operations, thereby increasing
NBTY's manufacturing margins and increasing H&B's margins while reducing
per unit production costs in NBTY's manufacturing facilities through
increased capacity utilization. Additionally, the Company intends to
achieve significant operating efficiencies from the integration of its
POS system into the H&B stores, which will significantly improve
inventory management, production scheduling and administrative functions.
o RAPID NEW PRODUCT INTRODUCTION. Management believes that NBTY is among
the leaders in its industry in the timely introduction of products in
response to consumer demands. During 1997 alone, NBTY introduced more
than 100 new SKUs. Given the changing nature of consumer demands for new
products and the growing publicity of the value of vitamins, minerals and
other nutritional supplements in the promotion of general health,
management believes that NBTY will continue to attract new customers
based upon its ability to rapidly respond to consumer demands with high
quality, value oriented products. As a result of the Company's ongoing
manufacturing expansion, the Company will be poised to further develop
new products that meet consumers' demand.
COMPANY HISTORY
NBTY. The business of NBTY as a direct marketer of vitamins was begun
in 1971 under the name of NATURE'S BOUNTY, Inc. by Arthur Rudolph, NBTY's former
chairman, and NBTY completed its initial public offering of stock that same
year. NBTY first developed its manufacturing capabilities in 1974 in order to
capitalize on efficiencies gained through vertical integration. NBTY began its
mail order operation in 1974, opened its first retail store in 1979 and has
grown through a series of strategic acquisitions that included the acquisition,
in 1989, of GNC's mail order operation. It changed its name to NBTY, Inc. in
1995.
H&B. H&B, founded in 1920, was acquired in the late 1960s by Booker
plc. Under the direction of Booker plc, the H&B network was expanded to 183
stores through new store openings as well as through the acquisition of
independent health food stores. In 1991, H&B was acquired by Lloyds. Under the
direction of Lloyds, H&B was expanded to 410 stores through continued store
openings and acquisitions of independent health food stores. Lloyds was acquired
by GEHE in January 1997 and, pursuant to GEHE's strategy of divesting Lloyds of
non-core assets, GEHE determined to divest the H&B subsidiary.
INDUSTRY OVERVIEW
The U.S. retail market for vitamins, minerals and other nutritional
supplements ("VMS") has grown at a compound annual rate of approximately 15%,
from $3.7 billion in 1992 to $6.5 billion in 1996, according to the 1997
Packaged Facts Survey. This growth has stemmed primarily from the availability
of new supplements and wider distribution as well as from a positive regulatory
environment. In addition to these factors driving the growth of the nutritional
supplement industry, recent scientific research suggesting important health
benefits derived from the regular consumption of vitamins and other nutritional
supplement products has fueled an increasing societal interest in preventive
health measures.
The continued aging of the U.S. population, together with an increased
focus on preventive health measures, is expected to result in a continuing
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increase in demand for nutritional supplement products. According to the Simmons
Market Research Bureau, 54% of the U.S. adult population regularly uses
vitamins, minerals or supplements. Further, based on U.S. Bureau of the Census
data, the 45-and-older age group, which accounted for approximately 32% of the
U.S. population in 1990, is expected to grow to 40% of the U.S. population by
2010.
Vitamins and other nutritional supplements are sold primarily through
the following channels of distribution: health food stores, drug stores,
supermarkets and other grocery stores, discount stores, mail order and direct
sales organizations. Mass market retailers (drug stores, grocery stores and
discount stores), health food stores and mail order and direct selling account
for approximately 46%, 38%, and 16%, respectively, of industry sales. The mass
marketers traditionally offer more mainstream VMS products, such as
multivitamins, individual vitamins (such as Vitamins A, C and E), and minerals
(such as calcium, potassium and magnesium), while the health food stores, mail
order and direct selling companies traditionally offer greater product breadth,
including the more sophisticated supplement products.
The retail and wholesale segments of the VMS industry are highly
fragmented. There are approximately 11,000 health food and vitamin chain stores
in the U.S., of which approximately 70% are independently owned and operated and
approximately 30% are associated with one of several regional or national
chains.
PRODUCTS
NBTY. NBTY manufactures and markets over 650 different products,
including vitamins, minerals, herbs, amino acids, sports nutrition products,
diet aids and other nutritional supplements. Management believes that NBTY's
unique production process enables the Company to manufacture smaller, easier to
swallow products than its competitors. Products are then packaged in recyclable
plastic bottles with tamper-evident hinged caps. As a result, NBTY's products
appeal to the needs of today's environmentally and safety conscious consumer.
NBTY assures total customer satisfaction by employing rigorous quality assurance
programs in its state-of-the-art laboratories.
H&B. H&B's product range is classified into two categories: nutritional
supplement products, which generated approximately 58% of total sales in fiscal
year 1997, and food products, which generated approximately 42% of total sales
in fiscal year 1997. Nutritional supplement products include herbal and
alternative remedies, sports nutrition, aromatherapy, and diet products. Food
product lines include fruit and nuts, confectionery, chilled and frozen foods,
beverages and milk, vegetarian foods, herbal teas, water and juices, honeys and
spreads, breakfast foods, condiments, and biscuits.
MANUFACTURING AND QUALITY CONTROL
NBTY. As a result of its ongoing manufacturing expansion, NBTY operates
technologically advanced manufacturing and production facilities, located on
Long Island in Bohemia, New York, consisting of approximately 625,000 square
feet in four modern buildings, of which 100,000 square feet is devoted to
manufacturing, 72,000 square feet to office space, 1,500 square feet to a
quality assurance and testing laboratory and the balance to warehouse and
distribution. All manufacturing is conducted in accordance with the good
manufacturing practices ("GMP") of the FDA and other applicable regulatory
standards. NBTY believes that the capacity of its manufacturing and distribution
facilities is adequate to meet the requirements of its current business and will
be adequate to meet the requirements of anticipated increases in net sales as a
result of the Acquisition.
NBTY's manufacturing process places special emphasis on quality
control. All raw materials used in production are initially held in quarantine
during which time NBTY's laboratory employees assay the product against the
manufacturer's certificate of analysis. Once cleared, a lot number is assigned,
samples are retained and the material is processed by formulating, mixing and
granulating, compression and sometimes coating operations. After the tablet is
manufactured, laboratory employees test its weight, purity, potency, dissolution
and stability. When a product such as vitamin tablets is ready for bottling, the
automated equipment counts the tablets, inserts them into bottles, adds a
tamper-resistant cap with an inner safety seal and affixes a label. NBTY uses
computer-generated documentation for picking and packing for order fulfillment.
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H&B. H&B has been a direct seller of a wide range of food and
nutritional supplement products and health food products and has not
historically manufactured its products. Prior to the Acquisition, H&B purchased
all of its products direct from wholesale manufacturers and third party
representatives and sold certain of these products under the H&B name.
SALES AND ADVERTISING
NBTY. NBTY has approximately 400 sales employees located throughout the
U.S. in its Vitamin World stores, and 70 employees who sell to NBTY's wholesale
distributors. In addition, NBTY sells through commissioned sales representative
organizations. In fiscal year 1996 and for the nine months ended June 30, 1997,
NBTY spent approximately $12.8 million and $10.6 million, respectively, on
advertising in print and media, including cooperative advertising. NBTY creates
its own advertising materials through a staff of approximately 22 employees.
H&B. During fiscal year 1997 H&B employed an average of 1,979 sales
employees in its retail stores. H&B runs advertisements weekly in four national
newspapers. It also conducts approximately 17 promotions per year at its retail
locations in addition to managers' specials. Six times per year H&B publishes a
glossy magazine with helpful articles and promotional materials.
RAW MATERIALS
The principal raw materials used in the manufacturing process are
natural and synthetic vitamins, purchased from bulk manufacturers in the U.S.,
Japan and Europe. NBTY purchases raw materials from numerous sources. One
supplier currently provides approximately 10% of NBTY's purchases, and no other
supplier accounts for 10% or more of NBTY's raw material purchases. NBTY
believes that the loss of its largest supplier would have a temporary adverse
effect upon its operations but that, over time, NBTY would be able to replace
such source of supply.
PROPERTIES
NBTY. NBTY owns a total of approximately 625,000 square feet of plant
facilities located at 60, 90, 105 and 115 Orville Drive in Bohemia, New York and
4320 Veterans Memorial Highway, Holbrook, New York. In addition, NBTY leases
approximately 10,000 square feet of warehouse space in Southampton, England, and
approximately 10,000 square feet of warehouse space in Reno, Nevada. NBTY
operates 115 retail stores under the name Vitamin World. The stores have an
average selling area of 1,200 square feet. Generally, NBTY leases the stores for
three to five years at annual base rents ranging from $12,000 to $94,000 and
percentage rents in the event sales exceed a specified amount.
H&B. H&B leases all of the locations of its 410 retail stores for terms
varying between 10 and 25 years at varying rents. No percentage rents are
payable. H&B leases approximately 9,000 square feet of space in Hinckley for
executive and administrative staff and also leases a 44,500 square foot facility
in Hinckley for warehouse and distribution space.
COMPETITION
UNITED STATES. The market for vitamins and other nutritional
supplements is highly competitive in all of NBTY's channels of distribution.
With respect to mail order sales, management believes that PURITAN'S PRIDE is
the largest mail order supplier of vitamins and other nutritional supplements
and competes with a large number of smaller, usually less geographically
diverse, mail order companies, some of which manufacture their own products and
some of which sell products manufactured by other companies. In its retail
Vitamin World stores, the Company competes regionally with specialty vitamin
stores, such as GNC and local drug stores, health food stores, supermarkets,
department stores and mass merchandisers. NBTY's NATURE'S BOUNTY and NATURAL
WEALTH brands compete with numerous vitamin distributors and manufacturers for
sales to drug store chains and supermarkets with heavily advertised national
brands manufactured by large pharmaceutical companies, as well as Your Life,
Nature Made and Sundown, marketed by Leiner Health Products, Inc., Pharmavite
Corp. and Rexall Sundown, Inc., respectively. It is not possible to estimate
accurately the number of competitors since the nutritional supplement industry
is fragmented.
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Management believes that NBTY competes favorably with other mail order
sellers of similar products on the basis of price and customer service,
including speed of delivery and new product offerings. Management believes that
NBTY competes favorably with the large pharmaceutical companies and other
companies that sell to wholesalers, on the basis of price, breadth of product
line, reputation and customer service, including innovative packaging and
displays and other services. Management believes that NBTY derives a competitive
advantage from its ability to manufacture and package its own vitamin and
nutritional supplement products, which affords it the flexibility to respond to
the shifting demands of each channel of distribution and, consequently, the
ability to achieve the manufacturing and operating efficiencies resulting from
larger production runs of products that can be packaged for sale in one or more
such channel.
UNITED KINGDOM. As in the U.S., the market for sales of vitamins,
minerals and other nutritional supplements is highly competitive. H&B's
principal competitors are large pharmacy chains, including Superdrug, Boots and
Lloyds, and major supermarket chains such as Tesco, Sainsbury's and ASDA. There
are also approximately 1,300 independent retailers of health foods and
nutritional supplements in the U.K. market. In addition, GNC has recently
entered the U.K. market and currently operates approximately 30 stores in the
U.K. As a result of the Acquisition, H&B intends to compete more effectively
with its competition through improved store formats, greater product offerings
and value pricing.
GOVERNMENT REGULATION
UNITED STATES. The manufacturing, packaging, labeling, advertising,
distribution and sale of NBTY's products are subject to regulation by one or
more federal agencies, the most active of which is the FDA. The Company's
products are also subject to regulation by the FTC, the Consumer Product Safety
Commission, the U.S. Department of Agriculture and the Environmental Protection
Agency, and by various agencies of the states and localities and foreign
countries in which NBTY's products are sold. In particular, the FDA, pursuant to
the Federal Food, Drug, and Cosmetic Act ("FDCA") regulates the production,
packaging, labeling and distribution of dietary supplements, including vitamins,
minerals and herbs, and over-the-counter ("OTC") drugs. In addition, the FTC has
jurisdiction to regulate advertising of dietary supplements and OTC drugs, while
the U.S. Postal Service regulates advertising claims with respect to such
products sold by mail order.
The FDCA has been amended several times with respect to dietary
supplements, most recently by the Dietary Supplement Health and Education Act of
1994 ("DSHEA") and the Nutrition Labeling and Education Act of 1990 ("NLEA").
DSHEA, enacted on October 15, 1994, introduced a new statutory framework
governing the composition and labeling of dietary supplements. With respect to
composition, DSHEA creates a new class of "dietary supplements," dietary
ingredients consisting of vitamins, minerals, herbs, amino acids and other
dietary substances for human use to supplement the diet, as well as
concentrates, metabolites, extracts or combinations of such dietary ingredients.
Generally, under DSHEA, dietary ingredients that were on the market before
October 15, 1994 may be sold without FDA pre-approval and without notifying the
FDA. On the other hand, a new dietary ingredient (one not on the market before
October 15, 1994) requires proof that it has been used as an article of food
without being chemically altered, or evidence of a history of use or other
evidence of safety establishing that it is reasonably expected to be safe. The
FDA must be supplied with such evidence at least 75 days before the initial use
of a new dietary ingredient. There can be no assurance that the FDA will accept
the evidence of safety for any new dietary ingredients that the Company may
decide to use, and the FDA's refusal to accept such evidence could result in
regulation of such dietary ingredients as food additives requiring FDA
pre-approval prior to marketing.
As for labeling, DSHEA permits "statements of nutritional support" for
dietary supplements without FDA pre-approval. Such statements may describe how
particular dietary ingredients affect the structure, function or general
well-being of the body, or the mechanism of action by which a dietary ingredient
may affect body structure, function or well-being (but may not state that a
dietary supplement will diagnose, mitigate, treat, cure or prevent a disease). A
company making a statement of nutritional support must possess substantiating
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<PAGE>
evidence for the statement, disclose on the label that the FDA has not reviewed
that statement and that the product is not intended for use for a disease, and
notify the FDA of the statement within 30 days after its initial use. However,
there can be no assurance that the FDA will not determine that a given statement
of nutritional support that the Company makes is not adequately substantiated as
required by DSHEA, or is a drug claim rather than a nutritional support
statement requiring the Company's submission and the FDA's approval of a new
drug application ("NDA"). Either determination could entail costly and
time-consuming clinical studies and in either situation the Company may have to
delete or modify the statement or claim involved. In addition, DSHEA allows the
dissemination of "third party literature", publications such as reprints of
scientific articles linking particular dietary ingredients with health benefits.
Third party literature may be used in connection with the sale of dietary
supplements to consumers at retail or by mail order. Such a publication may be
so distributed if, among other things, it is not false or misleading, no
particular manufacturer or brand of dietary supplement is mentioned, and a
balanced view of available scientific information on the subject matter is
presented. There can be no assurance, however, that all pieces of third party
literature that may be disseminated in connection with the Company's products
will be determined by the FDA to satisfy each of these requirements, and any
such failure could subject the product involved to regulation as a new drug.
Management anticipates that the FDA may promulgate good manufacturing
practice ("GMP") regulations authorized by DSHEA, which are specific to dietary
supplements. GMP regulations would require supplements to be prepared, packaged
and held in compliance with such rules, and may require similar quality control
provisions contained in the GMP regulations for drugs. The Company currently
manufactures its vitamins and nutritional supplement products pursuant to the
applicable food GMP rules. There can be no assurance that, if the FDA adopts GMP
regulations specific to dietary supplements, NBTY will be able to comply with
such GMP rules upon promulgation or without incurring material expense to do so.
The FDA has finalized regulations to implement certain labeling
provisions of DSHEA. In addition, further DSHEA labeling regulations are
expected to be proposed by the FDA once the agency receives the final report of
the expert Commission on Dietary Supplement Labels, established by DSHEA to
provide recommendations on labeling claims for supplements. The Commission on
Dietary Supplements issued its draft report in June 1997. It is uncertain when
the final report will be issued or when the FDA will propose further
regulations. NBTY cannot determine what effect such regulations, when
promulgated, will have on its business in the future. There can be no assurance
that such regulations will not require expanded or different labeling for NBTY's
vitamins and nutritional products or, 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.
NLEA prohibits the use of any health claim (as distinguished from
"statements of nutritional support" permitted by DSHEA) for foods, including
dietary supplements, unless the health claim is supported by significant
scientific agreement and is pre-approved by the FDA. To date, the FDA has
approved the use of health claims for dietary supplements only in connection
with the use of calcium for osteoporosis and the use of folic acid for neural
tube defects.
The FDA has broad authority to enforce the provisions of the FDCA
applicable to dietary supplements, including the power to seize adulterated or
misbranded products or unapproved new drugs, to request their recall from the
market, to enjoin their further manufacture or sale, to publicize information
about a hazardous product, to issue warning letters and to institute criminal
proceedings. Although the regulation of dietary supplements is less restrictive
than that imposed upon drugs and food additives, there can be no assurance that
dietary supplements will continue to be subject to the less restrictive
statutory scheme and regulations currently in effect. Further, there can be no
assurance that, if more stringent statutes are enacted or regulations are
promulgated, the Company will be able to comply with such statutes and
regulations without incurring material expense to do so.
The OTC pharmaceutical products distributed by the Company are subject
to regulation by a number of Federal and State governmental agencies. In
particular, the FDA regulates the formulation, manufacture, packaging and
labeling of all OTC pharmaceutical products pursuant to a monograph system
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<PAGE>
specifying OTC active drug ingredients that are generally recognized as safe and
effective for particular therapeutic conditions. Compliance with applicable FDA
monographs is required for the lawful interstate sale of OTC drugs. The FDA has
the same above-noted enforcement powers for violations of the FDCA by drug
manufacturers as it does for such violations by dietary supplement producers.
The FTC, which exercises jurisdiction over the advertising of dietary
supplements, has in the past several years instituted enforcement actions
against several dietary supplement companies for false and misleading
advertising of certain products. These enforcement actions have resulted in
consent decrees and the payment of fines by the companies involved. In addition,
the FTC has increased its scrutiny of infomercials. The Company is currently
subject to an FTC consent decree for past advertising claims for certain of its
products, and the Company is required to maintain compliance with this decree
under pain of civil monetary penalties. Further, the U.S. Postal Service has
issued cease and desist orders against certain mail order advertising claims
made by dietary supplement manufacturers, including NBTY, and NBTY is required
to maintain compliance with this order, also under pain of civil monetary
penalties.
The Company is also subject to regulation under various international,
state and local laws that include provisions regulating, among other things, the
marketing of dietary supplements and the operations of direct sales programs.
The Company may be subject to additional laws or regulations administered by the
FDA or other federal, state or foreign regulatory authorities, the repeal of
laws or regulations that considers favorable, such as DSHEA, or more stringent
interpretations of current laws or regulations, from time to time in the future.
The Company is unable to predict the nature of such future laws, regulations,
interpretations or applications, nor can it predict what effect additional
governmental regulations or administrative orders, when and if promulgated,
would have on its business in the future. These regulations could, however,
require the reformulation of certain products to meet new standards, the recall
or discontinuance of certain products not able to be reformulated, imposition of
additional recordkeeping requirements, expanded documentation of the properties
of certain products, expanded or different labeling, and/or scientific
substantiation. Any or all of such requirements could have a material adverse
effect on the Company's results of operations and financial condition. See "Risk
Factors--Government Regulation."
UNITED KINGDOM. In the U.K., the manufacture, advertising, sale and
marketing of food products is regulated by a number of government agencies
including the Ministry of Agriculture, Fisheries and Food and the Department of
Health. In addition, there are various independent committees and agencies that
report to the government, such as the Food Advisory Committee, which reports to
MAFF and suggests appropriate courses of action by the relevant government
department where there are areas of concern relating to food, and the Committee
on Toxicity, which reports to the Department of Health. The relevant legislation
governing the sale of food includes the Food Safety Act 1990, which sets out
general provisions relating to the sale of food; for example, this law makes it
unlawful to sell food that is harmful to human health. In addition, there are
various statutory instruments and E.C. regulations governing specific areas such
as the use of sweeteners, colouring and additives in food. Trading standards
officers under the control of the Department of Trade and Industry also regulate
matters such as the cleanliness of the properties on which food is produced and
sold.
Food that has medicinal properties may fall under the jurisdiction of
the Medicines Control Agency, a regulatory authority whose responsibility is to
ensure that all medicines sold or supplied for human use in the U.K. meet
acceptable standards of safety, quality and efficacy. These standards are
determined by the 1968 Medicines Act together with an increasing number of E.C.
regulations and directives laid down by the European Union. The latter take
precedence over national law. The MCA has a "borderline department" which
determines when food should be treated as a medicine and should therefore fall
under the relevant legislation relating to medicines. The MCA operates as the
agent of the licensing authority (the United Kingdom Health Ministers) and its
activities cover every facet of medicines controlled in the U.K. including
involvement in the development of common standards of medicines controlled in
Europe. The MCA is responsible, for example, for licensing, inspection and
enforcement to ensure that legal requirements concerning manufacture,
distribution, sale, labeling, advertising and promotion are upheld.
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TRADEMARKS
NBTY. NBTY owns trademarks registered with the United States Patent and
Trademark Office and many foreign jurisdictions for its NATURE'S BOUNTY, GOOD `N
NATURAL, HUDSON, AMERICAN HEALTH, NATURAL WEALTH, PURITAN'S PRIDE and Vitamin
World trademarks and has rights to use other names essential to its business.
U.S. registered trademarks have a perpetual life, as long as they are renewed on
a timely basis and used properly as trademarks, subject to the rights of third
parties to seek cancellation of the marks. NBTY regards its trademarks and other
proprietary rights as valuable assets and believes they have significant value
in the marketing of its products. NBTY vigorously protects its trademarks
against infringement.
H&B. H&B owns trademarks registered with the appropriate U.K.
authorities for its Holland & Barrett trademark and has rights to use other
names essential to its business.
EMPLOYEES
NBTY. As of June 30, 1997, NBTY employed approximately 1,460 persons,
of whom approximately 350 are in executive and administrative capacities, 70 are
in wholesale sales, 400 are in the Vitamin World stores and the balance are in
manufacturing, shipping and packaging. None of NBTY's employees are represented
by a labor union. NBTY believes that its relationship with its employees is
excellent.
H&B. During fiscal year 1997, H&B employed an average of 2,195 persons,
of whom 99 worked in executive or administrative capacities, 1,979 worked in
retail stores and 117 worked in warehouse and distribution. Other
administrative, clerical and buying services were provided by Lloyds personnel
pursuant to a central services arrangement. There is no trade union
representation at H&B. H&B management believes that its relationship with its
employees is excellent.
LITIGATION
NBTY. NBTY and certain other companies in the industry have been named
as defendants in cases arising out of the ingestion of products containing
L-Tryptophan. NBTY had been named in more than 265 such lawsuits, of which four
are still pending against NBTY. The other 261 lawsuits have been settled at no
cost to NBTY. NBTY's supplier of L-Tryptophan agreed to indemnify NBTY and the
other companies named in the lawsuits through the final resolution of all cases
involving L-Tryptophan. In addition, the supplier has posted, for the benefit of
NBTY and the other companies named in the lawsuits, a revolving, irrevocable
letter of credit of $20 million to be used in the event that the supplier is
unable or unwilling to satisfy any claims or judgments. While not all of these
suits quantify the amount demanded, NBTY believes that the amount required to
either settle these cases or to pay judgments rendered therein will be paid by
the supplier or by NBTY's product liability insurance carrier.
In October 1994, litigation was commenced in the U.S. District Court,
Eastern District of New York, against NBTY and two of its officers. An Amended
Complaint was filed in October 1996, alleging that false and misleading
statements and representations were made concerning NBTY's sales and earnings
estimates for the fiscal years ending September 30, 1993 and 1994 and the fiscal
quarters of 1994. The allegations are that NBTY improperly (i) recognized
revenue on a sale to a customer in September 1993, (ii) capitalized and
amortized certain promotional costs in 1994, (iii) reported positive sales
trends in mid-1994 by an improper comparison to prior year sales, and (iv)
expressed comfort with an independent analyst's projection of modest earnings
for 1994 when earnings later proved to be less than analysts predicted.
Plaintiffs' case has been certified as a class action. NBTY and its officers
denied the allegations of the Amended Complaint and have vigorously contested
the claim. In order to avoid the further commitment of senior management time
and to limit further litigation expense, on October 17, 1997, NBTY signed a
Memorandum of Understanding to settle the class action. While vigorously denying
any liability, under the terms of the settlement, the Company will pay a total
of $8 million, comprised of $4.4 million in cash and $3.6 million in stock. The
settlement requires the approval of the Court to be finalized. An undetermined
portion of that payment will be covered by insurance reimbursement under a
Directors and Officer Indemnity Policy, which was purchased prior to the
commencement of the lawsuit.
H&B. H&B is not involved in any litigation believed to be material to
its business or operations.
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MANAGEMENT
DIRECTORS AND OFFICERS
Set forth below are the names and other relevant information regarding
executive and certain other of officers of the Company as of August 29, 1997.
<TABLE>
<CAPTION>
COMMENCEMENT
YEAR FIRST OF TERM AS
ELECTED EXECUTIVE OR
NAME AGE POSITION DIRECTOR OTHER OFFICER
- ---- --- -------- -------- -------------
<S> <C> <C> <C> <C>
Scott Rudolph 39 Chairman of the Board, President and
Chief Executive Officer 1986 1986
Harvey Kamil 53 Executive Vice President, Chief
Financial Officer and Secretary -- 1982
Barry Drucker 49 Senior Vice President--Sales -- 1985
Patricia E. Ciccarone 41 Vice President--Vitamin World -- 1992
James P. Flaherty 40 Vice President--Advertising -- 1988
James A. Taylor 56 Vice President--Production -- 1982
Arthur Rudolph 69 Director 1971 --
Aram Garabedian 62 Director 1971 --
Bernard G. Owen 69 Director 1971 --
Alfred Sacks 69 Director 1971 --
Murray Daly 70 Director 1988 --
Glenn Cohen 38 Director 1994 --
Nathan Rosenblatt 40 Director 1994 --
</TABLE>
The Directors of the Company are elected to serve a three-year term or
until their respective successors are elected and qualified. Officers of the
Company hold office until the meeting of the Board of Directors immediately
following the next annual shareholders meeting or until removal by the Board,
whether with or without cause.
SCOTT RUDOLPH is the Chairman of the Board of Directors, President and
Chief Executive Officer and is a shareholder of the Company. Mr. Rudolph founded
U.S. Nutrition Corp., a mail order vitamin company in 1976, which was purchased
by NBTY in 1986. He is the Chairman of Dowling College, Long Island, New York.
He joined NBTY in 1986. He is the son of Arthur Rudolph.
HARVEY KAMIL is Executive Vice President, Chief Financial Officer and
Secretary. He is on the Board of Directors of the Council for Responsible
Nutrition. He joined NBTY in 1982.
BARRY DRUCKER is Senior Vice President--Sales. He joined NBTY in 1976.
PATRICIA E. CICCARONE is Vice President--Vitamin World. She previously
served as Director of Stores for Park Lane, a 500 store hosiery chain. She
joined NBTY in 1988.
JAMES P. FLAHERTY is Vice President--Advertising. He joined NBTY in
1979.
JAMES E. TAYLOR is Vice President--Production. He joined NBTY in 1981.
ARTHUR RUDOLPH founded Arco Pharmaceuticals, Inc., NBTY's predecessor,
in 1960 and served as NBTY's Chief Executive Officer and Chairman of the Board
of Directors since that date until his resignation in September 1993. He remains
a member of the Board of Directors and was responsible for the formation of NBTY
in 1971. He is the father of Scott Rudolph.
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<PAGE>
ARAM GARABEDIAN has been a real estate developer in Rhode Island since
1988. He was associated with NBTY and its predecessor, Arco Pharmaceuticals,
Inc., for 20 years in a sales capacity and as an Officer. He has served as a
Director since 1971.
BERNARD G. OWEN has been associated with Cafiero, Cuchel and Owen
Insurance Agency, Pitkin, Owen Insurance Agency and Wood-HEW Travel Agency for
more than the past five years. He currently serves as Chairman of these firms.
ALFRED SACKS has been engaged as President of Al Sacks, Inc., an
insurance agency, for the past thirty years.
MURRAY DALY, formerly a Vice President of J. P. Egan Office Equipment
Co., is currently a consultant to the office equipment industry.
GLENN COHEN has been the President of Glenn-Scott Landscape and Design
for more than five years.
BUD SOLK has been President of Chase/Ehrenberg & Rosene, Inc., an
advertising and marketing agency located in Chicago, Illinois since 1995.
Previously, Mr. Solk was President of Bud Solk Associates, Inc., which he
founded in 1958.
NATHAN ROSENBLATT is the President and Chief Executive Officer of
Ashland Maintenance Corp., a commercial maintenance organization located in Long
Island, New York.
EMPLOYMENT AGREEMENTS
Scott Rudolph, Chairman of the Board, President and Chief Executive
Officer of the Company, entered into an employment agreement effective February
1, 1994, as amended, to terminate January 31, 2004, providing for annual
compensation of $450,000 with annual cost of living index increases, bonuses and
other fringe benefits accorded other executives of NBTY.
Harvey Kamil, Executive Vice President, Chief Financial Officer and
Secretary of the Company, entered into an employment agreement effective
February 1, 1994, to terminate January 31, 2004, providing for annual
compensation of $250,000 with annual cost of living index increases, bonuses and
other fringe benefits accorded other executives of NBTY.
Each of the above agreements also provides for the immediate
acceleration of the payment of all compensation for the term of the contract and
the registration and sale of all issued stock, stock options and shares
underlying options in the event of a change of control, a tender offer for
shares of NBTY, which offer was not authorized by the Board of Directors, or
involuntary (i) termination of employment, (ii) reduction of compensation, or
(iii) diminution of responsibilities or authority. Additionally, three rnembers
of H&B's senior executive staff have 12 month service contracts which require
that they provide the Company with three months notice prior to termination of
the contract.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following information with respect to the outstanding shares of
common stock beneficially owned by (i) each director of the Company, (ii) the
chief executive officer and the five other most highly compensated executive
officers, (iii) all beneficial owners of more than five percent of common stock
known to the Company, and (iv) the directors and executive officers as a group,
is furnished as of August 25, 1997, except as otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF
NAME OF BENEFICIAL OWNERS COMMON STOCK CLASS
- ------------------------- ------------ ----------
<S> <C> <C>
Scott Rudolph(b).............................................. 3,147,686 16.0%
Arthur Rudolph(b)............................................. 647,982 3.5
Aram Garabedian............................................... 14,000 *
Bernard G. Owen............................................... 27,500 *
Alfred Sacks.................................................. -- --
Murray Daly................................................... 15,009 *
Glen Cohen.................................................... 29,000 *
Bud Solk...................................................... 14,000 --
Nathan Rosenblatt............................................. -- --
Harvey Kamil.................................................. 689,780 3.7
Barry Drucker................................................. 100,131 *
James P. Flaherty............................................. 44,408 *
James H. Taylor............................................... 41,483 *
Patricia E. Ciccarone......................................... 1,781 *
All directors and Executive Offficers as a group (14 persons)(b) 4,099,778 20.4
NBTY, Inc. Profit Sharing Plan................................ 1,062,228 5.7
</TABLE>
(*) Indicates ownership of less than one percent of class.
- -----------------
(a) Each stockholder shown on the table has sole voting and investment power
with respect to the shares beneficially owned. Each named person or group
is deemed to be the beneficial owner of securities which may be acquired
within 60 days through the exercise or conversion of options, if any, and
such securities are deemed to be outstanding for the purpose of computing
the percentage beneficially owned by such person or group. Such securities
are not deemed to be outstanding for the purpose of computing the
percentage of class beneficially owned by any other person or group.
Accordingly, the indicated number of shares includes shares issuable upon
exercise of options (including employee stock options) and any other
beneficial ownership of securities held by such person or group.
(b) Includes shares held in a Trust created by Arthur Rudolph for the benefit
of Scott Rudolph and others.
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<PAGE>
DESCRIPTION OF THE REVOLVING CREDIT FACILITY
The Revolving Credit Facility is provided by a syndicate of banks and
other financial institutions led by The Chase Manhattan Bank, as administrative
agent (the "Agent"), and provides for borrowings in an aggregate principal
amount of up to $50.0 million (of which up to $5.0 million is available in the
form of letters of credit and up to $5.0 million may be extended in the form of
swingline loans). The Company used a portion of the Revolving Credit Facility to
pay the Promissory Notes. The following summary of the Revolving Credit Facility
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, the Revolving Credit Facility.
SECURITY, GUARANTEES. The obligations of the Company under the
Revolving Credit Facility are unconditionally and irrevocably guaranteed,
jointly and severally, by each direct and indirect domestic subsidiary of the
Company and each subsequently acquired or organized subsidiary of the Company.
In addition, the obligations of the Company under the Revolving Credit Facility
and the guarantees thereunder are secured by substantially all of the non-real
estate assets of the Company and the guarantors.
INTEREST. The Revolving Credit Facility is a six-year facility and
bears interest at a rate per annum equal (at the Company's option) to: (i) the
Agent's Eurodollar rate plus an applicable margin, (ii) an alternate base rate
plus an applicable margin or (iii) the Agent's Eurocurrency rate plus an
applicable margin. Principal amounts under the Revolving Credit Facility not
paid when due shall bear interest at a default rate equal to 2.00% per annum
above the otherwise applicable rate. Other amounts not paid when due under the
Revolving Credit Facility shall bear interest at the interest rate then
applicable to alternate base rate loans under the Revolving Credit Facility plus
2.00% per annum.
PREPAYMENTS. Voluntary prepayments of borrowings under the Revolving
Credit Facility and voluntary reductions of the unutilized portions of the
Revolving Credit Facility are permitted at any time in minimum principal amounts
to be agreed upon.
FEES. The Company is required to pay the lenders, on a quarterly basis,
a commitment fee ranging from 0.25% to 0.50% per annum on the undrawn portion of
the commitments, based upon the Company's ratio of (i) consolidated total debt
as of the date of determination and (ii) consolidated EBITDA for the period of
four consecutive fiscal quarters most recently ended as of such date of
determination. The Company is also required to pay (a) a per annum letter of
credit fee, on a quarterly basis, equal to the applicable Eurodollar loan margin
on the amount available to be drawn under standby letters of credit, (b) a fee,
on a quarterly basis, equal to 0.25% of the aggregate face amount of outstanding
commercial letters of credit, (c) a fronting bank fee, and (d) agent,
arrangement and other similar fees.
COVENANTS. The Revolving Credit Facility contains a number of covenants
that, among other things, restrict the ability of the Company and its
subsidiaries, subject to certain exceptions, to dispose of assets, incur
additional indebtedness, incur guarantee obligations, prepay other indebtedness
or amend other debt instruments, make distributions or pay dividends on
partnership interests or capital stock, redeem and repurchase partnership
interests or capital stock, create liens on assets, enter into sale and
leaseback transactions, make investments, loans or advances, make acquisitions,
engage in mergers or consolidations, change the business conducted by the
Company or its subsidiaries, make capital expenditures or engage in certain
transactions with affiliates and otherwise restrict certain business activities.
In addition, the Company is required to comply with specified financial ratios
and tests, including minimum fixed charge coverage ratios, maximum leverage
ratios and minimum net worth tests.
The Revolving Credit Facility also contains provisions that prohibit
any modification of the Indenture in any manner adverse to the lenders and that
limit the Company's ability to refinance or otherwise prepay the Exchange Notes
without the consent of such lenders.
EVENTS OF DEFAULT. The Revolving Credit Facility contains customary
events of default, including payment defaults, breach of representations and
warranties, covenant defaults, cross-defaults and cross-acceleration to certain
other indebtedness, certain events of bankruptcy and insolvency, Employee
55
<PAGE>
Retirement Income Security Act of 1974 events, judgment defaults, actual or
asserted invalidity of any security documents or guarantees, change of control,
the voluntary creation of security interests relating to partnership interests
in the Company or the voluntary creation of any prohibition on the creation of
such security interests.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is based on the 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.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions 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
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. The Company recommends that each holder consult such holder's own tax
advisor as to the particular tax consequences of exchanging such holder's
Original Notes for Exchange Notes, including the applicability and effect of any
state, local or foreign tax laws.
The Company believes that the exchange of Original Notes for Exchange
Notes pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the Exchange Notes will not be considered to
differ materially in kind or extent from the Original Notes. Rather, the
Exchange Notes received by a holder will be treated as a continuation of the
Original Notes in the hands of such holder. As a result, there should be no
federal income tax consequences to holders exchanging Original Notes for
Exchange Notes pursuant to the Exchange Offer.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Original Notes were, and the Exchange Notes will be, issued under
an Indenture (the "Indenture"), dated as of September 23, 1997, by and between
the Company and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee").
The form and terms of the Exchange Notes are the same as the form and terms of
the Original Notes (which they replace) except that (i) the Exchange Notes bear
a Series B designation, (ii) the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and (iii) the holders of Exchange Notes will not be entitled to certain
rights under the Exchange and Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Original Notes
in certain circumstances relating to the timing of the Exchange Offer, which
rights will terminate when the Exchange Offer is consummated. The Original Notes
issued in the Initial Offering and the Exchange Notes offered hereby are
referred to collectively as the "Notes."
The following summary of certain provisions of the Indenture does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), and to all of the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part of the Indenture by
reference to the Trust Indenture Act, as in effect on the date of the Indenture.
The definitions of certain capitalized terms used in the following summary are
set forth below under "Certain Definitions." References in this "Description of
the Exchange Notes" section and the "Registration Rights," "Book-Entry; Delivery
and Form" and "Plan of Distribution" sections to "the Company" mean only NBTY,
Inc. and not any of its Subsidiaries.
GENERAL
The Notes are unsecured, senior subordinated obligations of the
Company. The Original Notes were and the Exchange Notes will be, issued only in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. Pursuant to the Indenture, the Trustee, initially, will
serve as registrar and paying agent. No service charge will be made for any
registration of transfer or exchange of the Notes, except for any tax or other
governmental charge that may be imposed in connection therewith.
RANKING
The Notes rank junior to, and are subordinated in right of payment to,
all existing and future Senior Indebtedness of the Company, PARI PASSU in right
of payment with all senior subordinated Indebtedness of the Company and senior
in right of payment to all Subordinated Indebtedness of the Company. At June 30,
1997, on a pro forma basis after giving effect to the Transaction, the Company
would have had approximately $31.1 million of Senior Indebtedness outstanding
(excluding unused commitments) and no senior subordinated Indebtedness, other
than the Notes. All debt incurred under the Revolving Credit Facility is Senior
Indebtedness of the Company, is guaranteed by the Company's domestic
Subsidiaries and is secured by substantially all of the assets of the Company
and its Subsidiaries.
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MATURITY, INTEREST AND PRINCIPAL OF THE NOTES
The Notes are limited to $150 million aggregate principal amount and
will mature on September 15, 2007. Cash interest on the Notes will accrue at a
rate of 8-5/8% per annum and will be payable semi-annually in arrears on each
September 15 and March 15, commencing on March 15, 1998, to the holders of
record of Notes at the close of business on September 1 and March 1,
respectively, immediately preceding such interest payment date. Interest 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. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or
in part, at any time on or after September 15, 2002, at the redemption prices
(expressed as a percentage of principal amount) set forth below, plus accrued
and unpaid interest thereon, if any, to the redemption date (subject to the
right of holders of record on the relevant record date to receive interest due
on the relevant interest payment date), if redeemed during the 12-month period
beginning on September 15, of the years indicated below:
REDEMPTION
YEAR PRICE
- --- ----------
2002................................................. 104.313%
2003................................................. 102.875%
2004................................................. 101.438%
2005 and thereafter.................................. 100.000%
In addition, at any time and from time to time on or prior to September
15, 2000, the Company may redeem in the aggregate up to 33-1/3% of the
originally issued aggregate principal amount of the Notes with the net cash
proceeds of one or more Public Equity Offerings by the Company at a redemption
price in cash equal to 108.625% of the principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the date of redemption (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); PROVIDED, HOWEVER, that at least 66-2/3%
of the originally issued aggregate principal amount of the Notes must remain
outstanding immediately after giving effect to each such redemption (excluding
any Notes held by the Company or any of its Affiliates). Notice of any such
redemption must be given within 60 days after the date of the closing of the
relevant Public Equity Offering of the Company.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any
time pursuant to an optional redemption, selection of such 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 then listed on a national securities exchange, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate;
PROVIDED, HOWEVER, that no Notes of a principal amount of $1,000 or less shall
be redeemed in part; provided, further, however, that if a partial redemption is
made with the net cash proceeds of a Public Equity Offering by the Company,
selection of the Notes or portions thereof for redemption shall be made by the
Trustee only on a pro rata basis or on as nearly a pro rata basis as is
practicable (subject to the procedures of The Depository Trust Company), unless
such method is otherwise prohibited. Notice 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. 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 a principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
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the original Note. On and after the redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as long as the Company
has deposited with the paying agent for the Notes funds in satisfaction of the
applicable redemption price pursuant to the Indenture.
SUBORDINATION OF THE NOTES
The payment of the principal of, premium, if any, and interest on the
Notes is subordinated in right of payment, to the extent and in the manner
provided in the Indenture, to the prior payment in full in cash of all Senior
Indebtedness.
Upon any payment or distribution of assets or securities of the Company
of any kind or character, whether in cash, property or securities (excluding any
payment or distribution of Permitted Junior Securities and excluding any payment
from funds deposited in accordance with, and held in trust for the benefit of
Holders pursuant to, "Legal Defeasance and Covenant Defeasance" (a "Defeasance
Trust Payment")), upon any dissolution or winding up or total liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Senior
Indebtedness then due shall first be paid in full in cash before the Holders of
the Notes or the Trustee on behalf of such Holders shall be entitled to receive
any payment by the Company of the principal of, premium, if any, or interest on
the Notes, or any payment by the Company to acquire any of the Notes for cash,
property or securities, or any distribution by the Company with respect to the
Notes of any cash, property or securities (excluding any payment or distribution
of Permitted Junior Securities and excluding any Defeasance Trust Payment).
Before any payment may be made by, or on behalf of, the Company of the principal
of, premium, if any, or interest on the Notes upon any such dissolution or
winding up or total liquidation or reorganization, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment), to which the Holders of the Notes or the Trustee on their behalf would
be entitled, but for the subordination provisions of the Indenture, shall be
made by the Company or by any receiver, trustee in bankruptcy, liquidation
trustee, agent or other Person making such payment or distribution, directly to
the holders of the Senior Indebtedness (pro rata to such holders on the basis of
the respective amounts of Senior Indebtedness held by such holders) or their
representatives or to the trustee or trustees or agent or agents under any
agreement or indenture pursuant to which any of such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full in cash after giving
effect to any prior or concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.
No direct or indirect payment (excluding any payment or distribution of
Permitted Junior Securities and excluding any Defeasance Trust Payment) by or on
behalf of the Company of principal of, premium, if any, or interest on the
Notes, whether pursuant to the terms of the Notes, upon acceleration, pursuant
to an Offer to Purchase or otherwise, shall be made if, at the time of such
payment, there exists a default in the payment of all or any portion of the
obligations on any Senior Indebtedness, whether at maturity, on account of
mandatory redemption or prepayment, acceleration or otherwise, and such default
shall not have been cured or waived or the benefits of this sentence waived by
or on behalf of the holders of such Senior Indebtedness. In addition, during the
continuance of any non-payment event of default with respect to any Designated
Senior Indebtedness pursuant to which the maturity thereof may be immediately
accelerated, and upon receipt by the Trustee of written notice (a "Payment
Blockage Notice") from the holder or holders of such Designated Senior
Indebtedness or the trustee or agent acting on behalf of the holders of such
Designated Senior Indebtedness, then, unless and until such event of default has
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been cured or waived or has ceased to exist or such Designated Senior
Indebtedness has been discharged or repaid in full in cash or the benefits of
these provisions have been waived by the holders of such Designated Senior
Indebtedness, no direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment) will be made by or on behalf of the Company of principal of, premium,
if any, or interest on the Notes, whether pursuant to the terms of the Notes,
upon acceleration, pursuant to an Offer to Purchase or otherwise, to such
Holders, during a period (a "Payment Blockage Period") commencing on the date of
receipt of such notice by the Trustee and ending 179 days thereafter.
Notwithstanding anything in the subordination provisions of the Indenture or the
Notes to the contrary, (x) in no event will a Payment Blockage Period extend
beyond 179 days from the date the Payment Blockage Notice in respect thereof was
given, (y) there shall be a period of at least 181 consecutive days in each
360-day period when no Payment Blockage Period is in effect and (z) not more
than one Payment Blockage Period may be commenced with respect to the Notes
during any period of 360 consecutive days. No event of default that existed or
was continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period (to the extent the holder of Designated Senior Indebtedness, or trustee
or agent, giving notice commencing such Payment Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for
the commencement of any other Payment Blockage Period by the holder or holders
of such Designated Senior Indebtedness or the trustee or agent acting on behalf
of such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days.
The failure to make any payment or distribution for or on account of
the Notes by reason of the provisions of the Indenture described under this
"Subordination of the Notes" heading will not be construed as preventing the
occurrence of any Event of Default in respect of the Notes. See "Events of
Default" below.
By reason of the subordination provisions described above, in the event
of insolvency of the Company, funds which would otherwise be payable to Holders
of the Notes will be paid to the holders of Senior Indebtedness to the extent
necessary to pay the Senior Indebtedness in full in cash, and the Company may be
unable to meet fully or at all its obligations with respect to the Notes.
At the time of the issuance of the Notes, the Revolving Credit Facility
will be the only outstanding Senior Indebtedness of the Company. Subject to the
restrictions set forth in the Indenture, in the future the Company may issue
additional Senior Indebtedness.
OFFER TO PURCHASE UPON CHANGE OF CONTROL
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall notify the
Holders of the Notes of such occurrence in the manner prescribed by the
Indenture and shall, within 20 days after the Change of Control Date, make an
Offer to Purchase all Notes then outstanding at a purchase price in cash equal
to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant record date to receive interest due on the relevant
interest payment date).
If a Change of Control occurs which also constitutes an event of
default under the Revolving Credit Facility, the lenders under the Revolving
Credit Facility would be entitled to exercise the remedies available to a
secured lender under applicable law and pursuant to the terms of the Revolving
Credit Facility. Accordingly, any claims of such lenders with respect to the
assets of the Company will be prior to any claim of the Holders of the Notes
with respect to such assets.
If the Company makes an Offer to Purchase, the Company will comply with
all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Notes are listed, and any
violation of the provisions of the Indenture relating to such Offer to Purchase
occurring as a result of such compliance shall not be deemed a Default or an
Event of Default.
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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.
CERTAIN COVENANTS
LIMITATION ON INDEBTEDNESS. The Company shall not, and shall not cause
or permit any Subsidiary to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness), except for Permitted Indebtedness; PROVIDED,
HOWEVER, that the Company may Incur Indebtedness if, at the time of and
immediately after giving pro forma effect to such Incurrence of Indebtedness and
the application of the proceeds therefrom, the Consolidated Coverage Ratio would
be greater than (x) 2.375 to 1.00 if such Indebtedness is Incurred prior to the
first anniversary of the Issue Date; (y) 2.5 to 1.00 if such Indebtedness is
Incurred on or after the first anniversary of the Issue Date and prior to the
second anniversary of the Issue Date; and (z) 2.625 to 1.00 if such Indebtedness
is Incurred thereafter. Notwithstanding the foregoing, after October 17, 1997,
the Company shall not permit to be outstanding the Promissory Notes or the
letters of credit issued to collateralize such Promissory Notes.
The limitations contained in the preceding paragraph will not apply to
the Incurrence of any of the following (collectively, "Permitted Indebtedness"),
each of which shall be given independent effect:
(a) Indebtedness under the Notes;
(b) Indebtedness of the Company Incurred under the Revolving Credit
Facility in an aggregate principal amount at any one time outstanding not to
exceed $60 million;
(c) Indebtedness of any Subsidiary of the Company owed to and held by
the Company or any Wholly Owned Subsidiary, and Indebtedness of the Company owed
to and held by any Wholly Owned Subsidiary that is unsecured and subordinated in
right of payment to the payment and performance of the Company's obligations
under any Senior Indebtedness, the Indenture and the Notes; PROVIDED, HOWEVER,
that an Incurrence of Indebtedness that is not permitted by this clause (c)
shall be deemed to have occurred upon (i) any sale or other disposition of any
Indebtedness of the Company or any Subsidiary of the Company referred to in this
clause (c) to a Person (other than the Company or a Wholly Owned Subsidiary),
(ii) any sale or other disposition of Equity Interests of any Subsidiary which
holds Indebtedness of the Company or another Subsidiary;
(d) Interest Rate Protection Obligations; PROVIDED, HOWEVER, that such
Interest Rate Protection Obligations have been entered into for bona fide
business purposes and not for speculation;
(e) Purchase Money Indebtedness and Capitalized Lease Obligations of
the Company or any Subsidiary of the Company and other Indebtedness of the
Company, in an aggregate principal amount at any one time outstanding not to
exceed $20 million;
(f) Indebtedness of the Company under Currency Agreements; PROVIDED,
HOWEVER, (i) that such Currency Agreements have been entered into for bona fide
business purposes and not for speculation and (ii) that in the case of Currency
Agreements which relate to Indebtedness, such Currency Agreements do not
increase the Indebtedness of the Company and its Subsidiaries outstanding other
than as a result of fluctuations in foreign currency exchange rates or by reason
of fees, indemnities and compensation payable thereunder;
(g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness (other than Indebtedness Incurred under clauses (b), (c), (d), (e),
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(f) or (h) of this covenant); PROVIDED, HOWEVER, that (i) any such refinancing
shall not exceed the sum of the principal amount (or accreted amount (determined
in accordance with GAAP), if less) of the Indebtedness being refinanced, plus
the amount of accrued interest thereon, plus the amount of any reasonably
determined prepayment premium necessary to accomplish such refinancing and such
reasonable fees and expenses incurred in connection therewith, (ii) Indebtedness
representing a refinancing of Indebtedness other than Senior Indebtedness shall
have a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of the Indebtedness being refinanced; (iii)
Indebtedness that is pari passu with the Notes may only be refinanced with
Indebtedness that is made pari passu with or subordinate in right of payment to
the Notes and Subordinated Indebtedness may only be refinanced with Subordinated
Indebtedness; and (iv) Indebtedness of the Company may only be refinanced by
Indebtedness of the Company and Indebtedness of a Subsidiary of the Company may
only be refinanced by Indebtedness of Subsidiaries or by the Company; and
(h) guarantees by a Subsidiary of the Company of Senior Indebtedness
Incurred by the Company so long as the Incurrence of such Indebtedness is
otherwise permitted by the terms of the Indenture.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company shall not,
directly or indirectly, Incur any Indebtedness that by its terms would expressly
rank senior in right of payment to the Notes and subordinate in right of payment
to any other Indebtedness of the Company.
LIMITATION ON RESTRICTED PAYMENTS. The Company shall not, and shall not
cause or permit any Subsidiary of the Company to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any Equity
Interests of the Company or any Subsidiary of the Company or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Subsidiary of
the Company (other than any dividends, distributions and payments made to
the Company or any Wholly Owned Subsidiary of the Company and dividends or
distributions payable to any Person solely in Qualified Equity Interests of
the Company or in options, warrants or other rights to purchase Qualified
Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary of the Company (other
than any such Equity Interests owned by the Company or any Subsidiary of
the Company); or
(iii) make any Investment in any Person (other than Permitted
Investments)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii) or (iii) (a "Restricted Payment"), unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of "Limitation on Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after the
Issue Date does not exceed an amount equal to the sum of (1) 50% of cumulative
Consolidated Net Income determined for the period (taken as one period) from the
beginning of the first fiscal quarter commencing after the Issue Date and ending
on the last day of the most recent fiscal quarter immediately preceding the date
of such Restricted Payment for which consolidated financial information of the
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Company is available (or if such cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss), plus (2) the aggregate net cash proceeds
received by the Company either (x) as capital contributions to the Company after
the Issue Date or (y) from the issue and sale (other than to a Subsidiary of the
Company) of its Qualified Equity Interests after the Issue Date (excluding the
net proceeds from any issuance and sale of Qualified Equity Interests financed,
directly or indirectly, using funds borrowed from the Company or any Subsidiary
of the Company until and to the extent such borrowing is repaid), plus (3) the
principal amount (or accreted amount (determined in accordance with GAAP), if
less) of any Indebtedness of the Company or any Subsidiary of the Company
Incurred after the Issue Date which has been converted into or exchanged for
Qualified Equity Interests of the Company (minus the amount of any cash or
property distributed by the Company or any Subsidiary of the Company upon such
conversion or exchange), plus (4) in the case of the disposition or repayment of
any Investment constituting a Restricted Payment made after the Issue Date, an
amount equal to 100% of the net cash proceeds thereof (or dividends,
distributions or interest payments received in cash thereon).
The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of the Indenture; (ii) the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent issue and sale (other than
to a Subsidiary of the Company) of, Qualified Equity Interests of the Company;
PROVIDED, HOWEVER, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for such retired Equity Interests
are excluded from clause (c)(2) of the preceding paragraph (and were not
included therein at any time) and are not used to redeem the Notes pursuant to
"--Optional Redemption" above; (iii) the purchase, redemption or other
acquisition for value of shares of capital stock of the Company (other than
Disqualified Capital Stock) or options on such shares held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) upon the death, disability, retirement or termination of
employment of such current or former officers or employees pursuant to the terms
of an employee benefit plan or any other agreement pursuant to which such shares
of capital stock or options were issued or pursuant to a severance, buy-sell or
right of first refusal agreement with such current or former officer or
employee; PROVIDED, HOWEVER, that the aggregate cash consideration paid, or
distributions made, pursuant to this clause (iii) do not in any one fiscal year
exceed $1 million; and (iv) Investments constituting Restricted Payments made as
a result of the receipt of non-cash consideration from any Asset Sale made
pursuant to and in compliance with "--Disposition of Proceeds of Asset Sales"
below; provided however, that in the case of each of clauses (ii), (iii) and
(iv), no Default or Event of Default shall have occurred and be continuing or
would arise therefrom.
In determining the amount of Restricted Payments permissible under this
covenant, amounts expended pursuant to clauses (i) and (iv) of the immediately
preceding paragraph shall be included as Restricted Payments. The amount of any
non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES. The Company shall not, and shall not cause or permit any
Subsidiary of the Company to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions to the Company or any other Subsidiary of the Company on its
Equity Interests or with respect to any other interest or participation in, or
measured by, its profits, or pay any Indebtedness owed to the Company or any
other Subsidiary of the Company, (b) make loans or advances to, or guarantee any
Indebtedness or other obligations of, or make any Investment in, the Company or
any other Subsidiary of the Company or (c) transfer any of its properties or
assets to the Company or any other Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of (i) the Revolving
Credit Facility as in effect on the Issue Date, any other agreement of the
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Company or its Subsidiaries outstanding on the Issue Date as in effect on the
Issue Date and any other agreement of the Company or its Subsidiaries
outstanding from time to time governing Senior Indebtedness provided that such
encumbrances or restrictions are no more adverse to the Company than those
contained in the Revolving Credit Facility as in effect on the Issue Date, and
any amendments, restatements, renewals, replacements or refinancings thereof;
PROVIDED, HOWEVER, that any such amendment, restatement, renewal, replacement or
refinancing is no more restrictive with respect to such encumbrances or
restrictions than those contained in the agreement being amended, restated,
reviewed, replaced or refinanced; (ii) applicable law; (iii) any instrument
governing Indebtedness or Equity Interests of an Acquired Person acquired by the
Company or any Subsidiary of the Company as in effect at the time of such
acquisition (except to the extent such Indebtedness was Incurred by such
Acquired Person in connection with, as a result of or in contemplation of such
acquisition); PROVIDED, HOWEVER, that such encumbrances and restrictions are not
applicable to the Company or any Subsidiary of the Company, or the properties or
assets of the Company or any Subsidiary of the Company, other than the Acquired
Person; (iv) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices; (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Subsidiary of the Company; PROVIDED, HOWEVER, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Subsidiary or assets, as applicable, and any such sale or disposition is made in
compliance with "Disposition of Proceeds of Asset Sales" below to the extent
applicable thereto; (vii) refinancing Indebtedness permitted under clause (g) of
the second paragraph of "Limitation on Indebtedness" above; PROVIDED, HOWEVER,
that such encumbrances and restrictions contained in the agreements governing
such Indebtedness are no more restrictive in the aggregate than those contained
in the agreements governing such Indebtedness being refinanced immediately prior
to such refinancing; or (viii) the Indenture.
LIMITATION ON LIENS. The Company shall not, and shall not cause or
permit any Subsidiary of the Company to, directly or indirectly, Incur any Liens
of any kind against or upon any of their respective properties or assets now
owned or hereafter acquired, or any proceeds therefrom or any income or profits
therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made to secure the Notes and all other amounts due under
the Indenture, equally and ratably with such Indebtedness (or, in the event that
such Indebtedness is subordinated in right of payment to the Notes prior to such
Indebtedness) with a Lien on the same properties and assets securing such
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (i) Liens securing Senior Indebtedness and (ii) Permitted Liens.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Company shall not, and
shall not cause or permit any Subsidiary of the Company to, directly or
indirectly, make any Asset Sale, unless (i) the Company or such Subsidiary, as
the case may be, receives consideration at the time of such Asset Sale at least
equal to the Fair Market Value of the assets sold or otherwise disposed of and
(ii) at least 85% of such consideration consists of (A) cash or Cash Equivalents
or (B) properties and capital assets that replace the properties and assets that
were the subject of such Asset Sale or in properties and capital assets that
will be used in the business of the Company and its Subsidiaries as existing on
the Issue Date or in businesses reasonably related thereto (as determined in
good faith by the Company's Board of Directors) ("Replacement Assets"), provided
that if the property or assets subject to such Asset Sale were directly owned by
the Company such Replacement Assets also shall be so directly owned. The amount
of any Indebtedness (other than any Subordinated Indebtedness) of the Company or
any Subsidiary of the Company that is actually assumed by the transferee in such
Asset Sale and from which the Company and its Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by the Company or its
Subsidiaries.
The Company or such Subsidiary of the Company, as the case may be, may
(i) apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt
thereof to repay Senior Indebtedness and permanently reduce any related
commitment, or (ii) make an Investment in Replacement Assets; PROVIDED, HOWEVER,
that such Investment occurs or the Company or a Subsidiary of the Company enters
into contractual commitments to make such Investment, subject only to customary
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conditions (other than the obtaining of financing), on or prior to the 180th day
following the receipt of such Net Cash Proceeds and Net Cash Proceeds
contractually committed are so applied within 270 days following the receipt of
such Net Cash Proceeds.
To the extent all or part of the Net Cash Proceeds of any Asset Sale
are not applied as described in clause (i) or (ii) of the immediately preceding
paragraph within the time periods set forth therein (the "Net Proceeds
Utilization Date") (such Net Cash Proceeds, the "Unutilized Net Cash Proceeds"),
the Company shall, within 20 days after such Net Proceeds Utilization Date, make
an Offer to Purchase all outstanding Notes up to a maximum principal amount
(expressed as a multiple of $1,000) of Notes equal to such Unutilized Net Cash
Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the Purchase Date;
PROVIDED, HOWEVER, that the Offer to Purchase may be deferred until there are
aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at
which time the entire amount of such Unutilized Net Cash Proceeds, and not just
the amount in excess of $5 million, shall be applied as required pursuant to
this paragraph.
With respect to any Offer to Purchase effected pursuant to this
covenant, among the Notes, to the extent the aggregate principal amount of Notes
tendered pursuant to such Offer to Purchase exceeds the Unutilized Net Cash
Proceeds to be applied to the repurchase thereof, such Notes shall be purchased
pro rata based on the aggregate principal amount of such Notes tendered by each
Holder. To the extent the Unutilized Net Cash Proceeds exceed the aggregate
amount of Notes tendered by the Holders of the Notes pursuant to such Offer to
Purchase, the Company may retain and utilize any portion of the Unutilized Net
Cash Proceeds not required to be applied to repurchase Notes tendered pursuant
to such Offer for any purpose consistent with the other terms of the Indenture.
In the event that the Company makes an Offer to Purchase the Notes, the
Company shall comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) of, and Rule 14e-1 under,
the Exchange Act, and any violation of the provisions of the Indenture relating
to such Offer to Purchase occurring as a result of such compliance shall not be
deemed an Event of Default or an event that with the passing of time or giving
of notice, or both, would constitute an Event of Default.
Each Holder shall be entitled to tender all or any portion of the Notes
owned by such Holder pursuant to the Offer to Purchase, subject to the
requirement that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount and subject to any proration among tendering
Holders as described above.
MERGER, SALE OF ASSETS, ETC. The Indenture provides that the Company
shall not consolidate with or merge with or into any other entity and the
Company shall not and shall not cause or permit any Subsidiary to, sell, convey,
assign, transfer, lease or otherwise dispose of all or substantially all of the
Company's and its Subsidiaries' properties and assets (determined on a
consolidated basis for the Company and its Subsidiaries) to any entity in a
single transaction or series of related transactions, unless: (i) either (x) the
Company shall be the Surviving Person or (y) the Surviving Person (if other than
the Company) shall be a corporation organized and validly existing under the
laws of the United States of America or any State thereof or the District of
Columbia, and shall, in any such case, expressly assume by a supplemental
indenture, the due and punctual payment of the principal of, premium, if any,
and interest on all the Notes and the performance and observance of every
covenant of the Indenture and the Registration Rights Agreement to be performed
or observed on the part of the Company; and (ii) immediately thereafter, no
Default or Event of Default shall have occurred and be continuing.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Subsidiaries of the
Company the Equity Interests of which constitutes all or substantially all the
properties and assets of the Company shall be deemed to be the transfer of all
or substantially all the properties and assets of the Company.
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TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not
cause or permit any Subsidiary of the Company to, directly or indirectly,
conduct any business or enter into any transaction (or series of related
transactions) with or for the benefit of any of their respective Affiliates or
any officer, director or employee of the Company or any Subsidiary of the
Company (each an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms which are no less favorable to the Company or such Subsidiary, as
the case may be, than would be available in a comparable transaction with an
unaffiliated third party and (ii) if such Affiliate Transaction (or series of
related Affiliate Transactions) involves aggregate payments or other
consideration having a Fair Market Value in excess of $500,000, such Affiliate
Transaction is in writing and a majority of the disinterested members of the
Board of Directors of the Company shall have approved such Affiliate Transaction
and determined that such Affiliate Transaction complies with the foregoing
provisions. In addition, any Affiliate Transaction involving aggregate payments
or other consideration having a Fair Market Value in excess of $2.5 million will
also require a written opinion from an Independent Financial Advisor (filed with
the Trustee) stating that the terms of such Affiliate Transaction are fair, from
a financial point of view, to the Company or its Subsidiaries involved in such
Affiliate Transaction, as the case may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and any
Wholly Owned Subsidiary or between or among Wholly Owned Subsidiaries; (ii)
reasonable fees and compensation paid to and indemnity provided on behalf of,
officers, directors, employees or agents of the Company or any Subsidiary of the
Company as determined in good faith by the Company's Board of Directors; (iii)
any transactions undertaken pursuant to any contractual obligations in existence
on the Issue Date (as in effect on the Issue Date); and (iv) any Restricted
Payments made in compliance with "Limitation on Restricted Payments" above.
LIMITATION ON THE SALE OR ISSUANCE OF EQUITY INTERESTS OF SUBSIDIARIES.
The Company shall not sell any Equity Interest of a Subsidiary of the Company,
and shall not cause or permit any Subsidiary of the Company, directly or
indirectly, to issue or sell or have outstanding any Equity Interests, except to
the Company or a Wholly Owned Subsidiary. Notwithstanding the foregoing, the
Company is permitted to sell all the Equity Interest of a Subsidiary of the
Company as long as the Company is in compliance with the terms of the covenant
described under "Disposition of Proceeds of Asset Sales" and, if applicable,
"Merger, Sale of Assets, Etc." above.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is
subject to Section 13(a) or 15(d) of the Exchange Act, or any successor
provision thereto, the Company shall file with the SEC (if permitted by SEC
practice and applicable law and regulations) the annual reports, quarterly
reports and other documents which the Company would have been required to file
with the SEC pursuant to such Section 13(a) or 15(d) or any successor provision
thereto if the Company were so subject, such documents to be filed with the SEC
on or prior to the respective dates (the "Required Filing Dates") by which the
Company would have been required so to file such documents if the Company were
so subject. The Company shall also in any event (a) within 15 days of each
Required Filing Date (whether or not permitted or required to be filed with the
SEC) (i) transmit (or cause to be transmitted) by mail to all Holders, as their
names and addresses appear in the Note register, without cost to such Holders,
and (ii) file with the Trustee, copies of the annual reports, quarterly reports
and other documents which the Company is required to file with the SEC pursuant
to the preceding sentence, or, if such filing is not so permitted, information
and data of a similar nature, and (b) if, notwithstanding the preceding
sentence, filing such documents by the Company with the SEC is not permitted by
SEC practice or applicable law or regulations, promptly upon written request
supply copies of such documents to any Holder. In addition, for so long as any
Notes remain outstanding and prior to the later of the consummation of the
Exchange Offer and the filing of the Initial Shelf Registration Statement, if
required, the Company will 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, and, to any
beneficial holder of Notes, if not obtainable from the SEC, information of the
type that would be filed with the SEC pursuant to the foregoing provisions, upon
the request of any such Holder.
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EVENTS OF DEFAULT
The occurrence of any of the following will be defined as an "Event of
Default" under the Indenture: (a) failure to pay principal of (or premium, if
any, on) any Note when due (whether or not prohibited by the provisions of the
Indenture described under "Subordination of the Notes" above); (b) failure to
pay any interest on any Note when due, continued for 30 days or more (whether or
not prohibited by the provisions of the Indenture described under "Subordination
of the Notes" above); (c) default in the payment of principal of or interest on
any Note required to be purchased pursuant to any Offer to Purchase required by
the Indenture when due and payable or failure to pay on the Purchase Date the
Purchase Price for any Note validly tendered pursuant to any Offer to Purchase
(whether or not prohibited by the provisions of the Indenture described under
"Subordination of the Notes" above); (d) failure to perform or comply with any
of the provisions described under "Certain Covenants-Merger, Sale of Assets,
etc." above; (e) failure to perform any other covenant, warranty or agreement of
the Company under the Indenture or in the Notes, continued for 30 days or more
after written notice to the Company by the Trustee or Holders of at least 25% in
aggregate principal amount of the outstanding Notes; (f) default or defaults
under the terms of one or more instruments evidencing or securing Indebtedness
of the Company or any of its Subsidiaries having an outstanding principal amount
of $5.0 million or more individually or in the aggregate that has resulted in
the acceleration of the payment of such Indebtedness or failure by the Company
or any of its Subsidiaries to pay principal when due at the stated maturity of
any such Indebtedness and such default or defaults shall have continued after
any applicable grace period and shall not have been cured or waived; (g) the
rendering of a final judgment or judgments (not subject to appeal) against the
Company or any of its Subsidiaries in an amount of $5.0 million or more (net of
any amounts covered by reputable and creditworthy insurance companies) which
remains undischarged or unstayed for a period of 60 days after the date on which
the right to appeal has expired; or (h) certain events of bankruptcy, insolvency
or reorganization affecting the Company or any of its Significant Subsidiaries.
Subject to the provisions of the Indenture relating to the duties of
the Trustee, in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders of Notes,
unless such Holders shall have offered to the Trustee reasonable indemnity.
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the outstanding Notes will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or exercising any trust or power conferred
on such Trustee.
If an Event of Default with respect to the Notes (other than an Event
of Default described in clause (h) of the preceding paragraph) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the outstanding Notes, by notice in writing to the Company may declare
the unpaid principal of (and premium, if any) and accrued interest to the date
of acceleration on all the outstanding Notes to be due and payable immediately
and, upon any such declaration, such principal amount (and premium, if any) and
accrued interest, notwithstanding anything contained in the Indenture or the
Notes to the contrary, will become immediately due and payable. If an Event or
Default specified in clause (h) of the preceding paragraph occurs under the
Indenture, the Notes will ipso facto become immediately due and payable without
any declaration or other act on the part of the Trustee or any Holder of the
Notes.
Any such declaration with respect to the Notes may be rescinded and
annulled by the Holders of a majority in aggregate principal amount of the
outstanding Notes upon the conditions provided in the Indenture. For information
as to waiver of defaults, see "Modification and Waiver" below.
The Indenture provides that the Trustee shall, within 30 days after the
occurrence of any Default or Event of Default with respect to the Notes
outstanding, give the Holders of the Notes thereof notice of all uncured
Defaults or Events of Default thereunder known to it; PROVIDED, HOWEVER, that,
except in the case of a Default or an Event of Default in payment with respect
to the Notes or a Default or Event of Default in complying with "Certain
Covenants-Merger, Sale of Assets, etc." above, the Trustee shall be protected in
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withholding such notice if and so long as a committee of its trust officers in
good faith determines that the withholding of such notice is in the interest of
the Holders of the Notes.
No Holder of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless such Holder
shall have previously given to the Trustee written notice of a continuing Event
of Default thereunder and unless the Holders of at least 25% of the aggregate
principal amount of the outstanding Notes shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding, and
the Trustee shall have not have received from the Holders of a majority in
aggregate principal amount of such outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted by a Holder of
such a Note for enforcement of payment of the principal of and premium, if any,
or interest on such Note on or after the respective due dates expressed in such
Note.
The Company will be required to furnish to the Trustee annually a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR, MANAGER
AND STOCKHOLDERS
No director, officer, employee, incorporator, manager or stockholder of
the Company or any of its Affiliates, as such, shall 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 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the outstanding
Notes, except for (i) the rights of Holders to receive payments in respect of
the principal of, premium, if any, and interest on the Notes when such payments
are due, (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 payments, (iii) the
rights, powers, trust, 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 an Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, reorganization 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 cash in U.S. dollars, non-callable U.S. government
obligations, 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 on the Notes on the
stated date for payment thereof or on the applicable redemption date, as the
case may be; (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
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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 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 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 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 shall not result in a breach or
violation of, or constitute a default under the Indenture or any other material
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; (vi) 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 or others;
(vii) 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; (viii) the Company shall have delivered to the Trustee an opinion
of counsel to the effect that (A) the trust funds will not be subject to any
rights of holders of Senior Indebtedness, including, without limitation, those
arising under the Indenture and (B) assuming no intervening bankruptcy of the
Company between the date of deposit and the 91st day following the date of the
deposit and that no Holder is an insider of the Company, after the 91st day
following the date of 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; and (ix) certain other customary
conditions precedent are satisfied. Notwithstanding the foregoing, the opinion
of counsel required by clause (ii) above need not be delivered if all Notes not
theretofore delivered to the Trustee for cancellation (x) have become due and
payable, (y) will become due and payable on the maturity date within one year or
(z) are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the Company.
GOVERNING LAW
The Indenture and the Notes will be governed by the laws of the State
of New York without regard to principles of conflicts of laws.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of a majority in
aggregate principal amount of the outstanding Notes (including consents obtained
in connection with a tender offer or exchange offer for the Notes); PROVIDED,
HOWEVER, that no such modification or amendment to the Indenture may, without
the consent of the Holder of each Note affected thereby, (a) change the maturity
of the principal of or any installment of interest on any such Note or alter the
optional redemption or repurchase provisions of any such Note or the Indenture
in a manner adverse to the Holders of the Notes; (b) reduce the principal amount
of (or the premium of) any such Note; (c) reduce the rate of or extend the time
for payment of interest on any such Note; (d) change the place or currency of
payment of principal of (or premium) or interest on any such Note; (e) modify
any provisions of the Indenture relating to the waiver of past defaults (other
than to add sections of the Indenture or the Notes subject thereto) or the right
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of the Holders of Notes to institute suit for the enforcement of any payment on
or with respect to any such Note or the modification and amendment provisions of
the Indenture and the Notes (other than to add sections of the Indenture or the
Notes which may not be modified, amended, supplemented or waived without the
consent of each Holder affected); (f) reduce the percentage of the principal
amount of outstanding Notes necessary for amendment to or waiver of compliance
with any provision of the Indenture or the Notes or for waiver of any Default in
respect thereof; (g) waive a default in the payment of principal of, interest
on, or redemption payment with respect to, the Notes (except a rescission of
acceleration of the Notes by the Holders thereof as provided in the Indenture
and a waiver of the payment default that resulted from such acceleration); (h)
modify the ranking or priority of any Note or modify the definition of Senior
Indebtedness or amend or modify the subordination provisions of the Indenture in
any manner adverse to the Holders of the Notes; or (i) modify the provisions of
any covenant (or the related definitions) in the Indenture requiring the Company
to make an Offer to Purchase in a manner materially adverse to the Holders of
Notes affected thereby otherwise than in accordance with the Indenture.
The Holders of a majority in aggregate principal amount of the
outstanding Notes, on behalf of all Holders of Notes, may waive compliance by
the Company with certain restrictive provisions of the Indenture. Subject to
certain rights of the Trustee, as provided in the Indenture, the Holders of a
majority in aggregate principal amount of the Notes, on behalf of all Holders,
may waive any past default under the Indenture (including any such waiver
obtained in connection with a tender offer or exchange offer for the Notes),
except a default in the payment of principal, premium or interest or a default
arising from failure to purchase any Notes tendered pursuant to an Offer to
Purchase, or a default in respect of a provision that under the Indenture cannot
be modified or amended without the consent of the Holder of each Note that is
affected.
THE TRUSTEE
Except during the continuance of a Default, the Trustee will perform
only such duties as are specifically set forth in the Indenture. During the
existence of a Default, the Trustee will exercise such rights and powers vested
in it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company or any other obligor upon the Notes, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claim as security or otherwise. The Trustee is
permitted to engage in other transactions with the Company or an Affiliate of
the Company; PROVIDED, HOWEVER, that if it acquires any conflicting interest (as
defined in the Indenture or in the Trust Indenture Act), it must eliminate such
conflict or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full definition of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Subsidiary of the Company or is merged or consolidated with or
into the Company or any Subsidiary of the Company.
"ACQUIRED PERSON" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"ACQUISITION" means (i) any capital contribution (by means of transfers
of cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by the Company or any Subsidiary of the
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Company to any other Person, or any acquisition or purchase of Equity Interests
of any other Person by the Company or any Subsidiary of the Company, in either
case pursuant to which such Person shall become a Subsidiary of the Company or
shall be consolidated with or merged into the Company or any Subsidiary of the
Company or (ii) any acquisition by the Company or any Subsidiary of the Company
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"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.
"ASSET SALE" means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than the Company, in one transaction or a series of related
transactions, of (i) any Equity Interest of any Subsidiary of the Company (other
than directors' qualifying shares, to the extent mandated by applicable law);
(ii) any assets of the Company or any Subsidiary of the Company which constitute
substantially all of an operating unit or line of business of the Company or any
Subsidiary of the Company; or (iii) any other property or asset of the Company
or any Subsidiary of the Company outside of the ordinary course of business
(including the receipt of proceeds paid on account of the loss of or damage to
any property or asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceedings). For the purposes of this
definition, the term "Asset Sale" shall not include (a) any transaction
consummated in compliance with "Certain Covenants--Merger, Sale of Assets, etc."
above and the creation of any Lien not prohibited by "Certain
Covenants--Limitation on Liens" above; (b) sales of property or equipment that
has become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Subsidiary of the Company, as
the case may be; and (c) any transaction consummated in compliance with "Certain
Covenants--Limitation on Restricted Payments" above. In addition, solely for
purposes of "Certain Covenants--Disposition of Proceeds of Asset Sales" above,
any sale, conveyance, transfer, lease or other disposition of (i) the Company's
cosmetic pencil business or (ii) any property or asset, whether in one
transaction or a series of related transactions, involving assets with a Fair
Market Value not in excess of $100,000 in any fiscal year, shall be deemed not
to be an Asset Sale.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the present value
(discounted according to GAAP at the cost of indebtedness implied in the lease)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Lease-Back Transaction (including
any period for which such lease has been extended).
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"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 so required to be capitalized on the balance sheet in
accordance with GAAP.
"CASH EQUIVALENTS" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) 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 domestic commercial bank having capital and
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surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1,
A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, and in each case maturing within six months
after the date of acquisition; and (f) in the case of any Subsidiary of the
Company whose jurisdiction of incorporation is not the United States or any
state thereof or the District of Columbia, Investments: (i) in direct
obligations of the sovereign nation (or any agency thereof) in which such
foreign Subsidiary is organized and is conducting business or in obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof) or (ii) of the type and maturity described in clauses (a) and (b) above
of foreign obligors, which Investment or obligors (or the parents of such
obligors) have ratings described in such clauses or equivalent ratings from
comparable foreign rating agencies.
"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 35% of the total voting power of the then
outstanding Voting Equity Interests of the Company; (ii) the Company
consolidates with, or merges with or into, another Person (other than a Wholly
Owned Subsidiary) or the Company or any of its Subsidiaries sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
the assets of the Company and its Subsidiaries (determined on a consolidated
basis) to any Person (other than the Company or any Wholly Owned Subsidiary),
other than any such transaction where immediately after such transaction the
Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 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 exercisable immediately or only after the passage of time)
immediately prior to such transaction, directly or indirectly, a majority of the
total voting power of the then outstanding Voting Equity Interests of the
Company "beneficially own" (as so determined), directly or indirectly, a
majority of the total voting power of the then outstanding Voting Equity
Interests of the surviving or transferee Person; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors of the Company then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; or (iv) the Company is
liquidated or dissolved or adopts a plan of liquidation or dissolution other
than in a transaction which complies with the provisions described under
"--Merger, Sale of Assets, etc."
"CHANGE OF CONTROL DATE" has the meaning set forth under "Offer to
Purchase upon Change of Control" above.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination (the "Four Quarter Period") to (ii) Consolidated
Interest Expense for such Four Quarter Period; PROVIDED, HOWEVER, that (1) if
the Company or any Subsidiary of the Company has incurred any Indebtedness since
the beginning of such Four Quarter Period that remains outstanding on such date
of determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDA and Consolidated Interest Expense for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
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such Indebtedness had been Incurred on the first day of such Four Quarter Period
and the discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such Four Quarter Period, (2) if since the
beginning of such Four Quarter Period the Company or any Subsidiary of the
Company shall have made any Asset Sale, the Consolidated EBITDA for such Four
Quarter Period shall be reduced by an amount equal to the Consolidated EBITDA
(if positive) directly attributable to the assets that are the subject of such
Asset Sale for such Four Quarter Period or increased by an amount equal to the
Consolidated EBITDA (if negative) directly attributable thereto for such Four
Quarter Period and Consolidated Interest Expense for such Four Quarter Period
shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Subsidiary of
the Company repaid, repurchased or otherwise discharged with respect to the
Company and its continuing Subsidiaries in connection with such Asset Sale for
such Four Quarter Period (or, if the Equity Interests of any Subsidiary of the
Company are sold, the Consolidated Interest Expense for such Four Quarter Period
directly attributable to the Indebtedness of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such Four Quarter
Period the Company or any Subsidiary of the Company (by merger or otherwise)
shall have made an Investment in any Subsidiary of the Company (or any Person
that becomes a Subsidiary of the Company) or an acquisition of assets, including
any acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, Consolidated EBITDA and Consolidated Interest
Expense for such Four Quarter Period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such Four Quarter Period
and (4) if since the beginning of such Four Quarter Period any Person (that
subsequently became a Subsidiary or was merged with or into the Company or any
Subsidiary of the Company since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Subsidiary of the Company during such Four Quarter Period,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition of assets occurred on, with respect to any
Investment or acquisition, the first day of such Four Quarter Period and, with
respect to any Asset Sale, the day prior to the first day of such Four Quarter
Period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in accordance with Regulation S-X under the Securities Act as in
effect on the date of such calculation. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any agreement under which Interest Rate Protection Obligations are
outstanding applicable to such Indebtedness if such agreement under which such
Interest Rate Protection Obligations are outstanding has a remaining term as at
the date of determination in excess of 12 months); PROVIDED, HOWEVER, that the
Consolidated Interest Expense of the Company attributable to interest on any
Indebtedness Incurred under a revolving credit facility computed on a pro forma
basis shall be computed based upon the average daily balance of such
Indebtedness during the Four Quarter Period.
"CONSOLIDATED EBITDA" means, for any period, the Consolidated Net
Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) Consolidated Income Tax Expense for such
period; (ii) Consolidated Interest Expense for such period; and (iii)
Consolidated Non-cash Charges for such period less (A) all non-cash items
increasing Consolidated Net Income for such period and (B) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to the Company
for any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company for
any period, without duplication, the sum of (i) the interest expense of the
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Company and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (e) all capitalized interest and all accrued interest, (f) non-cash
interest expense and (g) interest on Indebtedness of another Person that is
guaranteed by the Company or any Subsidiary of the Company actually paid by the
Company or any Subsidiary of the Company and (ii) the interest component of
Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and its Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (loss) of the Company and its Subsidiaries; PROVIDED, HOWEVER, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such person is not a Subsidiary of the Company, except the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (loss)
of any person acquired by the Company or a Subsidiary of the Company in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (but not loss) of any Subsidiary of the
Company if such Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Subsidiary,
directly or indirectly, to the Company to the extent of such restrictions; (iv)
any gain or loss realized upon the sale or other disposition of any asset of the
Company or its Subsidiaries (including pursuant to any sale/leaseback
transaction) outside of the ordinary course of business including, without
limitation, on or with respect to Investments (and excluding dividends,
distributions or interest thereon); (v) any extraordinary gain or loss; (vi) the
cumulative effect of a change in accounting principles after the Issue Date; and
(vii) any restoration to income of any contingency reserve of an extraordinary,
non-recurring or unusual nature, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time following
the Issue Date.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period the sum of (A) depreciation, (B) amortization and (C) other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding, for purposes of clause (C) only, such
charges which require an accrual of or a reserve for cash charges for any future
period.)
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary of the Company against fluctuations in currency
values.
"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 (a) any Indebtedness outstanding
under the Revolving Credit Facility and (b) any other Senior Indebtedness which,
at the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $25.0
million, if the instrument governing such Senior Indebtedness expressly states
that such Indebtedness is "Designated Senior Indebtedness" for purposes of the
Indenture and a Board Resolution setting forth such designation by the Company
has been filed with the Trustee.
"DISPOSITION" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"DISQUALIFIED EQUITY INTEREST" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
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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, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Notes or the date on which no Notes remain
outstanding.
"EQUITY INTEREST" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXPIRATION DATE" has the meaning set forth in the definition of "Offer
to Purchase" below.
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; PROVIDED, HOWEVER, that the Fair Market
Value of any such asset shall be determined conclusively by the Board of
Directors of the Company acting in good faith, and shall be evidenced by
resolutions of the Board of Directors of the Company delivered to the Trustee.
"FOUR QUARTER PERIOD" has the meaning set forth in the definition of
"Consolidated Coverage Ratio" above.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
"HOLDERS" means the registered holders of the Notes.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred" and "Incurring" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Subsidiary of
the Company (or is merged into or consolidated with the Company or any
Subsidiary of the Company), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Subsidiary of the Company (or being merged into or consolidated with
the Company or any Subsidiary), shall be deemed Incurred at the time any such
Acquired Person becomes a Subsidiary or merges into or consolidates with the
Company or any Subsidiary.
"INDEBTEDNESS" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
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every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business); (e)
every Capital Lease Obligation of such Person; (f) every net obligation under
Interest Rate Protection Obligations or similar agreements or Currency
Agreements of such Person; (g) Attributable Indebtedness; (h) every obligation
of the type referred to in clauses (a) through (g) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise; and (i) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a) through
(h) above. Indebtedness (i) shall not be calculated taking into account any cash
and cash equivalents held by such Person; (ii) shall not include obligations of
any Person (x) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business, provided that such
obligations are extinguished within two Business Days of their incurrence, (y)
resulting from the endorsement of negotiable instruments for collection in the
ordinary course of business and consistent with past business practices and (z)
under stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents; (iii) which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be
deemed to be Incurred or outstanding in an amount equal to the accreted value
thereof at the date of determination; and (iv) shall not include obligations
under performance bonds, performance guarantees, surety bonds and appeal bonds,
letters of credit or similar obligations, incurred in the ordinary course of
business.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized
accounting, appraisal, investment banking firm or consultant (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
or indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to any
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"INTEREST" means, with respect to the Notes, the sum of any cash
interest and any Liquidated Damages (as defined under "Registration Rights"
below) on the Notes.
"INTEREST RATE PROTECTION 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.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. For
purposes of the "Limitation on Restricted Payments" covenant above, the amount
of any Investment shall be the original cost of such Investment, plus the cost
of all additions thereto, but without any other adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment; reduced by the payment of dividends or distributions in connection
with such Investment or any other amounts received in respect of such
Investment; PROVIDED, HOWEVER, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. In determining the
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amount of any Investment involving a transfer of any property or asset other
than cash, such property shall be valued at its fair market value at the time of
such transfer, as determined in good faith by the Board of Directors (or
comparable body) of the Person making such transfer.
"ISSUE DATE" means the original issue date of the Notes.
"LIEN" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof, and any agreement to give any security interest).
"MATURITY DATE" means the date, which is set forth on the face of the
Notes, on which the Notes will mature.
"NET CASH PROCEEDS" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Subsidiary of the Company in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) 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; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale; including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an officers' certificate delivered to the
Trustee (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been reversed
or are not otherwise required to be retained as a reserve); and (e) with respect
to Asset Sales by Subsidiaries, the portion of such cash payments attributable
to Persons holding a minority interest in such Subsidiary.
"NET PROCEEDS UTILIZATION DATE" has the meaning set forth in the second
paragraph under "Certain Covenants--Disposition of Proceeds of Asset Sales"
above.
"OBLIGATIONS" means any principal, interest (including, without
limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"OFFER" has the meaning set forth in the definition of "Offer to
Purchase" below.
"OFFER TO PURCHASE" means a written offer (the "Offer") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each holder at
his address appearing in the register for the Notes on the date of the Offer
offering to purchase up to the principal amount of Notes specified in such Offer
at the purchase price specified in such Offer (as determined pursuant to the
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase, which shall
be not less than 20 Business Days nor more than 60 days after the date of such
Offer, and a settlement date (the "Purchase Date") for purchase of Notes to
occur no later than five Business Days after the Expiration Date. The Company
shall notify the Trustee at least 15 Business Days (or such shorter period as is
acceptable to the Trustee) prior to the mailing of the Offer of the Company's
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obligation to make an Offer to Purchase, and the Offer shall be mailed by the
Company or, at the Company's request, by the Trustee in the name and at the
expense of the Company. The Offer shall contain all the information required by
applicable law to be included therein. The Offer shall also contain information
concerning the business of the Company and its Subsidiaries which the Company in
good faith believes will enable such Holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum will include (i) the most
recent annual and quarterly financial statements and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contained in the
documents required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein). The Offer shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Offer to Purchase. The Offer shall also state: (1) the Section of the Indenture
pursuant to which the Offer to Purchase is being made; (2) the Expiration Date
and the Purchase Date; (3) the aggregate principal amount of the outstanding
Notes offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of the Indenture requiring the Offer to
Purchase) (the "Purchase Amount"); (4) the purchase price to be paid by the
Company for each $1,000 aggregate principal amount of Notes accepted for payment
(as specified pursuant to the Indenture) (the "Purchase Price"); (5) that the
Holder may tender all or any portion of the Notes registered in the name of such
Holder and that any portion of a Note tendered must be tendered in an integral
multiple of $1,000 principal amount; (6) the place or places where Notes are to
be surrendered for tender pursuant to the Offer to Purchase; (7) that interest
on any Note not tendered or tendered but not purchased by the Company pursuant
to the Offer to Purchase will continue to accrue; (8) that on the Purchase Date
the Purchase Price will become due and payable upon each Note being accepted for
payment pursuant to the Offer to Purchase and that interest thereon shall cease
to accrue on and after the Purchase Date; (9) that each Holder electing to
tender all or any portion of a Note pursuant to the Offer to Purchase will be
required to surrender such Note at the place or places specified in the Offer
prior to the close of business on the Expiration Date (such Note being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly authorized in
writing); (10) that Holders will be entitled to withdraw all or any portion of
Notes tendered if the Company (or its Paying Agent) receives, not later than the
close of business on the fifth Business Day next preceding the Expiration Date,
a telegram, telex, facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Note the Holder tendered, the
certificate number of the Note the Holder tendered and a statement that such
Holder is withdrawing all or a portion of his tender; (11) that (a) if Notes in
an aggregate principal amount less than or equal to the Purchase Amount are duly
tendered and not withdrawn pursuant to the Offer to Purchase, the Company shall
purchase all such Notes and (b) if Notes in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn pursuant to the
Offer to Purchase, the Company shall purchase Notes having an aggregate
principal amount equal to the Purchase Amount on a pro rata basis (with such
adjustments as may be deemed appropriate so that only Notes in denominations of
$1,000 principal amount or integral multiples thereof shall be purchased); and
(12) that in the case of any Holder whose Note is purchased only in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Note without service charge, a new Note or Notes, of any
authorized denomination as requested by such Holder, in an aggregate principal
amount equal to and in exchange for the unpurchased portion of the Note so
tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
"PERMITTED HOLDER" means Scott Rudolph and Arthur Rudolph and members
of either of their immediate families and trusts of which such persons are the
beneficiaries.
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"PERMITTED INDEBTEDNESS" has the meaning set forth in the second
paragraph of "Certain Covenants-Limitation on Indebtedness" above.
"PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) Interest
Rate Protection Obligations and Currency Agreements; (d) Investments received in
connection with the bankruptcy or reorganization of suppliers and customers and
in settlement of delinquent obligations of, and other disputes with, customers
and suppliers, in each case arising in the ordinary course of business; (e)
Investments in the Company and direct or indirect loans, advances, guarantees or
other extensions of credit in the ordinary course of business to or on behalf of
a Subsidiary of the Company and cash Investments in a Person that, as a result
of or in connection with such Investment, is merged with or into or consolidated
with the Company or a Wholly Owned Subsidiary; (f) Investments paid for in
Common Stock of the Company; and (g) loans or advances to officers or employees
of the Company and its Subsidiaries in the ordinary course of business for bona
fide business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $1 million in the aggregate at any one time
outstanding.
"PERMITTED JUNIOR SECURITIES" means any securities of the Company or
any other Person that are (i) equity securities without special covenants or
(ii) debt securities expressly subordinated in right of payment to all Senior
Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Notes are subordinated as provided
in the Indenture, in any event pursuant to a court order so providing and as to
which (a) the rate of interest on such securities shall not exceed the effective
rate of interest on the Notes on the date of the Indenture, (b) such securities
shall not be entitled to the benefits of covenants or defaults materially more
beneficial to the holders of such securities than those in effect with respect
to the Notes on the date of the Indenture and (c) such securities shall not
provide for amortization (including sinking fund and mandatory prepayment
provisions) commencing prior to the date six months following the final
scheduled maturity date of the Senior Indebtedness (as modified by the plan of
reorganization of readjustment pursuant to which such securities are issued).
"PERMITTED LIENS" means (a) 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, HOWEVER, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Subsidiary of the Company other than
the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than 30 days past due or
which are being contested in good faith and by appropriate proceedings; (c)
Liens existing on the Issue Date and Liens in favor of the lenders under the
Revolving Credit Facility; (d) Liens securing only the Notes; (e) Liens in favor
of the Company or any Subsidiary of the Company; (f) 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, HOWEVER, that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (g) easements, reservation of rights of way,
restrictions and other similar easements, licenses, restrictions on the use of
properties, or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the properties
subject thereto or interfere with the ordinary conduct of the business of the
Company and its Subsidiaries; (h) Liens resulting from the deposit of cash or
notes in connection with contracts, tenders or expropriation proceedings, or to
secure workers' compensation, surety or appeal bonds, costs of litigation when
required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (i)
Liens securing Indebtedness consisting of Capitalized Lease Obligations,
Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or
other monetary obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of construction or
installation of assets used in the business of the Company or its Subsidiaries,
or repairs, additions or improvements to such assets, PROVIDED, HOWEVER, that
(I) such Liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair, addition or
improvements thereto (plus an amount equal to the reasonable fees and expenses
in connection with the incurrence of such Indebtedness), (II) such Liens do not
extend to any other assets of the Company or its Subsidiaries (and, in the case
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<PAGE>
of repair, addition or improvements to any such assets, such Lien extends only
to the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by "Certain
Covenants-Limitation on Indebtedness" above and (IV) such Liens attach within 90
days of such purchase, construction, installation, repair, addition or
improvement; and (j) Liens to secure any refinancings, renewals, extensions,
modifications or replacements (collectively, "refinancings") (or successive
refinancings), in whole or in part, of any Indebtedness secured by Liens
referred to in the clauses above so long as such Lien does not extend to any
other property (other than improvements thereto).
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"POST-PETITION INTEREST" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"PREFERRED EQUITY INTEREST," in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"PRINCIPAL" of a debt security means the principal of the security
plus, when appropriate, the premium, if any, on the security.
"PUBLIC EQUITY OFFERING" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"PURCHASE AMOUNT" has the meaning set forth in the definition of "Offer
to Purchase" above.
"PURCHASE DATE" has the meaning set forth in the definition of "Offer
to Purchase" above.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or any
Subsidiary of the Company Incurred for the purpose of financing in the ordinary
course of business all or any part of the purchase price or the cost of
construction or improvement of any property; PROVIDED, HOWEVER, that the
aggregate principal amount of such Indebtedness does not exceed the lesser of
the Fair Market Value of such property or such purchase price or cost, including
any refinancing of such Indebtedness that does not increase the aggregate
principal amount (or accreted amount, if less) thereof as of the date of
refinancing.
"PURCHASE PRICE" has the meaning set forth in the definition of "Offer
to Purchase" above.
"QUALIFIED EQUITY INTEREST" in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
"REDEMPTION DATE" has the meaning set forth in the third paragraph of
"Optional Redemption" above.
"REPLACEMENT ASSETS" has the meaning set forth in the first paragraph
under "Certain Covenants--Disposition of Proceeds of Asset Sales" above.
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"REVOLVING CREDIT FACILITY" means the credit and guarantee agreement,
dated as of the Issue Date, by and among the Company, the Subsidiaries of the
Company identified on the signature pages thereof and any Subsidiary of the
Company that is later added thereto, the lenders named therein, and The Chase
Manhattan Bank, N.A. as Agent, as amended, including any deferrals, renewals,
extensions, replacements, refinancings or refundings thereof, or amendments,
modifications or supplements thereto and any agreement providing therefor,
whether by or with the same or any other lender, creditor, group of lenders or
group of creditors, and including related notes, guarantee and note agreements
and other instruments and agreements executed in connection therewith.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal Property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"SEC" means the Securities and Exchange Commission.
"SENIOR INDEBTEDNESS" means, at any date, (a) all Obligations of the
Company under the Revolving Credit Facility; (b) all Interest Rate Protection
Obligations of the Company and all Obligations of the Company under Currency
Agreements; (c) all Obligations of the Company under stand-by letters of credit;
and (d) all other Indebtedness of the Company, including principal, premium, if
any, and interest (including Post-Petition Interest) on such Indebtedness,
unless the instrument under which such Indebtedness of the Company is Incurred
expressly provides that such Indebtedness for money borrowed is not senior or
superior in right of payment to the Notes, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Senior Indebtedness shall not include (a) to the extent that it may
constitute Indebtedness, any Obligation for Federal, state, local or other
taxes; (b) any Indebtedness among or between the Company and any Subsidiary of
the Company or any Affiliate of the Company or any of such Affiliate's
Subsidiaries; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
that portion of any Indebtedness that is Incurred in violation of the Indenture;
(e) Indebtedness evidenced by the Notes; (f) Indebtedness of the Company that is
expressly subordinate or junior in right of payment to any other Indebtedness of
the Company; (g) to the extent that it may constitute Indebtedness, any
obligation owing under leases (other than Capitalized Lease Obligations) or
management agreements; and (h) any obligation that by operation of law is
subordinate to any general unsecured obligations of the Company. No Indebtedness
shall be deemed to be subordinated to other Indebtedness solely because such
other Indebtedness is secured.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, (a) any
Subsidiary of the Company that, together with its Subsidiaries (i) for the most
recent fiscal year of the Company accounted for more than 10.0% of the
consolidated revenues of the Company and its Subsidiaries or (ii) as of the end
of such fiscal year, owned more than 10.0% of the consolidated assets of the
Company and its Subsidiaries, all as set forth on the consolidated financial
statements of the Company and the Subsidiaries for such year prepared in
conformity with GAAP, and (b) any Subsidiary of the Company which, when
aggregated with all other Subsidiaries of the Company that are not otherwise
Significant Subsidiaries and as to which any event described in clause (h) of
"Events of Default" above has occurred, would constitute a Significant
Subsidiary under clause (a) of this definition.
"STATED MATURITY" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to the Company, any
Indebtedness of the Company which is expressly subordinated in right of payment
to the Notes.
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"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"SURVIVING PERSON" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"UNITED STATES GOVERNMENT OBLIGATIONS" means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"UNUTILIZED NET CASH PROCEEDS" has the meaning set forth in the third
paragraph under "Certain Covenants--Disposition of Proceeds of Asset Sales"
above.
"VOTING EQUITY INTERESTS" means Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary of the Company all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
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<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Notes initially will be
represented by one or more permanent global certificates in definitive, duly
registered form (the "Global Notes"). The Global Notes will be deposited on the
Issue Date with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), and registered in the name of a nominee of DTC.
THE GLOBAL NOTES. The Company expects that pursuant to procedures
established by DTC (i) upon the issuance of the Global Notes, DTC or its
custodian will credit, on its internal system, an interest in such Global Notes
to the respective accounts of persons who have accounts with DTC and (ii)
ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership will be effected only through, records maintained by
DTC or its nominee (with respect to interests of participants) and the records
of participants (with respect to interests of persons other than participants).
Such accounts initially will be designated by or on behalf of the Initial
Purchaser and ownership of beneficial interests in the Global Notes will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants. QIBs and institutional Accredited Investors
who are not QIBs may hold their interests in the Global Notes directly through
DTC if they are participants in such system, or indirectly through organizations
which are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of
the Notes, DTC or such nominee, as the case may be, will be considered the sole
owner or holder of the Notes represented by such Global Notes for all purposes
under the Indenture. No beneficial owner of an interest in the Global Notes will
be able to transfer that interest except in accordance with DTC's procedures, in
addition to those provided for under the Indenture with respect to the Notes.
Payments of the principal of, premium, if any, and interest on the
Global Notes will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any Paying Agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal, premium, if any, and interest on the Global Notes, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global Notes as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global Notes
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary
way through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states that require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in a Global Note in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to
be taken by a Holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Notes are credited and only in respect
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<PAGE>
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Indenture, DTC will exchange the Global Notes
for Certificated Securities, which it will distribute to its participants.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and certain other
organizations. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the Global Note among participants of DTC,
it is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
CERTIFICATED SECURITIES. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Issuer within 90 days, Certificated Securities will be issued
in exchange for the Global Notes.
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 resales of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until ___________, all dealers
effecting transactions in the Exchange Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of Exchange
Notes by broker-dealers. 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 at 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 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 commission 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.
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For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Original Notes), other than commissions or concessions of any
broker-dealers and will indemnify the holders of the Original Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act. The Company will be indemnified by the holders of Original
Notes, severally, against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon
for the Company by Kirkpatrick & Lockhart LLP, Washington, D.C.
INDEPENDENT ACCOUNTANTS
The consolidated balance sheets as of September 30, 1996 and 1995 and
the consolidated statements of income, stockholders' equity, and cash flows for
each of the three years in the period ended September 30, 1996 of NBTY, Inc. and
Subsidiaries included in this Prospectus have been included herein in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants given on the
authority of that firm as experts in accounting and auditing.
The consolidated balance sheets as of June 30, 1997 and 1996 and the
consolidated profit and loss accounts, statements of total recognized gains and
losses, and cash flows for each of the three years in the period ended June 30,
1997 of Holland & Barrett Holdings Ltd. included in this Prospectus have been
included herein in reliance on the report of KPMG, chartered accountants and
registered auditors, given on the authority of that firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 (the "Exchange Offer Registration Statement," which term shall
encompass all amendments, exhibits, annexes and schedules thereto) pursuant to
the Securities Act, covering the Exchange Notes offered hereby. This Prospectus
does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company and
the Exchange Offer, reference is made to the Exchange Offer Registration
Statement. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to such contract, agreement or other document filed as an exhibit
to the Exchange Offer Registration Statement, reference is made to the exhibit
for a more complete description of the document or matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
While any Original Notes remain outstanding the Company will make
available, upon request, to any holder and any prospective purchaser of Notes
the information required pursuant to Rule 144A(d) (4) under the Securities Act
during any period in which the Company is not subject to Section 13 or 15(d) of
the Exchange Act. Any such request should be directed to Harvey Kamil,
Secretary, NBTY, Inc., 90 Orville Drive, Bohemia, New York 11716-2510.
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such material, including the Exchange
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<PAGE>
Offer Registration Statement, may be inspected and copied at prescribed rates at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the
following Regional Offices of the Commission: Seven World Trade Center, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission, as does the Company;
the address of such site is http://www.sec.gov. The common stock of NBTY is
listed on the Nasdaq Stock Market under the symbol "NBTY." Material filed by
NBTY may be inspected at the offices of the National Association of Securities
Dealers, Inc., Reports Section, 1735 K Street, N.W. Washington, D.C. 20006.
The Indenture provides that the Company will furnish copies of the
periodic reports required to be filed with the Commission under the Exchange Act
to the holders of the Notes. If the Company is not subject to the periodic
reporting and informational requirements of the Exchange Act, it will, to the
extent such filings are accepted by the Commission, and whether or not the
Company has a class of securities registered under the Exchange Act, file with
the Commission, and provide the Trustee and the holders of the Notes within 15
days after such filings with, annual reports containing the information required
to be contained in Form 10-K promulgated under the Exchange Act, quarterly
reports containing the information required to be contained in Form 10-Q
promulgated under the Exchange Act, and from time to time such other information
as is required to be contained in Form 8-K promulgated under the Exchange Act.
If filing such reports with the Commission is not accepted by the Commission or
prohibited by the Exchange Act, the Company will also provide copies of such
reports, at its cost, to prospective purchasers of the Notes and participants in
the Exchange Offer promptly upon written request.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by NBTY with the
Commission, are incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended September 30,
1996.
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended
December 31, 1996, March 31, 1997 and June 30, 1997.
3. Reports on Form 8-K, dated August 21, 1997, October 17, 1997 and
November 4, 1997.
All documents filed by NBTY with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the sale of the Exchange Notes offered hereby
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof from the date of filing of such documents. Any statement contained
herein or in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
NBTY will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the documents which have been or may be incorporated by reference in this
Prospectus, other than exhibits to such documents not specifically described
above. Requests for such documents should be directed to Harvey Kamil, Executive
Vice President and Secretary, at the address of NBTY.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
NBTY, INC. AND SUBSIDIARIES
Report of Independent Accountants.......................................... F-2
Consolidated Balance Sheets as of September 30, 1996 and 1995.............. F-3
Consolidated Statements of Income for the Years Ended September 30, 1996,
1995 and 1994......................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1996, 1995 and 1994...................................... F-5
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994................................................... F-6
Notes to Consolidated Financial Statements................................. F-8
Condensed Consolidated Balance Sheets as of June 30, 1997 (Unaudited)
and September 30, 1996................................................. F-18
Condensed Consolidated Statements of Income (Unaudited) for the Nine Months
Ended June 30, 1997 and 1996........................................... F-19
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended
June 30, 1997 and 1996................................................. F-20
Notes to Condensed Consolidated Financial Statements....................... F-22
HOLLAND & BARRETT HOLDINGS LIMITED
(FORMERLY HOLLAND & BARRETT RETAIL LIMITED)
A WHOLLY-OWNED SUBSIDIARY OF GEHE AG
Independent Auditors' Report............................................... F-24
Consolidated Profit and Loss Accounts for the Years Ended June 30, 1997, 1996
and 1995............................................................... F-25
Consolidated Statements of Total Recognized Gains and Losses for the Years
Ended June 30, 1997, 1996 and 1995..................................... F-26
Reconciliation of Movements in Group Shareholders' Funds for the Years Ended
June 30, 1997, 1996 and 1995........................................... F-26
Consolidated Balance Sheets at June 30, 1997 and 1996...................... F-27
Consolidated Cash Flow Statements for the Years Ended June 30, 1997, 1996
and 1995.............................................................. F-28
Notes to the Consolidated Financial Statements............................. F-29
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of NBTY, Inc.:
We have audited the consolidated financial statements of NBTY, Inc. and
Subsidiaries as listed on page F-1. 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of NBTY,
Inc. and Subsidiaries as of September 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Melville, New York
November 5, 1996
F-2
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................................. $ 9,292,374 $ 10,378,476
Short-term investments................................................. 11,024,624
Accounts receivable, less allowance for doubtful accounts
of $793,669 in 1996 and $576,579 in 1995........................... 11,625,112 12,354,545
Inventories............................................................ 38,070,071 36,972,592
Deferred income taxes.................................................. 3,155,163 1,846,875
Prepaid catalog costs and other current assets......................... 5,682,874 6,170,243
----------- -----------
Total current assets............................................... 78,850,218 67,722,731
Property, plant and equipment, net......................................... 61,731,625 48,324,576
Intangible assets, net..................................................... 3,974,573 5,813,031
Other assets............................................................... 993,785 1,668,309
----------- -----------
Total assets....................................................... $145,550,201 $123,528,647
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations........ $ 934,887 $ 358,675
Accounts payable....................................................... 10,943,228 16,411,562
Accrued expenses....................................................... 14,704,507 10,287,989
----------- -----------
Total current liabilities.......................................... 26,582,622 27,058,226
----------- -----------
Long-term debt............................................................. 15,178,412 9,705,534
Obligations under capital leases........................................... 3,219,127 1,218,920
Deferred income taxes...................................................... 2,827,198 2,161,537
Other liabilities.......................................................... 792,985 768,985
----------- -----------
Total liabilities.................................................. 48,600,344 40,913,202
----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.008 par; authorized 25,000,000 shares; issued 20,079,676
shares in 1996 and 19,207,676 shares in 1995 and outstanding 18,592,119
shares in 1996 and 17,766,
119 shares in 1995................................................. 160,638 153,662
Capital in excess of par............................................... 56,012,910 54,151,206
Retained earnings...................................................... 44,008,465 30,656,586
----------- -----------
100,182,013 84,961,454
Less 1,487,557 and 1,441,557 treasury shares at cost, in
1996 and 1995, respectively........................................ 2,648,256 2,346,009
Stock subscriptions receivable......................................... 583,900
----------- -----------
Total stockholders' equity......................................... 96,949,857 82,615,445
----------- -----------
Total liabilities and stockholders' equity......................... $145,550,201 $123,528,647
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------------ ------------
<S> <C> <C> <C>
Net sales ................................. $ 194,403,040 $ 178,759,871 $ 156,057,056
------------- ------------- -------------
Costs and expenses:
Cost of sales ......................... 95,638,272 93,875,162 79,891,302
Catalog printing, postage and promotion 17,634,801 19,261,733 14,786,217
Selling, general and administrative ... 58,515,059 56,728,368 49,207,943
------------- ------------- -------------
171,788,132 169,865,263 143,885,462
------------- ------------- -------------
Income from operations .................... 22,614,908 8,894,608 12,171,594
------------- ------------- -------------
Other income (expenses):
Interest, net ......................... (1,445,036) (1,084,331) (913,583)
Miscellaneous, net .................... 1,203,061 571,098 1,284,953
------------- ------------- -------------
(241,975) (513,233) 371,370
------------- ------------- -------------
Income before income taxes ................ 22,372,933 8,381,375 12,542,964
Income taxes .............................. 9,021,054 3,245,517 4,766,526
------------- ------------- -------------
Net income ...................... $ 13,351,879 $ 5,135,858 $ 7,776,438
============= ============= =============
Net income per share ...................... $ 0.67 $ 0.26 $ 0.38
============= ============= =============
Weighted average common shares outstanding 19,975,678 19,974,270 20,257,325
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
COMMON STOCK TREASURY STOCK
------------------- ------------------ STOCK
NUMBER OF CAPITAL IN RETAINED NUMBER OF SUBSCRIPTIONS
SHARES AMOUNT EXCESS OF PAR EARNINGS SHARES AMOUNT RECEIVABLE TOTAL
------- ------ ------------- ---------- --------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1993.................... 18,717,676 $ 149,742 $52,970,926 $ 17,744,290 1,213,404 $ (862,722) $ 70,002,236
Net income for year
ended
September 30, 1994.... 7,776,438 7,776,438
Expenses associated with
prior year public
offering of stock..... (225,000) (225,000)
Exercise of stock
options.............. 60,000 480 29,520 30,000
Tax benefit from
exercise of stock
options............... 433,200 433,200
--------- ---------- ---------- ---------- --------- --------- ---------- ------------
Balance, September 30,
1994.................... 18,777,676 150,222 53,208,646 25,520,728 1,213,404 (862,722) 78,016,874
Net income for year
ended
September 30, 1995.... 5,135,858 5,135,858
Exercise of stock
options............... 430,000 3,440 211,560 215,000
Tax benefit from exercise
of stock options...... 731,000 731,000
Purchase of treasury
stock, at cost........ 228,153 (1,483,287) (1,483,287)
--------- ---------- ---------- ---------- --------- ---------- ---------- ------------
Balance, September 30,
1995.................... 19,207,676 153,662 54,151,206 30,656,586 1,441,557 (2,346,009) 82,615,445
Net income for year ended
September 30, 1996.... 13,351,879 13,351,879
Exercise of stock
options............... 872,000 6,976 587,904 $ (583,900) 10,980
Tax benefit from exercise
of stock options...... 1,273,800 1,273,800
Purchase of treasury
stock, at cost........ 46,000 (302,247) (302,247)
--------- ---------- ---------- ---------- --------- --------- ----------- ------------
Balance, September 30,
1996.................. 20,079,676 $ 160,638 $56,012,910 $44,008,465 1,487,557 $(2,648,256) $96,949,857 $ (583,900)
========== ========== =========== =========== ========= ============ =========== =============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 13,351,879 $ 5,135,858 $ 7,776,438
Adjustments to reconcile net income to cash
provided by operating activities:
Loss on disposal/sale of property, plant and equipment.. 422 374,126 519
Depreciation and amortization......................... 5,623,277 4,840,570 4,243,985
Provision (recovery) for allowance for doubtful accounts 217,090 (17,943) 89,968
Deferred income taxes................................. (642,627) 684,426 3,046,493
Changes in assets and liabilities:
Accounts receivable................................. 1,615,504 (2,119,589) (454,841)
Inventories......................................... (2,035,883) 4,453,583 (10,770,809)
Income tax receivable............................... 1,300,198 3,089,929
Prepaid catalog costs and other current assets...... 487,369 (264,253) (2,297,276)
Other assets........................................ 674,524 1,123,818 (2,465,151)
Accounts payable.................................... (5,468,334) 3,160,180 (2,828,998)
Accrued expenses.................................... 5,690,318 2,809,518 3,226,894
Other liabilities................................... 24,000 274,999 (353,225)
---------- ---------- ----------
Net cash provided by operating activities......... 19,537,539 21,755,491 2,303,926
---------- ---------- ----------
Cash flows from investment activities:
Purchase of property, plant and equipment................. (15,750,517) (11,547,570) (11,592,662)
Increase in intangible assets............................. (66,691) (1,063,953) (253,772)
Proceeds from sale of property, plant and equipment....... 4,270 11,000
Purchase of short-term investments........................ (11,024,624)
Receipt of payments on notes from sale of direct mail
cosmetics business...................................... 741,303
Proceeds from sale of direct mail cosmetic business....... 350,000
---------- ---------- ----------
Net cash used in investing activities............. (25,746,259) (12,611,523) (11,835,434)
---------- ---------- ----------
Cash flows from financing activities:
Net (payments) borrowings under line of credit agreement.. (5,000,000) 5,000,000
Borrowings under long-term debt agreements................ 6,000,000 2,400,000
Principal payments under long-term debt agreements
and capital leases...................................... (586,115) (797,799) (221,307)
Purchase of treasury stock................................ (302,247) (1,292,287)
Proceeds from stock options exercised..................... 10,980 24,000 30,000
Proceeds from public offering, less expenses.............. (225,000)
---------- ---------- ----------
Net cash provided by (used in) financing activities 5,122,618 (4,666,086) 4,583,693
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents........ (1,086,102) 4,477,882 (4,947,815)
Cash and cash equivalents at beginning of year.............. 10,378,476 5,900,594 10,848,409
---------- ---------- ----------
Cash and cash equivalents at end of year.................... $ 9,292,374 $ 10,378,476 $ 5,900,594
========== ========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest.................. $ 1,454,380 $ 1,085,647 $ 913,145
========== ========== ==========
Cash paid during the period for income taxes.............. $ 5,386,714 $ 1,648,765 $ 2,349,198
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
The Company entered into capital leases for machinery and equipment
aggregating $2,635,412 during fiscal 1996 and $1,416,472 in fiscal 1995.
During fiscal 1996, 1995 and 1994, options were exercised with shares
of common stock issued to certain officers and directors. Accordingly, the tax
benefit of approximately $1,274,000, $731,000 and $433,000 for the years ended
September 30, 1996, 1995 and 1994, respectively, was recorded as an increase in
capital in excess of par and a reduction in taxes currently payable. (See Note
11.)
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received $350,000
in cash and non-interest bearing notes aggregating approximately $2,145,000 for
inventory, a customer list and other intangible assets. The notes will be paid
over a three-year period based on a predetermined formula with guaranteed
minimum payments. A final payment for the remaining outstanding balance will be
made on September 30, 1998.
See notes to consolidated financial statements.
F-7
<PAGE>
NBTY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS OPERATIONS
NBTY, Inc., formerly Nature's Bounty, Inc. (the "Company"),
manufactures and distributes vitamins, food supplements and health and beauty
aids. The processing, formulation, packaging, labeling and advertising of the
Company's products are subject to regulation by one or more federal agencies,
including the Food and Drug Administration, the Federal Trade Commission, the
Consumer Product Safety Commission, the United States Department of Agriculture,
the United States Environmental Protection Agency and the United States Postal
Service.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All material intercompany accounts
and transactions have been eliminated.
REVENUE RECOGNITION
The Company recognizes revenue upon shipment or, with respect to its
own retail store operations, upon the sale of products. The Company has no
single customer that represents more than 10% of annual net sales or accounts
receivable as of September 30, 1996.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis. The cost elements of inventory
include materials, labor and overhead. One supplier provided approximately 12%
of the Company's purchases in 1996.
PREPAID CATALOG COSTS
Mail order production and mailing costs are capitalized as prepaid
catalog costs and charged to income over the catalog period, which typically
approximates three months.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is
provided on a straight-line basis over the estimated useful lives of the related
assets. Expenditures which significantly improve or extend the life of an asset
are capitalized.
Maintenance and repairs are charged to expense in the year incurred.
Cost and related accumulated depreciation for property, plant and equipment are
removed from the accounts upon sale or disposition and the resulting gain or
loss is reflected in earnings.
F-8
<PAGE>
INTANGIBLE ASSETS
Goodwill represents the excess of purchase price over the fair value of
identifiable net assets of companies acquired. Goodwill and other intangibles
are amortized on a straight-line basis over appropriate periods not exceeding 40
years.
INCOME TAXES
The Company recognizes deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
SHORT-TERM INVESTMENTS
Short-term interest bearing investments are those with maturities of
less than one year but greater than three months when purchased. These
investments are readily convertible to cash and are stated at market value,
which approximates cost. Realized gains and losses are included in other income
on a specific identification basis in the period they are realized.
COMMON SHARES AND EARNINGS PER SHARE
Earnings per share are based on the weighted average number of common
shares outstanding during the period. Common stock equivalents are not included
in income per share computations since their effect on the calculation is
immaterial.
STOCK-BASED PLANS
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which establishes financial accounting and reporting standards
for stock based plans. The Statement, which becomes effective in fiscal 1997,
requires the Company to choose between accounting for issuances of stock and
other equity instruments to employees based on their fair value or to continue
to use an intrinsic value based method and disclosing the pro forma effects such
accounting would have had on the Company's net income and earnings per share.
The Company will continue to use the intrinsic value based method, which
generally does not result in compensation cost.
RECLASSIFICATIONS
Certain reclassifications have been made to conform prior year amounts
to the current year presentation.
F-9
<PAGE>
2. SALE OF DIRECT-MAIL COSMETICS BUSINESS
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received $350,000
in cash and non interest bearing notes aggregating approximately $2,145,000 for
inventory, a customer list and other intangible assets. The notes will be paid
over a three-year period based on a predetermined formula with guaranteed
minimum payments. A final payment for the remaining outstanding balance will be
made on September 30, 1998. Revenues applicable to this marginally unprofitable
business were $136,648, $8,283,517 and $13,276,045 for fiscal 1996, 1995 and
1994, respectively.
3. INVENTORIES
SEPTEMBER 30,
-------------------------------
1996 1995
----------- ----------
Raw materials......................... $17,131,532 $15,898,215
Work-in-process....................... 1,522,803 1,848,629
Finished goods........................ 19,415,736 19,225,748
---------- ----------
$38,070,071 $36,972,592
========== ==========
4. PROPERTY, PLANT AND EQUIPMENT
SEPTEMBER 30,
---------------------------
1996 1995
---------- ---------
Land.................................. $ 4,764,965 $ 3,064,965
Buildings and leasehold improvements.. 38,087,461 31,830,638
Machinery and equipment............... 28,560,427 22,279,226
Furniture and fixtures................ 8,484,103 6,065,382
Transportation equipment.............. 640,982 200,982
Computer equipment.................... 8,544,945 7,296,395
---------- ----------
89,082,883 70,737,588
Less accumulated depreciation and
amortization.......................... 27,351,258 22,413,012
========== ==========
$61,731,625 $48,324,576
Depreciation and amortization of property, plant and equipment for the
years ended September 30, 1996, 1995 and 1994 was approximately $4,974,000,
$4,064,000 and $3,190,000, respectively.
Property, plant and equipment includes approximately $4,052,000 and
$1,416,000 for assets recorded under capital leases for fiscal 1996 and 1995,
respectively.
F-10
<PAGE>
5. INTANGIBLE ASSETS
Intangible assets, at cost, acquired at various dates are as follows:
SEPTEMBER 30,
-------------------------
1996 1995 AMORTIZATION
---- ----- PERIOD
Goodwill......................... $ 469,400 $ 469,400 20-40
Customer lists................... 8,783,475 10,540,017 6-15
Trademark and licenses........... 1,201,205 1,134,514 2-3
Covenants not to compete......... 1,304,538 1,304,538 5-7
---------- ----------
11,758,618 13,448,469
Less accumulated amortization 7,784,045 7,635,438
---------- ----------
$ 3,974,573 $ 5,813,031
========== ==========
Amortization included in the consolidated statements of income under
the caption "selling, general and administrative expenses" in 1996, 1995 and
1994 was approximately $649,000, $776,000 and $1,054,000, respectively.
Effective October 1, 1993, the Company changed its estimates of the
lives of certain customer lists. Customer list amortization lives that
previously averaged 6 years were increased to an average of 15 years. This
change was made to better reflect the estimated periods during which an
individual will remain a customer of the Company. The change had the effect of
reducing amortization expense by approximately $500,000 and increasing the net
income by $310,000 in 1994.
6. ACCRUED EXPENSES
SEPTEMBER 30,
----------------------------
1996 1995
--- ----
Payroll and related payroll taxes...... $ 2,730,453 $ 2,166,355
Customer deposits...................... 1,862,837 2,034,175
Accrued purchases...................... 1,765,420 1,734,844
Income taxes payable................... 2,670,270 39,815
Other.................................. 5,675,527 4,312,800
---------- ----------
$14,704,507 $10,287,989
========== ==========
F-11
<PAGE>
7. LONG-TERM DEBT
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Mortgages:
First mortgage, payable in monthly principal and interest
(10.375%) installments (a)............................... $ 7,447,859 $ 7,566,144
First mortgage payable in monthly principal and interest
(9.73%) installments of $25,396 (b)...................... 2,257,729 2,338,432
First mortgage, payable in monthly principal and interest
(7.375%) installments of $55,196 (c)..................... 5,926,038
---------- ---------
15,631,626 9,904,576
Less current portion........................................... 453,214 199,042
---------- ---------
$15,178,412 $ 9,705,534
========== =========
</TABLE>
- -------------
(a) In September 1990, the Company obtained an $8,000,000 first mortgage,
collateralized by the underlying building, issued through the Town of
Islip, New York Industrial Development Agency. The taxable bond, held by an
insurance company, has monthly principal and interest payments of $74,821
for ten years through 2000, with a final payment of $6,891,258 in September
2000.
(b) In November 1994, the Company purchased a building which it previously
occupied under a long-term lease. The purchase price of approximately
$3,090,000 was funded with $690,000 in cash and the balance through a
15-year mortgage note payable. This agreement contains restrictive
covenants identical to the covenants noted under the revolving credit
facility described below.
(c) In April 1996, the Company obtained a $6,000,000 first mortgage with a
fixed interest rate of 7.375%, collateralized by the underlying real
estate. The mortgage has monthly principal and interest payments of $55,196
for fifteen years through 2011.
On April 3, 1996, the Company renewed a revolving credit agreement (the
"Agreement") with two banks that provides for unsecured borrowings up to
$15,000,000 which expires March 31, 1999. As of September 30, 1996, there were
no borrowings under this Agreement. Under the most restrictive covenants of the
Agreement, the Company is required to maintain tangible net worth of at least
$84,000,000, a current ratio of at least 1.75 to 1.00 and has a limitation on
the amount of capital expenditures.
Required principal payments of long-term debt are as follows:
YEARS ENDED
SEPTEMBER 30,
- ----------
1997...................................................... $ 453,214
1998...................................................... 494,324
1999...................................................... 539,266
2000...................................................... 7,419,600
2001...................................................... 443,875
Thereafter................................................ 6,281,347
----------
$15,631,626
==========
F-12
<PAGE>
8. CAPITAL LEASE OBLIGATIONS
The Company entered into six capital leases for machinery and equipment
aggregating $2,635,412 during fiscal 1996 and two capital leases for machinery
and equipment aggregating $1,416,472 in fiscal 1995. The leases provide the
Company with bargain purchase options at the end of such lease terms.
Future minimum payments under capital lease obligations as of September
30, 1996 are as follows:
1997........................................................... $ 758,872
1998........................................................... 758,872
1999........................................................... 758,872
2000........................................................... 758,872
2001........................................................... 758,872
Thereafter..................................................... 870,186
---------
4,664,546
Less, amount representing interest............................. 963,746
---------
Present value of minimum lease payments
(including $481,673 due within one year)....................... $3,700,800
=========
9. INCOME TAXES
Provision for income taxes consists of the following:
YEAR ENDED SEPTEMBER 30,
--------------------------------------------
1996 1995 1994
---- ---- ----
Federal
Current.......... $ 7,551,755 $ 2,224,935 $ 856,774
Deferred......... (501,249) 636,516 3,156,289
State
Current.......... 2,111,926 336,156 515,893
Deferred......... (141,378) 47,910 237,570
--------- --------- ---------
Total provision...... $ 9,021,054 $ 3,245,517 $ 4,766,526
========= ========= =========
The following is a reconciliation of the income tax expense computed
using the statutory federal income tax rate to the actual income tax expense and
its effective income tax rate.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------
1996 1995 1994
------------------ ------------------ --------------------
PERCENT OF PERCENT OF PERCENT OF
PRETAX PRETAX PRETAX
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
<S> <C> <C> <C> <C> <C> <C>
Income tax expense at
statutory rate................. $ 7,830,527 35.0% $ 2,849,668 34.0% $ 4,390,037 35.0%
State income taxes, net of
federal income tax benefit..... 1,280,856 5.7% 253,483 3.0% 489,751 3.9%
Other, individually less than 5%... (90,329) (0.4)% 142,366 1.7% (113,262) (0.9)%
--------- ---- --------- ---- --------- ----
Actual income tax
provision...................... $ 9,021,054 40.3% $ 3,245,517 38.7% $ 4,766,526 38.0%
========= ==== ========= ==== ========= ====
</TABLE>
F-13
<PAGE>
The components of deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Current:
Inventory capitalization................................. $ 243,000 $ 178,034
Accrued expenses and reserves not currently deductible... 2,591,137 1,049,584
Tax credits.............................................. 321,026 555,822
Miscellaneous............................................ 63,435
--------- ---------
Current deferred tax assets........................ 3,155,163 1,846,875
--------- ---------
Noncurrent:
Intangibles............................................ 334,820 231,701
Reserves not currently deductible...................... 200,070 342,910
--------- ---------
Total noncurrent................................. 534,890 574,611
--------- ---------
Deferred tax liabilities:
Property, plant and equipment............................. (3,362,088) (2,736,148)
--------- ---------
Net deferred tax asset (liability).............. $ 327,965 $ (314,662)
========= =========
</TABLE>
Available state tax credits of $321,026 and $555,822 in 1996 and 1995,
respectively, are scheduled to expire through fiscal 2002.
10. COMMITMENTS
LEASES
The Company conducts retail operations under operating leases which
expire at various dates through 2011. Some of the leases contain renewal options
and provide for additional rentals based upon sales plus certain tax and
maintenance costs.
Future minimal rental payments under the retail location and automotive
leases that have initial or noncancelable lease terms in excess of one year at
September 30, 1996 are as follows:
YEAR ENDING
SEPTEMBER 30,
- ----------
1997.................................................... $ 3,319,803
1998.................................................... 3,010,636
1999.................................................... 2,807,311
2000.................................................... 2,375,884
2001.................................................... 1,660,407
Thereafter.............................................. 811,796
----------
$13,985,837
==========
Operating lease rental expense, including real estate tax and
maintenance costs and leases on a month to month basis, was approximately
$1,979,000, $1,248,000 and $1,200,000 for the years ended September 30, 1996,
1995 and 1994, respectively.
F-14
<PAGE>
PURCHASE COMMITMENTS
The Company was committed to make future purchases under various
purchase order arrangements with fixed price provisions aggregating
approximately $12,923,000 and $972,000 at September 30, 1996 and 1995,
respectively.
EMPLOYMENT AND CONSULTING AGREEMENT AGREEMENTS
The Company has employment agreements with two of its officers. The
agreements, which expire in January 2004, provide for minimum salary levels, as
adjusted for cost of living changes, as well as contain provisions regarding
severance and changes in control of the Company. The commitment for salaries as
of September 30, 1996 was approximately $749,000 per year.
The Company also has a two-year consulting agreement with its former
chairman and current director which expires on December 31, 1996. Such agreement
required annual payments of approximately $300,000. The parties are presently
negotiating a renewal of the agreement under substantially comparable terms. In
addition, an entity owned by a relative of an officer received sales commissions
of $417,000, $510,000 and $351,000 in 1996, 1995 and 1994, respectively.
11. STOCK OPTION PLANS
The Board of Directors approved the issuance of 1,608,000 non-qualified
stock options on December 11, 1989, exercisable at $0.50 per share, which
options terminated on December 10, 1994. The Board also approved the issuance of
2,220,000 non-qualified options on September 23, 1990, exercisable at $0.63 per
share, which options terminate on September 23, 2000. In addition, on March 11,
1992, the Board of Directors approved the issuance of an aggregate of 1,800,000
non-qualified stock options to directors and officers, exercisable at $0.92 per
share, and expiring on March 10, 2002. The exercise price of each of the
aforementioned issuances was in excess of the market price at the date such
options were granted.
During fiscal 1996, options were exercised with 872,000 shares of
common stock issued to certain officers and directors for $10,980 and interest
bearing notes in the amount of $583,900. As a result of the exercise of these
options, the Company is entitled to a compensation deduction for tax purposes of
approximately $3,145,000 which should ultimately result in a tax benefit to the
Company of approximately $1,273,800. Accordingly, the Company has recorded an
increase in capital in excess of par and has adjusted its current liability to
recognize the effect of this tax benefit.
During fiscal 1995, options were exercised with 430,000 shares of
common stock issued to certain officers and directors for $24,000 and an
interest bearing note in the amount of $191,000. The promissory note, including
interest, was paid by the surrender of 23,153 NBTY common shares to the Company
at the prevailing market price. As a result of the exercise of these options,
the Company was entitled to a compensation deduction of approximately $1,827,500
which resulted in a tax benefit of approximately $731,000. Such benefit was
recorded as an increase in capital in excess of par and a reduction to taxes
currently payable.
During fiscal 1994, options were exercised with 60,000 shares of common
stock issued to certain directors for $30,000. As a result of the exercise of
these options, the Company was entitled to a compensation deduction for tax
purposes of approximately $1,140,000 which resulted in a tax benefit of
approximately $433,200. Such benefit was recorded as an increase to capital in
excess of par and a reduction to taxes currently payable.
F-15
<PAGE>
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
COMMON EXERCISE PRICE
SHARES PER SHARE
------ ----------
<S> <C> <C>
Shares under option, September 30, 1994 (fully exercisable).......... 2,825,000 $.50-$.92
Exercised in 1995.......................................... 430,000 $.50
-------- --------
2,395,000 $.63-$.92
Shares under option, September 30, 1995 (fully exercisable)
Exercised in 1996.......................................... 872,000 $.63-$.92
-------- --------
Shares under option, September 30, 1996 (fully exercisable).......... 1,523,000 $.63-$.92
======== ========
</TABLE>
12. EMPLOYEE BENEFIT PLANS
The Company maintains a defined contribution savings plan, which
qualifies under Section 401(k) of the Internal Revenue Code, and an employee
stock ownership plan. The accompanying financial statements reflect
contributions to these plans in the approximate amount of $489,000, $498,000 and
$103,000 for the years ended September 30, 1996, 1995 and 1994, respectively.
13. LITIGATION
L-TRYPTOPHAN
The Company and certain other companies in the industry, including
distributors, wholesalers and retailers (the "Indemnified Group") had been named
as defendants in cases arising out of the ingestion of products containing
L-tryptophan. The Company had been named in more than 265 lawsuits, 4 of which
are still pending against the Company. The Indemnified Group has entered into an
agreement with the Company's supplier of bulk L-tryptophan, Showa Denko America,
Inc. (the "Supplier"), under which the Supplier, a U.S. subsidiary of a major
Japanese corporation, Showa Denko K.K., has assumed the defense of all claims
against the Indemnified Group and has agreed to pay the legal fees and expenses
in that defense. The Supplier and Showa Denko K.K. has agreed to indemnify the
Indemnified Group against any judgments and to fund settlements arising out of
those actions and claims.
The Supplier has posted a revolving, irrevocable letter of credit of
$20 million to be used for the benefit of the Indemnified Group in the event
that the Supplier is unable or unwilling to satisfy any claims or judgments.
While not all of these suits quantify the amount demanded, it can
reasonably be assumed that the amount required to either settle these cases or
to pay judgments rendered therein will be paid by the Supplier or by the
Company's product liability insurance carrier. To date, no cases in which the
Company is a party have reached trial.
While the outcome of any litigation is uncertain, it is the opinion of
management and legal counsel of the Company that it is remote that the Company
will incur a material loss as a result of the L-tryptophan litigation and
claims. Accordingly, no provision for liability, if any, that may result
therefrom has been made in the Company's financial statements.
SHAREHOLDER LITIGATION
In October 1994, litigation was commenced in the U.S. District Court,
Eastern District of New York, against the Company and two of its officers. The
F-16
<PAGE>
complaint alleges that false and misleading statements and representations were
made concerning the Company's sales and earnings estimates for the fourth fiscal
quarter and the year ended September 30, 1994. The allegations are that: (a)
sales were artificially inflated; (b) costs were improperly capitalized; (c)
sales and profit margins were materially declining; (d) inventory and accounts
receivable were overstated; and (e) that because of the foregoing, the Company
would incur a loss in its fourth fiscal quarter. The Plaintiffs seek Class
Action certification and an unspecified amount of monetary damages. The Company
and its officers deny the allegations of the complaints and intend to vigorously
contest the litigation. In 1994, prior to commencement of these lawsuits, the
Company purchased a directors and officers Indemnity Policy. Special counsel has
been retained to represent the Company and its officers. Since the outcome of
any litigation is uncertain, the Company is unable to predict (i) whether it
will ultimately prevail; (ii) whether it will be fully or partially indemnified,
if at all; (iii) the amount of loss, if any, that may be attributable to the
above, and (iv) the amount of expense which may be incurred in the defense of
these actions.
OTHER LITIGATION
The Company is also involved in miscellaneous claims and litigation
which, taken individually or in the aggregate, would not have a material adverse
effect on the Company's financial position or its business.
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the unaudited quarterly results of
operations for fiscal 1996 and 1995 (dollars in thousands, except per share
data):
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
------------ -------- ------- -------------
<S> <C> <C> <C> <C>
Net sales................................ $ 38,589 $ 55,605 $ 47,900 $ 52,309
Gross profit............................. 17,779 27,760 24,453 28,773
Income (loss) before income taxes........ (412) 7,502 6,503 8,780(a)
Net income (loss)........................ (251) 4,576 3,763 5,264
Earnings (loss) per share................ $ (0.01) $ 0.23 $ 0.19 $ 0.26
1995:
Net sales................................ $ 37,478 $ 50,945 $ 41,650 $ 48,687
Gross profit............................. 18,380 25,220 20,564 20,720
Income before income taxes............... 1,648 4,336 2,004 394(b)
Net income............................... 939 2,552 1,152 493
Earnings per share....................... $ 0.05 $ 0.13 $ 0.06 $ 0.02
</TABLE>
- ------------
(a) 1996 year-end adjustments resulting in an increase to pre-tax income of
approximately $2 million related to adjustments of inventory amounts.
(b) 1995 year-end adjustments resulting in a charge to operations included
approximately $1,475,000 for various accruals and for the write-off of
certain equipment associated with the Company's cosmetic pencil operation,
and $900,000 pertaining to the identification of obsolete inventory.
F-17
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1997 1996
------- ----------
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................ $ 2,915,318 $ 9,292,374
Short-term investments............................................... 15,540,808 11,024,624
Accounts receivable, less allowance for doubtful accounts of $996,491
in 1997 and $793,669 in 1996................................... 13,012,095 11,625,112
Inventories.......................................................... 58,682,289 38,070,071
Deferred income taxes................................................ 3,155,163 3,155,163
Prepaid catalog costs and other current assets....................... 7,648,111 5,682,874
----------- -----------
Total current assets..................................................... 100,953,784 78,850,218
Property, plant and equipment............................................ 99,846,582 89,082,883
Less accumulated depreciation and amortization........................... 31,398,648 27,351,258
----------- -----------
68,447,934 61,731,625
Intangible assets, net................................................... 3,748,030 3,974,573
Other assets............................................................. 514,845 993,785
----------- -----------
Total assets............................................................. $173,664,593 $145,550,201
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease obligations...... $ 995,225 $ 934,887
Accounts payable..................................................... 22,807,676 10,943,228
Accrued expenses..................................................... 15,258,867 14,704,507
----------- -----------
Total current liabilities................................................ 39,061,768 26,582,622
Long-term debt........................................................... 14,782,083 15,178,412
Obligations under capital leases......................................... 2,863,638 3,219,127
Deferred income taxes.................................................... 2,827,198 2,827,198
Other liabilities........................................................ 792,985 792,985
----------- -----------
Total liabilities........................................................ 60,327,672 48,600,344
Commitments and contingencies
Stockholders' equity:
Commonstock, $.008 par; authorized 25,000,000 shares; issued 20,116,676
shares in 1997 and 20,079,676 in 1996 and outstanding 18,628,491
shares in 1997 and 18,592,
119 shares in 1996............................................. 160,934 160,638
Capital in excess of par................................................. 56,303,677 56,012,910
Retained earnings........................................................ 60,061,732 44,008,465
----------- -----------
116,526,343 100,182,013
Less 1,488,185 and 1,487,557 treasury shares at cost, in 1997 and 1996,
respectively......................................................... 2,663,167 2,648,256
Stock subscriptions receivable........................................... 526,255 583,900
----------- -----------
Total stockholders' equity............................................... 113,336,921 96,949,857
----------- -----------
Total liabilities and stockholders' equity............................... $173,664,593 $145,550,201
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-18
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales........................................................ $ 184,107,656 $ 142,093,552
----------- -----------
Costs and expenses:
Cost of sales................................................ 88,205,269 72,101,151
Catalog printing, postage and promotion...................... 14,580,501 13,240,001
Selling, general and administrative.......................... 53,884,692 42,782,415
----------- -----------
156,670,462 128,123,567
----------- -----------
Income from operations........................................... 27,437,194 13,969,985
----------- -----------
Other income (charges):
Interest expense............................................. (1,294,232) (1,017,497)
Miscellaneous, net........................................... 612,483 640,730
----------- -----------
(681,749) (376,767)
----------- -----------
Income before income taxes....................................... 26,755,445 13,593,218
Income taxes..................................................... 10,702,178 5,505,398
----------- -----------
Net income....................................................... $ 16,053,267 $ 8,087,820
=========== ===========
Earnings per common share and common share equivalents........... $0.80 $0.41
===== =====
Weighted average common shares and
common share equivalents..................................... 20,052,391 19,939,042
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED JUNE 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Net income............................................................... $ 16,053,267 $ 8,087,820
Adjustments to reconcile net income to cash provided by
operating activities:
(Gain), Loss on sale of property, plant and equipment................ 25,526 (2,250)
Depreciation and amortization........................................ 4,582,566 4,003,164
Provision for allowance for doubtful accounts........................ 202,822 169,481
Changes in assets and liabilities, net of acquisitions:
(Increase) decrease in accounts receivable..................... (2,636,906) 797,534
(Increase) decrease in inventories............................. (20,612,218) 229,671
Increase in prepaid catalog costs and other current assets..... (1,965,237) (4,499,475)
Decrease other assets.......................................... 453,343 2,547,275
Increase (decrease) in accounts payable........................ 11,864,448 (5,083,382)
Increase in accrued expenses................................... 880,193 2,298,094
---------- ----------
Net cash provided by operating activities................................ 8,847,804 8,547,932
---------- ----------
Cash flow from investing activities:
Increase in intangible assets........................................ (40,047)
Purchase of property, plant and equipment............................ (11,092,412) (11,494,483)
Proceeds from sale of property, plant and equipment.................. 20,150 2,250
Purchase of short-term investments................................... (4,516,184)
Proceeds from sale of direct-mail cosmetics business................. 350,000
Receipt of payments from direct-mail cosmetics business.............. 1,047,101 499,670
---------- ----------
Net cash used in investing activities................................ (14,541,345) (10,682,610)
---------- ----------
Cash flows from financing activities:
Borrowings under long term debt agreements........................... 6,000,000
Principal payments under long-term debt agreements
and capital leases............................................. (691,479) (368,248)
Purchase of treasury stock........................................... (14,911) (302,247)
Proceeds from stock options exercised................................ 22,875 10,980
---------- ----------
Net cash (used in) provided by financing activities...................... (683,515) 5,340,485
---------- ----------
Net (decrease) increase in cash and cash equivalents..................... (6,377,056) 3,205,807
Cash and cash equivalents at beginning of year........................... 9,292,374 10,378,476
---------- ----------
Cash and cash equivalents at end of quarter.............................. $ 2,915,318 $ 13,584,283
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest............................. $ 1,294,232 $ 1,012,622
Cash paid during the period for taxes................................ $ 11,067,626 $ 2,178,025
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE>
NBTY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
The Company entered into capital leases for machinery and equipment
aggregating $2,635,412 for the nine months ended June 30, 1996.
During the first nine months of 1997, options were exercised with
37,000 shares of common stock issued to certain officers for $22,875 and a note
for $10,980. As a result of the exercise of those options, the Company received
a compensation deduction for tax purposes of approximately $643,000 and a tax
benefit of approximately $257,200. An additional 628 NBTY common shares were
surrendered to the Company, at market price, in payment of a stock subscription
receivable and interest in 1997. The average cost of shares was $22.50 in 1997.
During the first nine months of fiscal 1996, options were exercised
with 872,000 shares of common stock issued to certain officers for $10,980 and
interest bearing notes in the amount of $583,900. As a result of the exercise of
those options, the Company received a compensation deduction for tax purposes of
approximately $3,150,000 and a tax benefit of approximately $1,230,000.
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received $350,000
in cash and non-interest bearing notes aggregating approximately $2,145,000 for
inventory, a customer list and other intangible assets. The inventory note was
repaid in full in October 1996. In April 1997, the Company received $725,000 as
a final payment of the customer list note.
See notes to condensed consolidated financial statements.
F-21
<PAGE>
NBTY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to present
fairly its financial position as of June 30, 1997 and results of operations for
the nine months ended June 30, 1997 and 1996 and statements of cash flows for
the nine months ended June 30, 1997 and 1996. The consolidated condensed balance
sheet as of September 30, 1996 has been derived from the audited balance sheet
as of that date. This report should be read in conjunction with the Company's
annual report filed on Form 10-K for the fiscal year ended September 30, 1996.
2. The results of operations and cash flows for the nine months ended June 30,
1997 are not necessarily indicative of the results to be expected for the full
year.
3. Sale of Direct-Mail Cosmetic Business:
On October 9, 1995, the Company sold certain assets of its direct-mail
cosmetics business for approximately $2,495,000. The Company received $350,000
in cash and non-interest bearing notes aggregating approximately $2,145,000 for
inventory, a customer list and other intangible assets. The inventory note was
repaid in full in October 1996. In April 1997, the Company received $725,000 as
a final payment of the customer list note.
4. Inventories have been estimated by using the gross profit method for the
interim periods. The components of the inventories are as follows:
JUNE 30, SEPTEMBER 30,
1997 1996
------------ ------------
(UNAUDITED)
Raw materials and work-in-process..... $ 35,023,137 $ 18,654,335
Finished goods........................ 23,659,152 19,415,736
------------ ------------
$ 58,682,289 $ 38,070,071
============ ============
5. Intangible assets, at cost, acquired at various dates are as follows:
JUNE 30, SEPTEMBER 30,
1997 1996
---------- -------------
(UNAUDITED)
Goodwill...................................... $ 469,400 $ 469,400
Customer lists................................ 8,783,475 8,783,475
Trademark and licenses........................ 1,201,205 1,201,205
Covenants not to compete...................... 1,304,538 1,304,538
---------- -----------
11,758,618 11,758,618
Less, accumulated amortization................ 8,010,588 7,784,045
---------- -----------
$ 3,748,030 $ 3,974,573
========== ===========
<PAGE>
6. Accrued expenses:
JUNE 30, SEPTEMBER 30,
1997 1996
----------- -------------
(UNAUDITED)
Payroll and related payroll taxes........... $ 3,286,118 $ 2,730,453
Customer deposits........................... 2,499,656 1,862,837
Accrued purchases........................... 935,110 1,765,420
Income taxes payable........................ 2,115,214 2,670,270
Other....................................... 6,422,769 5,675,527
----------- -----------
$15,258,867 $14,704,507
=========== ===========
7. The Company purchased 46,000 shares of its common stock for $302,247 for the
nine months ended June 30, 1996 in open market transactions. The average price
per share was $6.57. An additional 628 NBTY common shares were surrendered to
the Company at market price in payment of a stock subscription receivable and
interest in 1997. The average cost of shares was $22.50 in 1997.
8. Earnings per share are based on the weighted average number of common shares
and common equivalent shares outstanding during the three and nine month periods
ended June 30, 1997 and 1996. The calculation of earnings per share include
1,441,560 and 1,501,084 common stock equivalent shares for the nine month
periods ended June 30, 1997 and 1996, respectively.
9. During the first nine months of 1997, options were exercised with 37,000
shares of common stock issued to certain officers and a director for $22,875 and
a note for $10,980. As a result of the exercise of those options, the Company
received a compensation deduction for tax purposes of approximately $643,000 and
a tax benefit of approximately $257,200. An additional 628 NBTY common shares
were surrendered to the Company, at market price, in payment of a stock
subscription receivable and interest in 1997. The average cost of shares was
$22.50 in 1997.
During the first nine months of 1996, options were exercised with
872,000 shares of common stock issued to certain officers for $10,980 and
interest bearing notes in the amount of $583,900. As a result of the exercise of
those options, the Company received a compensation deduction for tax purposes of
approximately $3,150,000 and a tax benefit of approximately $1,230,000.
In November 1995, options were exercised with shares of common stock
issued to certain officers for an interest bearing note in the amount of
$437,500. As a result of the exercise of those options, the Company received a
compensation deduction for tax purposes of approximately $2,362,500 and a tax
benefit of approximately $920,000.
The following is a summary of changes in outstanding options for the
Company's Stock Option Plans for the nine month period ended June 30, 1997:
<TABLE>
<CAPTION>
EXERCISE
PRICE
--------
<S> <C> <C>
Shares under option, September 30, 1996 (fully exercisable)........ 1,523,000 $.63-$.92
Options exercised.................................................. (37,000) $.92
Shares exercisable, June 30, 1997 (fully exercisable).............. 1,486,000 $.63-$.92
</TABLE>
10. Subsequent event:
The Company has entered into negotiations to acquire a vitamin and health
food retailer that operates 410 stores in the United Kingdom. The Company would
finance the purchase with bonds and borrowings through a U.S. bank. The Company
has not reached an agreement in principle in connection with this potential
transaction.
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To: The Directors and shareholders of Holland & Barrett Holdings Limited
We have audited the accompanying consolidated balance sheets of Holland &
Barrett Holdings Limited (formerly Holland & Barrett Retail Limited) and its
subsidiaries ("the Group") as at 30 June 1996 and 1997 and the related
consolidated profit and loss accounts, cash flow statements, statements of total
recognized gains and losses and changes in shareholders' funds for each of the
years in the three year period ended 30 June 1997. These consolidated financial
statements are the responsibility of the Group's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United Kingdom which do not differ in any material respects from
generally accepted auditing standards in the United States. 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 aforementioned consolidated financial statements present
fairly, in all material respects, the financial position of Holland & Barrett
Holdings Limited and subsidiaries as of 30 June 1996 and 1997, and the results
of their operations and their cash flows for each of the years in the three year
period ended 30 June 1997 in conformity with generally accepted accounting
principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected results of operations for each of the years in the
two year period ended 30 June 1997 and shareholders' equity as of 30 June 1997
and 1996, to the extent summarized in Note 3 of the consolidated financial
statements.
KPMG
Chartered Accountants
Registered Auditors
Birmingham, England
4 August 1997,
except for Note 23
which is as of
7 August 1997
F-24
<PAGE>
HOLLAND & BARRETT HOLDINGS LIMITED
(A WHOLLY-OWNED SUBSIDIARY OF GEHE AG)
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE THREE YEARS ENDED 30 JUNE
<TABLE>
<CAPTION>
YEAR ENDED 30 JUNE
--------------------------
1997 1996 1995
NOTE (POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
---- -------------------- -------------------- -------------------
<S> <C> <C> <C> <C>
Turnover........................................... 102,880 90,632 77,124
Cost of sales...................................... (53,578) (47,968) (41,077)
------ ------ -----
Gross profit....................................... 49,302 42,664 36,047
Distribution costs................................. (39,365) (33,860) (28,729)
Administrative expenses............................ (2,232) (1,532) (1,512)
Other operating income............................. -- 46 1
------ ------ -----
Operating profit................................... 4 7,705 7,318 5,807
Loss on sale of fixed assets....................... (372) (46) (230)
Other interest receivable and similar income....... 7 92 -- 2
Interest payable and similar charges............... 8 (7) (393) (387)
------ ------ -----
Profit on ordinary activities before taxation...... 7,418 6,879 5,192
Taxation on profit on ordinary activities.......... 9 (2,575) (2,493) (1,725)
------ ------ -----
Profit on ordinary activities after taxation....... 4,843 4,386 3,467
Dividend written back/(proposed)................... 8,100 (8,100) (2,395)
------ ------ -----
Retained profit/(loss) for the financial year...... 10,19 12,943 (3,714) 1,072
------ ------ -----
- ------------
There are no discontinued activities.
The effect of acquisitions on turnover and operating profit is considered to be not material.
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-25
<PAGE>
HOLLAND & BARRETT HOLDINGS LIMITED
(A WHOLLY-OWNED SUBSIDIARY OF GEHE AG)
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE THREE YEARS ENDED 30 JUNE 1997
During the three years ended 30 June 1997 there were no gains or losses
other than the profit for the financial year.
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
YEAR ENDED 30 JUNE
-----------------------------
1997 1996 1995
(POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
<S> <C> <C> <C>
------------------- ------------------- -------------------
Profit for the year......................................... 4,843 4,386 3,467
Dividends written back/(proposed)........................... 8,100 (8,100) (2,395)
------ ----- -----
12,943 (3,714) 1,072
Other recognized gains and losses relating to the year:
Goodwill written off.................................... (130) -- (595)
------ ----- -----
Net movement in shareholders' funds..................... 12,813 (3,714) 477
Shareholders' funds at beginning of year................ 4,095 7,809 7,332
------ ----- -----
Shareholders' funds at end of year...................... 16,908 4,095 7,809
------ ----- -----
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-26
<PAGE>
HOLLAND & BARRETT HOLDINGS LIMITED
(A WHOLLY-OWNED SUBSIDIARY OF GEHE AG)
CONSOLIDATED BALANCE SHEETS
AT 30 JUNE 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
NOTE (POUND STERLING)`000 (POUND STERLING)`000
---- -------------------- --------------------
<S> <C> <C> <C>
FIXED ASSETS:
Tangible assets......................................... 11 22,988 20,042
------ ------
CURRENT ASSETS:
Stocks.................................................. 13 11,479 12,037
Debtors................................................. 14 10,684 8,559
Cash at bank and in hand................................ 5,668 2,748
------ ------
27,831 23,344
Creditors: amounts falling due within one year.............. 15 (31,354) (24,734)
------ ------
Net current liabilities..................................... (3,523) (1,390)
------ ------
Total assets less current liabilities....................... 19,465 18,652
Creditors: amounts falling due after more than one year..... 16 -- (12,500)
Provisions for liabilities and charges...................... 17 (2,557) (2,057)
------ ------
NET ASSETS.................................................. 16,908 4,095
====== ======
Capital and reserves
Called up share capital................................. 18 1,050 1,050
Goodwill write off reserve.............................. 19 (680) (582)
Consolidated goodwill................................... 19 (715) (715)
Capital reserve......................................... 19 4,587 4,587
Profit and loss account................................. 19 12,666 (245)
------ ------
Equity shareholders' funds.................................. 16,908 4,095
====== ======
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-27
<PAGE>
HOLLAND & BARRETT HOLDINGS LIMITED
(A WHOLLY-OWNED SUBSIDIARY OF GEHE AG)
CONSOLIDATED CASH FLOW STATEMENTS
FOR THE THREE YEARS ENDED 30 JUNE 1997
<TABLE>
<CAPTION>
1997 1996 1995
(POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
<S> <C> <C> <C> <C>
-------------------- ------------------- --------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES..................... 20(a) 10,994 11,050 6,087
------ ------ -----
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE:
Interest received......................................... 92 -- 2
Interest paid............................................. (7) (393) (387)
------ ------ -----
85 (393) (385)
------ ------ -----
TAXATION
Corporation tax (paid)/received............................... (1,368) 21 (1,795)
------ ------ -----
CAPITAL EXPENDITURES
Payments to acquire tangible fixed assets..................... (6,817) (6,787) (6,141)
Receipts from sales of tangible fixed assets.................. 156 153 79
------ ------ -----
(6,661) (6,634) (6,062)
------ ------ -----
ACQUISITIONS AND DISPOSALS
Acquisition of businesses and subsidiaries.................... (130) -- (388)
------ ------ -----
Net cash inflow/(outflow) before financing and increase/(decrease)
in cash and cash equivalents.............................. 20(b) 2,920 4,044 (2,543)
====== ====== =====
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE>
HOLLAND & BARRETT HOLDINGS LIMITED
(A WHOLLY-OWNED SUBSIDIARY OF GEHE AG)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION OF FINANCIAL INFORMATION
The consolidated financial statements of Holland & Barrett Holdings Limited
(formerly Holland and Barrett Retail Limited), a wholly-owned subsidiary of Gehe
AG (the "Parent") have been prepared under the historical cost convention and in
accordance with generally accepted accounting principles in the United Kingdom
("UK GAAP"). Transfers of net assets between entities under the common control
of the Parent have been accounted for at historical cost in a manner similar to
pooling of interests with the financial statements restated to give effect to
the transactions as if such entities had always been combined.
On 11 October 1996, Holland & Barrett Holdings Limited was incorporated
under the Laws of England and Wales. On 11 April 1997 it acquired the investment
in Holland & Barrett Retail Limited ("Retail") from Lloyds Chemists plc, a
fellow subsidiary company.
On 30 June 1995, Holland & Barrett Retail Limited ("Retail") acquired the
trade and assets of the Holland & Barret Distribution ("Distribution") from
Barclay Pharmaceutical Limited at book value, a fellow subsidiary of Lloyds
Chemists plc.
On 11 April 1997 Retail acquired Holland & Barrett Limited ("H&B") and
Lifecycle Limited ("Lifecycle"), two dormant subsidiaries of Lloyds Chemists plc
for (Pound Sterling)50,000. The net assets of H&B and Lifecycle were (Pound
Sterling) 4,637,000, being amounts due from Lloyds Chemists plc. The excess of
net assets over the purchase price was treated as a capital transaction.
The results and assets of Distribution, H&B and Lifecycle have been
included in the consolidated financial statements for the three year period
ended 30 June 1997.
2. ACCOUNTING POLICIES
The following accounting policies conform with UK Generally Accepted
Accounting Principles ("UK GAAP") and have been applied consistently in dealing
with the items which are considered material in relation to the consolidated
financial statements:
CONSOLIDATION
The consolidated financial statements include the financial statements of
all wholly owned subsidiaries, all of which are made up to 30 June each year.
Intercompany transactions and balances have been eliminated.
FIXED ASSETS
Fixed assets are stated at cost, less appropriate depreciation and
provisions. Depreciation is calculated so as to write off the gross book value
F-29
<PAGE>
less estimated residual value of tangible fixed assets over their estimated
useful lives. The principal rates used are as follows:
Short leasehold property -- period of the lease
Motor vehicles -- 25% on a reducing balance
Fixtures, fittings and equipment -- 10%-20% on a straight time basis
LEASED ASSETS
All leases are operating leases and the rental charges are taken to the
profit and loss account on a straight tine basis over the life of the lease.
STOCKS
Stocks are valued at the lower of cost and net realizable value. Cost for
this purpose consists of materials and an appropriate proportion of overheads.
PENSIONS
The company sponsors a defined contribution pension scheme operated as part
of Lloyds Chemists Group. The assets of the scheme are held separately in an
independently administered fund. The pension cost charge represents
contributions payable during the year.
TAXATION
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an actual liability
will crystallize.
GOODWILL
Goodwill relating to the acquisition of businesses is written off
immediately against reserves.
TURNOVER
Turnover represents amounts invoiced by the group to third parties in
respect of goods sold during the year, excluding value added tax and trade
discounts. In the opinion of the directors there is only one class of business.
All turnover is within the UK.
3. SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN UK GAAP AND US GAAP
The consolidated financial statements have been prepared in accordance with
UK GAAP which differs in certain significant respects from generally accepted
accounting principles in the United States ("US GAAP"). This summary should not
be taken as a complete list of all differences between UK GAAP and US GAAP. The
significant differences between UK GAAP and US GAAP which affect the Group's net
profit and shareholders' funds are set out below:
F-30
<PAGE>
(a) Goodwill and other intangibles
Under UK GAAP, the Group writes off goodwill, being the excess of cost
over the fair value attributable to the net assets acquired, to
consolidated equity in the year of acquisition. In calculating any gain or
loss resulting from a disposal of assets, attributable goodwill previously
written off is included. Under US GAAP, goodwill is capitalized and
amortized through the statement of income over a period representing its
estimated useful life of 25 years.
(b) Deferred taxation
Under UK GAAP, provision is made for deferred taxation under the
liability method unless there is reasonable certainty that such deferred
taxation will not become payable or receivable in the foreseeable future.
Under US GAAP, deferred taxation is provided on all temporary differences
which will result in taxable or tax deductible amounts in future years,
subject to a valuation allowance to reduce deferred tax assets if it is
more likely than not that the related tax benefit will not be realized.
(c) Dividends
Under UK GAAP, dividends are provided for in the year to which they
relate. These dividends are deducted from current year earnings, US GAAP
recognizes dividends as a reduction of retained earnings in the accounting
period in which they are formally declared.
(d) Cash flows
Under UK GAAP, the Group complies with Financial Reporting Standard No.
1 (revised), "Cash flow statements" ("FRSI"). Its objectives and principles
are similar to US GAAP as set out in Statement of Financial Accounting
Standards No 95, "Statement of Cash flows" ("SFAS No 95"). The principal
difference between the standards is in respect of classification. Under
FRSI, the Group presents its cash flows for a) operating activities, b)
returns on investments and servicing of finance, c) taxation, d) capital
expenditure and financial investment, e) acquisitions and disposals, f)
equity dividends paid, g) management of liquid resources and h) financing.
SFAS No 95 requires only three categories of cash flow activity: a)
operating activities, b) investing activities and c) financing activities.
Under FRSI, cash includes deposits and overdrafts, repayable on demand
while movements on short term investments are included in management of liquid
resources. SFAS No 95 defines cash and cash equivalents as also including short
term highly liquid investments.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRSI would be included as operating activities under SFAS No
95. Cash flows relating to capital expenditure and financial investment and
acquisitions and disposals would be included as investing activities under SFAS
No 95. Equity dividend payments would be included as a financing activity under
SFAS No 95.
A summarized consolidated cash flow under US GAAP is as follows:
<TABLE>
<CAPTION>
1997 1996
(POUND STERLING)`000 (POUND STERLING)`000
-------------------- --------------------
<S> <C> <C>
Cash inflow from operating activities............. 9,711 10,678
Cash (outflow) on investing activities............ (6,791) (6,634)
Cash inflow/(outflow) from financing activities... -- --
----- ------
Increase in cash and cash equivalents............. 2,920 4,044
Cash and cash equivalents at beginning of year.... 2,748 (1,296)
----- ------
Cash and cash equivalents at end of year.......... 5,668 2,748
===== ======
</TABLE>
F-31
<PAGE>
The following is a summary of the material adjustments to net income
and shareholders' funds which would have been required if US GAAP had been
applied instead of UK GAAP.
YEARS ENDED 30 JUNE
--------------------------
1997 1996
(POUND STERLING)`000 (POUND STERLING)`000
-------------------- --------------------
Profit after tax--UK GAAP............ 4,843 4,386
Adjustments to conform with US GAAP
Amortization of goodwill......... (59) (43)
Deferred tax..................... (35) (51)
----- -----
Net income--US GAAP.................. 4,749 4,292
===== =====
AT 30 JUNE
--------------------------
1997 1996
POUND STERLING)`000 (POUND STERLING)`000
------------------- --------------------
Shareholders' funds, UK GAAP............ 16,908 4,095
Adjustment to conform to US GAAP:
Goodwill...................... 1,326 1,255
Deferred tax.................. 96 131
Dividends..................... -- 8,100
------ ------
Shareholders' funds, US GAAP............ 18,330 13,581
====== ======
4. OPERATING PROFIT
This is stated after charging the following:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
(POUND STERLING)'000 (POUND STERLING)`000 (POUND STERLING)`000
-------------------- -------------------- --------------------
<S> <C> <C> <C>
Depreciation........................................... 3,343 2,659 1,619
Directors' emoluments (see note 6)..................... 181 128 121
Payments under operating leases:
Land and buildings................................. 13,981 11,864 10,162
Plant and machinery................................ 510 113 145
Auditors' renumeration:
Audit.............................................. 15 19 15
------ ------ ------
</TABLE>
F-32
<PAGE>
5. STAFF NUMBERS AND COSTS:
The average number of persons employed by the group (including directors)
during the year, was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
Administration................................................... 99 127 120
Retail........................................................... 1,979 1,786 1,539
Distribution..................................................... 117 109 100
------ ------ -----
2,195 2,022 1,759
====== ====== =====
The aggregate payroll costs of these persons were as follows: (Pound Sterling)'000 (Pound Sterling)'000 (Pound Sterling)'000
(Pound Sterling)'000 ------------------- -------------------- --------------------
Wages and salaries........................................... 12,947 10,720 8,899
Social security costs........................................ 844 702 581
Other pension costs.......................................... 40 31 25
------ ------ -----
13,831 11,453 9,505
====== ====== =====
</TABLE>
6. EMOLUMENTS OF DIRECTORS
The emoluments (excluding pension contributions) including estimated
benefits in kind of the director who served as chairman during the year were
(Pound Sterling) Nil (1996: (Pound Sterling) Nil; 1995: (Pound Sterling) Nil).
Excluding pension contributions, the emoluments of the highest paid
director were (Pound Sterling) 99,246 (1996: (Pound Sterling) 75,750; 1995:
(Pound Sterling) 64,000). Excluding pension contributions but including benefits
in kind the emoluments of the directors were within the following ranges:
<TABLE>
<CAPTION>
1997 1996 1995
NUMBER NUMBER NUMBER
----- ----- -----
<S> <C> <C> <C>
(Pound Sterling) 0 - (Pound Sterling) 5,000 8 6 6
(Pound Sterling) 5,001 - (Pound Sterling) 10,000 1 -- --
(Pound Sterling) 45,001 - (Pound Sterling) 50,000 -- 1 1
(Pound Sterling) 60,001 - (Pound Sterling) 65,000 1 -- --
(Pound Sterling) 70,001 - (Pound Sterling) 75,000 -- -- 1
(Pound Sterling) 75,001 - (Pound Sterling) 80,000 -- 1 --
(Pound Sterling) 95,001 - (Pound Sterling)100,000. 1 -- --
----- ----- -----
7. OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
1997 1996 1995
----- ----- -----
(POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
Bank Interest...................... 92 -- 2
----- ------- ------
8. INTEREST PAYABLE AND SIMILAR CHARGES
1997 1996 1995
----- ----- -----
(POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
On bank overdrafts.................. 7 393 387
- --- ---
</TABLE>
F-33
<PAGE>
9. TAX ON PROFIT ON ORDINARY ACTIVITIES
Taxation based on the profit for the year:
<TABLE>
<CAPTION>
1996 1995 1997
----- ----- -----
(POUND STERLING)'000(POUND STERLING)'000 (POUND STERLING)'000
<S> <C> <C> <C>
Corporation tax at 33% (1996: 33%; 1995: 33%)............. 2,196 1,558 979
Deferred taxation......................................... 310 733 752
Adjustments in respect of prior years:
Corporation tax....................................... (121) 430 (6)
Deferred taxation..................................... 190 (228) --
----- ----- -----
2,575 2,493 1,725
===== ===== =====
10. RETAINED PROFIT/(LOSS) FOR THE FINANCIAL YEAR
1997 1996 1995
------ ------ -----
(POUND STERLING)`000(POUND STERLING)`000(POUND STERLING)`000
Holland and Barrett Holdings Limited................. 12,812 (3,914) 1,218
Subsidiaries......................................... 131 200 (146)
------ ----- -----
12,943 (3,714) 1,072
====== ===== =====
</TABLE>
11. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
SHORT FIXTURES,
FREEHOLD LEASEHOLD MOTOR LININGS, TOOLS
LAND PROPERTY VEHICLES AND EQUIPMENT TOTAL
------ ------- -------- ---------- ------
(POUND STERLING)'000 (POUND STERLING)'000 (POUND STERLING)'000 (POUND STERLING)'000(POUND STERLING)'000
<S> <C> <C> <C> <C> <C>
COST
At 1 July 1996................. 130 4,712 261 24,373 29,476
Additions.................. -- -- 5 6,812 6,817
Disposals.................. -- (361) -- (1,435) (1,796)
--- ----- --- ------ ------
At 30 June 1997................ 130 4,351 266 29,750 34,497
=== ===== === ====== ======
DEPRECIATION
At 1 July 1996................. -- 2,717 41 6,676 9,434
Charged in year............ -- 225 44 3,074 3,343
Disposals.................. -- (292) -- (976) (1,268)
--- ----- --- ------ ------
At 30 June 1997................ -- 2,650 85 8,774 11,509
=== ===== === ====== ======
NET BOOK VALUE
At 30 June 1997................ 130 1,701 181 20,976 22,988
--- ----- --- ------ ------
At 30 June 1996................ 130 1,995 220 17,697 20,042
=== ===== === ====== ======
</TABLE>
F-34
<PAGE>
12. SUBSIDIARY UNDERTAKINGS
The investments in subsidiary undertakings, which are all wholly owned
directly by Holland and Barrett Retail Limited, are as follows:
<TABLE>
<CAPTION>
NAME PRINCIPAL ACTIVITY SHARES
--- ----------- -----
<S> <C> <C>
Holland & Barrett (Franchising)
Limited................................ Dormant company 50,000 ordinary shares of (Pound Sterling) 1 each
Natural Health & Beauty Stores
Limited................................ Dormant company 100 ordinary shares of (Pound Sterling)1 each
100 preferred ordinary shares of (Pound Sterling) 1 each
Hillstart Limited.......................... Dormant company 160,000 ordinary shares of (Pound Sterling) 1 each
Nature's Way Limited....................... Dormant company 100 ordinary shares of (Pound Sterling) 1 each
Beaumonts Health Stores Limited............ Retailer Healthfood 100 ordinary shares of (Pound Sterling) 1 each
produces
Naplers of Edinburgh Limited............... Dormant company 99 ordinary shares of (Pound Sterling) 1 each
Neals Yard (Wholefoods) Limited............ Retailer Health food 100 ordinary shares of (Pound Sterling) 1 each
products 234,900 redeemable preference shares of
(Pound Sterling) 1 each
Holland & Barrett Limited.................. Dormant company 5,533,398 ordinary shares of (Pound Sterling) 1 each
Lifecycle Limited.......................... Dormant company 1,500,000 ordinary shares of (Pound Sterling) 1 each
With the exception of Holland & Barrett (Franchising) Limited which is
registered in Scotland, all of these companies are registered in England and
Wales.
</TABLE>
13. STOCKS
1997 1996
----- -----
(POUND STERLING)`000 (POUND STERLING)`000
Goods for resale.............. 11,479 12,037
------ ------
14. DEBTORS
<TABLE>
<CAPTION>
1997 1996
------ -----
(POUND STERLING)`000(POUND STERLING)`000
<S> <C> <C>
Trade debtors........................................................... 98 282
Amounts owed by the Parent and its subsidiary undertakings.............. 2,846 1,110
Other debtors........................................................... 288 431
Corporation tax recoverable............................................. -- 92
Prepayments............................................................. 7,452 6,644
------ -----
10,684 8,559
====== =====
</TABLE>
F-35
<PAGE>
15. CREDITORS; AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
---- -----
(POUND STERLING) `000(POUND STERLING)`000
<S> <C> <C>
Trade creditors......................................................... 15,039 15,457
Amounts owed to the Parent and its subsidiary undertakings.............. 11,123 5,933
Other taxation and social security...................................... 902 276
Other creditors and accruals............................................ 2,102 1,495
Corporation tax......................................................... 2,188 1,573
------ ------
31,354 24,734
====== ======
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1997 1996
---- ----
(POUND STERLING)`000 (POUND STERLING)`000
Amounts owed to the parent and its subsidiary undertakings............... -- 12,500
----- ------
17. PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED TAXATION
------------
(POUND STERLING)`000
At 1 July 1996................................................................ 2,057
Charge for the year........................................................... 500
-----
At 30 June 1997............................................................... 2,557
=====
The amounts provided for deferred taxation and the full potential liability
are set out below.
1997 1996
----- -----
(POUND STERLING)`000 (POUND STERLING)`000
Accelerated capital allowances..................................... 2,559 2,094
Short term timing differences...................................... (2) (37)
Chargeable gains rolled over....................................... 73 73
----- -----
Full potential liability........................................... 2,630 2,130
Amounts provided in financial statements........................... (2,557) (2,057)
----- -----
Amounts for which no provisions have been made..................... 73 73
===== =====
</TABLE>
F-36
<PAGE>
18. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
------ -----
(POUND STERLING)`000(POUND STERLING)`000
<S> <C> <C>
AUTHORIZED, ALLOTTED, CALLED UP AND FULLY PAID:
1,050,000 ordinary shares of (Pound Sterling) 1 each............. 1,050 1,050
----- -----
19. RESERVES
CONSOLIDATED GOODWILL PROFIT
GOODWILL WRITE OFF CAPITAL AND LOSS
RESERVE RESERVE RESERVE ACCOUNT
--------- -------- --------- --------
(POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000 (POUND STERLING)`000
At 1 July 1996................................ (715) (582) 4,587 (245)
Goodwill written off.......................... -- (130) -- --
Goodwill transferred to profit and loss
account................................... -- 32 -- (32)
Retained profit for the year.................. -- -- -- 12,943
--- --- ----- ------
At 30 June 1997............................... (715) (680) 4,587 12,666
=== === ===== ======
20. CASH FLOW NOTES
(a) Reconciliation of operating profit to net cash inflow from operating activities:
1997 1996 1995
------ ------ ------
(POUND STERLING)`000(POUND STERLING)`000(POUND STERLING)`000
Operating profit.................................. 7,705 7,318 5,807
Depreciation...................................... 3,343 2,659 1,619
Decrease/(increase) in stocks..................... 558 (3,921) (855)
(Increase)/decrease in debtors.................... (210) (3,170) (1,957)
(Decrease)/Increase in creditors.................. (402) 8,164 1,473
------ ------ -----
10,994 11,050 6,087
====== ====== =====
(b) Analysis of change in cash and cash equivalents during the year:
CASH OVERDRAFT NET
------ ------- ------
(POUND STERLING)`000(POUND STERLING)`000(POUND STERLING)`000
Balance at 1 July 1994.......................... 1,247 -- 1,247
Net Cash inflow................................. (1,209) (1,334) (2,543)
----- ----- -----
Balance at 30 June 1995......................... 38 (1,334) (1,296)
Net cash inflow................................. 2,710 1,334 4,044
----- ----- -----
Balance at 30 June 1996......................... 2,748 -- 2,748
Net cash inflow................................. 2,920 -- 2,920
----- ----- -----
Balance at 30 June 1997......................... 5,668 -- 5,668
===== ===== =====
</TABLE>
F-37
<PAGE>
21. COMMITMENTS UNDER OPERATING LEASES
Annual commitments under non-cancelable operating leases in respect of
assets other than land and buildings are:
1997
------
(POUND STERLING)`000
Commitments which expire
Within one year................................ 669
Within two to five years....................... 1,602
After five years............................... 12,089
------
14,360
======
22. RELATED PARTY TRANSACTIONS
In the three year period ended 30 June 1997 Lloyds Chemists plc charged
the following management fees to the Group 1997 (Pound Sterling) Nil, 1996
(Pound Sterling) 362,000, 1995 (Pound Sterling) 430,000, representing the cost
of central services, including legal, company secretarial, property maintenance
and management, personnel and payroll services and data processing departments.
Such fees are included within administrative expenses in the profit and loss
account.
23. SUBSEQUENT EVENTS
On 7 August 1997 the whole of the issued share capital of Holland &
Barrett Holdings Limited was acquired by NBTY Inc. for an aggregate
consideration of approximately $169 million.
F-38
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Summary....................................................................1
Risk Factors...............................................................14
The Exchange Offer.........................................................21
Use of Proceeds............................................................30
The Transaction............................................................30
Capitalization.............................................................31
Selected Historical Financial Data.........................................32
Unaudited Pro Forma Combined Financial Data................................35
Management's Discussion and Analysis of Financial Condition
and Results of Operations..............................................41
Business...................................................................45
Management.................................................................55
Security Ownership of Certain Beneficial Owners and
Management.............................................................57
Description of the Revolving Credit Facility...............................58
Certain Federal Income Tax Consequences....................................59
Description of the Exchange Notes..........................................60
Book-Entry; Delivery and Form..............................................86
Plan of Distribution.......................................................87
Legal Matters..............................................................88
Independent Accountants....................................................88
Available Information......................................................88
Incorporation of Certain Documents by Reference............................89
Index to Financial Statements..............................................F-1
<PAGE>
PROSPECTUS
$150,000,000
NBTY, INC.
OFFER TO EXCHANGE 8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B FOR ALL
OUTSTANDING 8-5/8% SENIOR SUBORDINATED NOTES DUE 2007 OF NBTY, INC.
- --------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to the Company's Certificate of Incorporation and to
Section 145 of the Delaware General Corporation Law ("DGCL"). Section 145 of the
DGCL authorizes a corporation to provide indemnification against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred, in non-derivative actions, suits or
proceedings brought by third parties against an officer, director, employee or
agent of the corporation, if such party acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful as determined in accordance
with the statute.
In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the Court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
The Company maintains officers and directors liability insurance.
Further, the Company has agreed to indemnify all directors and officers of the
Company for any claims made against them, subject to the following conditions.
Such indemnification will not extend to certain claims, including claims based
upon or attributable to the indemnitee's gaining personal profit or advantage to
which he is not legally entitled, claims brought or contributed to by the
dishonesty of the indemnitee and claims under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), for an accounting of
profits resulting from the purchase or sale by the indemnitee of the Company's
securities. Notwithstanding the foregoing, and insofar as indemnification for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"), may be permitted to directors, officers or personnel
controlling the Company, in the opinion of the Securities and Exchange
Commission (the "Commission"), such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director, officer or a
controlling person of the Company in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person for
liabilities arising under the Securities Act in connection with the securities
being registered hereunder, the Company will, unless in the opinion of its
counsel the issue has been settled by controlling precedent, submit to a court
or appropriate jurisdiction the issue as to whether such indemnification by it
is against public policy as expressed in the Securities Act and will comply with
the final adjudication of such issue.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
II-1
<PAGE>
question as to whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
ITEM 21. EXHIBITS
(a) The following is a complete list of exhibits filed as part of this
Registration Statement, which are incorporated herein:
3.1 Amended and Restated Certificate of Incorporation of NBTY, Inc.
3.2 Amended and Restated By-Laws of NBTY, Inc.
4.1 Indenture, dated as of September 23, 1997, between NBTY, Inc. and
IBJ Schroder Bank & Trust Company, as trustee, relating to
$150,000,000 in aggregate principal amount of 8-5/8% Senior
Subordinated Notes due 2007, Series A and Series B.
4.2 Specimen Certificate of 8-5/8% Senior Subordinated Notes due 2007,
Series A ("Original Notes") (included in Exhibit 4.1 hereto).
4.3 Specimen Certificate of 8-5/8% Senior Subordinated Notes due 2007,
Series B (the "Exchange Notes") (included in Exhibit 4.1 hereto).
4.4 Exchange and Registration Rights Agreement, dated as of
September 23, 1997, by and between NBTY, Inc. and Chase Securities
Inc.
5.1 Opinion of Kirkpatrick & Lockhart LLP regarding the validity of
the Exchange Notes.
10.1 Credit and Guarantee Agreement, dated as of September 23, 1997,
among NBTY, Inc., Holland & Barrett Holdings Limited and The Chase
Manhattan Bank.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of NBTY, Inc. (included in Exhibit 10.1 hereto)
23.1 Consent of Kirkpatrick & Lockhart LLP (included in Exhibit 5.1).
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of KPMG.
24.1 Power of Attorney of NBTY, Inc. (included on signature page to this
Registration Statement on Form S-4).
25.1 Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of 1939, as amended, of IBJ Schroder Bank &
Trust Company.
99.1 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
II-2
<PAGE>
(b) Financial Statement Schedules:
None.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim of indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred by the Registrant in the successful defense of any action, suit paid by
a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 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.
(d) 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bohemia, State of New
York on November 4, 1997.
NBTY, INC.
By: /s/ Scott Rudolph
----------------------------------
Scott Rudolph
Chairman of the Board of Directors,
President and Chief Executive Officer
POWER OF ATTORNEY
Know All Men By These Presents, that each person whose signature
appears below constitutes and appoints Scott Rudolph and Harvey Kamil, and each
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution and revocation, for such person and in such person's name,
place and stead, in any and all amendment (including post-effective amendments
to this Registration Statement) and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Scott Rudolph
- ------------------------------- Chairman of the Board of November 4, 1997
Scott Rudolph Directors, President and Chief
Executive Officer (Principal
Executive Officer)
/s/ Harvey Kamil
- ------------------------------- Executive Vice President and November 4, 1997
Harvey Kamil Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Arthur Rudolph
- ------------------------------- Director November 4, 1997
Arthur Rudolph
/s/ Aram Garabedian
- ------------------------------- Director November 4, 1997
Aram Garabedian
/s/ Bernard Owen
- ------------------------------- Director November 4, 1997
Bernard Owen
<PAGE>
/s/ Alfred Sacks
- ------------------------------- Director November 4, 1997
Alfred Sacks
/s/ Murray Daly
- ------------------------------- Director November 4, 1997
Murray Daly
/s/ Glenn Cohen Director November 4, 1997
- -------------------------------
Glenn Cohen
/s/ Bud Solk Director November 4, 1997
- -------------------------------
Bud Solk
/s/ Nathan Rosenblatt Director November 4, 1997
- -------------------------------
Nathan Rosenblatt
</TABLE>
EX-3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
NBTY INC., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
That a meeting of the Board of Directors of NBTY, Inc., a resolution
was adopted in accordance with Section 245 of the General Corporation Law of the
State of Delaware, restating and integrating all previously filed Certificate of
Incorporation and Amendments thereto. The Restated Certificate of Incorporation
does further amend the provisions of the Certificate of Incorporation as
therefore amended or supplemented, and there is no discrepancy between those
provisions and the provisions of the Restated Certificate of Incorporation. The
date of incorporation is July 24, 1979.
That thereafter, pursuant to resolution of its Board of Directors, an
annual meeting of the stockholders of said corporation was duly called and held,
upon notice in accordance with Section 222 of the General Corporation Law of the
State of Delaware at which meeting the necessary number of shares as required by
statute were voted in favor of the amendment. The restated Certificate of
Incorporation will read as follows:
FIRST: The name of the incorporation is NBTY, INC.
SECOND: Its registered office and place of business in the State of
Delaware is to be located at 15 North Street in the City of Dover, County of
Kent. The Registered Agent in charge thereof is Corporate Service Bureau, Inc.
THIRD: The nature of the business and the objects and purposes proposed to
be transacted, promoted and carried on are to do any and all things herein
mentioned, as fully and to the same extent as natural persons might or could do,
and in any part of the world, viz:
The purpose of the corporation is to engage in any lawful act or
activity for which corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation shall be authorized to issue Twenty-five Million
(25,000,000) Common Shares at $0.008 Par value.
FIFTH: The Directors shall have the power to make and to alter or amend the
By-Laws; to fix the amount to be reserved as working capital, and to authorize
and cause to be executed, mortgages and liens without limit as to the amount,
upon the property and franchise of this Corporation.
With the consent, in writing, and pursuant to a vote of the holders of
a majority of the capital stock, issued and outstanding, the Directors shall
have authority to dispose, in any manner, of the whole property of this
Corporation.
<PAGE>
The By-Laws shall determine whether and to what extent the account and
books of this Corporation, or any of them, shall be open to the inspection of
the stockholders; no stockholder shall have any right of inspecting any account,
or book, or document of this Corporation, except as conferred by the law or by
the By-Laws, or by resolution of the stockholders.
The stockholders and directors shall have power to hold their meetings
and keep the books, documents and papers of the Corporation outside of the State
of Delaware, at such places as may be, from time to time, designated by the
By-Laws or by resolution of the stockholders or directors, except as otherwise
required by the laws of Delaware.
It is the intention that all objects, purposes and powers specified in
the THIRD paragraph hereof, shall, except where otherwise specified in said
paragraph, be nowise limited or restricted by reference to or interference from
the terms of any other clause or paragraph in this Certification of
Incorporation, but that the objects, purposes and powers specified in the THIRD
paragraph and in each of the clauses or paragraphs of this charter shall be
regarded as independent objects, purposes and powers.
SIXTH: The Corporation shall, to the full extent permitted by Section 145
of the Delaware General Corporation Law, as amended from time to time, indemnify
all persons whom it may indemnify pursuant thereto.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
SEVENTH:
(1) "Affiliate" and "Associate" shall be determined pursuant to Rule
12b-2 (or any successor rule) of the General Rules and Regulations under the
Securities Exchange Act of 1934.
(2) "Beneficial Ownership" shall be determined pursuant to Rule 13d-3
(or any successor rule) of the General Rules and Regulations under the
Securities Exchange Act of 1934 and shall include:
(i) shares of stock which a Person has the right to acquire, hold or
vote pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants, options or
otherwise; and
(ii) shares of stock which are beneficially owned, directly or
indirectly (including shares deemed owned through application of
the foregoing clause (i), by any Person (a) with which it or its
2
<PAGE>
Affiliate or Associate has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of shares of stock of the corporation or (b) which is
its Affiliate or Associate;
(3) "Business Combination" shall include:
(i) any merger or consolidation of the corporation with or into any
other Related Person;
(ii) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with any Related Person of any assets of the corporation or
any subsidiary thereof having an aggregate fair market value of
$15,000,000 or more;
(iii) the issuance or transfer by the corporation or any subsidiary
thereof (in one transaction or a series of transactions) of any
securities of the corporation or any subsidiary thereof to any
Related Person in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair
market value of $15,000,000 or more;
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by or on behalf of any
Related Person; or
(v) any reclassification or recapitalization of securities of the
corporation if the effect, directly or indirectly, of such
transaction is to increase the relative voting power of any
Related Person;
(4) "Continuing Director" shall mean a member of the Board of
Directors of the corporation who was not affiliated with the Related Person and
was a member of the Board of Directors prior to the time that the Related Person
acquired the last shares of stock of the corporation entitling such Related
Person to exercise, in the aggregate, in excess of ten (10%) percent of the
total voting power of all classes of stock of the corporation entitled to vote
in elections of directors, or a Person recommended to succeed a Continuing
Director by a majority of Continuing Directors;
(5) "Person" shall include any individual, corporation, partnership,
person or other entity; and
(6) "Related Person" shall mean any Person, together with any
Affiliate or Associate of such Person, which has Beneficial Ownership, directly
or indirectly, of shares of stock of the corporation entitling such Person to
exercise more than ten (10%) percent of the total voting power of all classes of
stock of the corporation entitled to vote in elections of directors, considered
for the purposes of this Article SEVENTH as one class, together with the
successors and assigns of any such Person in any transaction or series of
transactions not involving a public offering of the corporations stock within
the meaning of the Securities Act of 1933.
3
<PAGE>
B. Unless the conditions set forth in subparagraphs (1) or (2) of this
paragraph B are satisfied, the affirmative vote of not less than seventy-five
(75%) percent of the outstanding shares of stock of the corporation entitled to
vote in elections of directors, considered for the purposes of this Article
SEVENTH as one class, shall be required for the adoption or authorization of a
Business Combination with any Related Person. Such affirmative vote shall be
required notwithstanding the fact that no vote, or a lesser percentage, may be
required by law or in any agreement with any national securities exchange or
otherwise, but such vote shall not be applicable if:
(1) The definitive agreement or other arrangements to effectuate a
Business Combination with a Related Person are approved by a majority of the
Continuing Directors; such determination shall be made by a majority of the
Continuing Directors even if such majority does not constitute a quorum of the
members of the Board of Directors then in office; or
(2) All of the following conditions are satisfied:
(i) the cash and fair market value of the property, securities or
other consideration (including, without limitation, stock of the
corporation retained by its existing publicstockholders in the
event of a Business Combination in which the corporation is the
surviving corporation) to be received per share by the holders
of each class or series of stock of the corporation in a
Business Combination with a Related Person is not less than the
highest per share price (including brokerage commissions and/or
soliciting dealers fees) paid by such Related Person in
acquiring any shares of such class or series, respectively;
(ii) The consideration to be received by holders of a particular
class of securities shall be in cash or in the same form as the
Related Person has previously paid for shares of such class of
stock. If the Related Person has paid for shares of any class of
stock with varying forms of consideration, the form of
consideration for such class of stock shall be either in cash or
the form used to acquire the largest number of shares of such
class of stock previously acquired by it;
(iii) After a Person has become a Related Person and prior to the
consummation of a Business Combination, except as approved by a
majority of the Continuing Directors, there shall have been no
reduction in the annual rate of dividends paid on shares of
stock of the corporation (except as necessary to reflect any
subdivision of such shares);
(iv) The Related Person shall not have (a) received the benefit,
directly or indirectly (except proportionately as a
stockholder), or any loans, advances, guarantees, pledges or
other financial assistance or tax credits provided by the
corporation, or (b) made any major change in the corporation's
4
<PAGE>
business or equity capital structures without the approval of a
majority of the Continuing Directors, in either case prior to
the consummation of the Business Combination, and
(v) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 shall be mailed to public
stockholders of the corporation for the purpose of soliciting
stockholder approval of the Business Combination and shall
contain at the front thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of
the Business Combination which the Continuing Directors, or any
of them, may choose to state and, if deemed advisable by a
majority of the Continuing Directors, an opinion of a reputable
investment banking firm as to the fairness (or not) of the terms
of such Business Combination, from the point of view of the
remaining public stockholders of the corporation (such
investment banking firm to be selected by a majority of the
Continuing Directors and to be paid a reasonable fee for their
services by the corporation upon receipt of such opinion).
The provisions of this Article SEVENTH shall also apply to a Business
Combination with any Person which at any time has been a Related Person,
notwithstanding the fact that such Person is no longer a Related Person, if, at
any time the definitive agreement or other arrangements relating to a Business
Combination with such Person was entered into, it was a related Person or it, as
of the record date for the determination of stockholders entitled to notice of
and to vote on the Business Combination, such Person is an Affiliate of the
corporation.
C. A majority of the Continuing Directors shall have the power and
duty, consistent with the fiduciary obligations, to determine for the purpose of
this Article SEVENTH, on the basis of information known to them,
(1) whether any Person is a Related Person;
(2) whether any Person is an Affiliate or Associate of another,
(3) whether any Person has an agreement, arrangement, or
understanding with another, or
(4) the fair market value of property, securities or other
consideration (other than cash) to be received by the holders of
shares of stock of the corporation.
The good faith determination of a majority of the Continuing Directors
on such matters shall be binding and conclusive for purposes of this Article
SEVENTH.
D. Any corporate action which may be taken by the written consent of
stockholders entitled to vote upon such action pursuant to this Restated
Certificate of Incorporation or pursuant to Delaware General Corporation Law
shall be only by the written consent of holders of not less than seventy-five
5
<PAGE>
(75%) percent of the shares of stock of the corporation entitled to vote
thereon, notwithstanding the fact that a lesser percentage may be required by
law or otherwise.
E. Any corporate action which may be taken at a special meting of
stockholders called by the Board of Directors, a majority of which Board are not
Continuing Directors, shall be only by the affirmative vote of the holders of
not less than seventy-five (75%) percent of the outstanding shares of stock of
the corporation entitled to vote in elections of directors, considered for the
purposes of this Article SEVENTH as one class, notwithstanding the fact that a
lesser percentage may be required by law or otherwise.
F. Notwithstanding any other provision contained in this Restated
Certificate of Incorporation, any action by stockholders to amend this Restated
Certificate of Incorporation or the By-Laws of the corporation shall be made at
a meeting of the stockholders called for that purpose and not by written
consent.
G. No amendment to the Certificate of Incorporation shall amend,
alter, change or repeal any of the provisions of this Article SEVENTH, unless
the amendment effecting such amendment, alteration, change or repeal shall
receive the affirmative vote of not less than seventy-five (75%) percent of the
shares of stock of the corporation entitled to vote in elections of directors,
considered for the purposes of this Article SEVENTH as one class; provided that
this paragraph G shall not apply to, and such seventy-five (75%) percent vote
shall not be required for, any amendment, alteration, change or repeal
recommended to the stockholders by a majority of the Continuing Directors.
H. Nothing contained in this Article SEVENTH shall be construed to
relieve the Board of Directors or any Related Person from a fiduciary obligation
imposed by law.
EIGHTH: That said amendment was duly adopted in accordance with the
provisions of Section 245 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said NBTY, INC., has caused its corporate seal to be
hereunto affixed and this Certificate to be signed by Scott Rudolph, its
President, and Harvey Kamil, its Secretary, this 29th day of November, 1994.
/S/ SCOTT RUDOLPH, PRESIDENT
----------------------------
Scott Rudolph, President
/S/ HARVEY KAMIL, SECRETARY
---------------------------
Harvey Kamil, Secretary
6
EX-3.2
AMENDED AND RESTATED BY-LAWS
OF
NBTY, INC.
ARTICLE I - OFFICES
SECTION 1. REGISTERED OFFICE. - The registered office shall be
established and maintained at 410 So. State Street, Dover in the County of Kent
in the State of Delaware.
SECTION 2. OTHER OFFICES. - The corporation may have other offices,
either within or without the State of Delaware, at such place or places as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - MEETING OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS. - Annual meetings of stockholders for the
election of directors, and for such other business as may be stated in the
notice of the meeting, shall be held at such place, either within or without the
State of Delaware, and at such times and date as the Board of Directors, by
resolution, shall determine and as set forth in the notice of the meeting.
At an annual meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted upon, as shall have been
brought before the annual meeting (a) by, or at the direction of, the presiding
officer of the annual meeting or (b) by any stockholder of the corporation who
complies with the notice procedures set forth in this Section. For a proposal to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof, in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to, or
mailed by registered or certified mail, return receipt requested, and received
at, the principal executive offices of the corporation not less than 60 days nor
more than 90 days prior to the scheduled annual meeting, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that, if less than 70 days' notice or prior public disclosure
of the date of the scheduled annual meeting is given or made, notice by the
stockholder, to be timely, must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A stockholder's notice to the Secretary
shall set forth, as to each matter the stockholder proposes to bring before the
annual meeting, (a) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the corporation's
books, of the stockholder proposing such business and any other stockholders
known by such stockholder to be supporting such proposal, (c) the class and
number of shares of the corporation's stock that are beneficially owned by the
stockholder on the date of such stockholder notice and by any other stockholders
<PAGE>
known by such stockholder to be supporting such proposal on the date of such
stockholder notice, and (d) any financial interest of the stockholder in such
proposal.
The presiding officer of the annual meeting shall determine and
declare at the annual meeting whether a stockholder proposal was made in
accordance with the terms of this Section. If the presiding officer determines
that a stockholder proposal was not made in accordance with the terms of this
Section, he or she shall so declare at the annual meeting and any such proposal
shall not be acted upon at the annual meeting.
No business shall be conducted at an annual meeting, except in
accordance with the procedures set forth in this Section. Nothing contained in
this Section shall preclude the corporation from excluding from any proxy
materials, to the extent permitted by the laws of the State of Delaware, any
stockholder proposal of a type described in Rule 14a-8(c) under the Securities
Exchange Act of 1934, as amended, or any successor or similar provision.
SECTION 2. SPECIAL MEETINGS. - Special meetings of the stockholders,
for any purpose or purposes, unless otherwise prescribed by law or by the
Certificate of Incorporation, may be called at any time by a majority of the
entire Board of Directors, the Chairman of the Board of Directors or the
President of the corporation. Special meetings of the stockholders of the
corporation may not be called by any other person or persons. Special meetings
may be held at such time and place, within or without the State of Delaware, as
shall be stated in the notice of the meeting. No business may be transacted at
such meeting except that referred to in the notice thereof.
SECTION 3. CONDUCT OF MEETINGS. - The Board of Directors may adopt by
resolution such rules and regulations for the conduct of meetings of
stockholders as it shall deem appropriate. Except to the extent inconsistent
with such rules and regulations as adopted by the Board of Directors, the
presiding officer of any meeting of the stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such presiding officer, are appropriate for the
proper conduct of the meeting. Such rules, regulations and procedures, whether
adopted by the Board of Directors or prescribed by the presiding officer of the
meeting, may include, without limitation, the following: (a) the establishment
of an agenda or order of business for the meeting; (b) rules and procedures for
maintaining order at the meeting and the safety of those present; (c)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies or such
other persons as the presiding officer of the meeting shall determine; (d)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (e) limitations on the time allotted to questions and/or comments
by participants. Unless and to the extent determined by the Board of Directors
or the presiding officer of the meeting, meetings of stockholders shall not be
required to be held in accordance with the rules of parliamentary procedure.
SECTION 4. VOTING. - Each stockholder entitled to vote in accordance
with the terms and provisions of the Certificate of Incorporation and these
By-Laws shall be entitled to one vote, in person or by proxy, for each share of
2
<PAGE>
stock entitled to vote held by such stockholder. The vote for directors and upon
any question before the meeting shall be by ballot. All elections for directors
shall be deiced by plurality vote; all other questions shall be decided by
majority affirmative vote, except as otherwise provided by the Certificate of
Incorporation or required by the laws of the State of Delaware.
SECTION 5. PROXIES. - Any stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him, her or it
by proxy, but no such proxy shall be voted after three years from its date,
unless the proxy provides for a longer period. Without limiting the manner in
which a stockholder may authorize another person or persons to act for him, her
or it as proxy, the foregoing shall constitute a valid means by which a
stockholder may grant such authority; (a) a stockholder may execute a writing
authorizing another person or persons to act for him, her or it as proxy;
execution may be accomplished by the stockholder or his, her or its authorized
officer, director, employee or agent signing such writing or causing his or her
signature to be affixed to such writing by any reasonable means, including, but
not limited to, by facsimile signature; and (b) a stockholder may authorize
another person or persons to act for him, her or it as proxy by transmitting or
authorizing the transmission of a telegram, cablegram or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. It if is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission required by the above may be submitted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction is a complete reproduction of the entire
original writing or transmission.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
SECTION 6. STOCKHOLDER LIST. - The officer who has charge of the stock
ledger of the corporation shall at least 10 days before each meeting of the
stockholders prepare a complete alphabetical addressed list of the stockholders
entitled to vote at the ensuing election, with the number of shares held by
each. Said list shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least 10 days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall be available for inspection at the meeting.
3
<PAGE>
SECTION 7. QUORUM; ADJOURNMENT. - Except as otherwise required by law,
by the Certificate of Incorporation or by these By-Laws, the presence, in person
or by proxy, of stockholders holding a majority of the stock of the corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, the presiding officer of
the meeting or a majority in interest of the stockholders entitled to vote
thereat present in person or by proxy shall have power to adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
the requisite amount of stock entitled to vote shall be present. At any such
adjourned meeting at which the requisite amount of stock entitled to vote shall
be represented, any business may be transacted which might have been transacted
at the meeting as originally noticed; but only those stockholders entitled to
vote at the meeting as originally noticed shall be entitled to vote at any
adjournment or adjournments thereof. In addition, the Board of Directors may
adjourn a meeting of the stockholders if the Board of Directors determines that
adjournment is necessary or appropriate in order to enable the stockholders (a)
to consider fully information that the Board of Directors determine has not been
made sufficiently or timely available to stockholders or (b) to otherwise
effectively exercise their voting rights.
SECTION 8. NOTICE OF MEETINGS. - Written notice, stating the place,
date and time of the meeting, and the general nature of the business to be
considered, shall be given to each stockholder entitled to vote thereat at his,
her or its address as it appears on the records of the corporation, not less
than 10 nor more than 60 days before the date of the meeting.
SECTION 9. ACTION WITHOUT MEETING. - Except as otherwise provided by
the Certificate of Incorporation, whenever the vote of stockholders at a meeting
thereof is required or permitted to be taken in connection with any corporate
action by any provisions of the statutes or the Certificate of Incorporation or
of these By-Laws, the meeting and vote of stockholders may be dispensed with if
all the stockholders who would have been entitled to vote upon the action if
such meeting were held shall consent in writing to such corporate action being
taken.
ARTICLE III - DIRECTORS
SECTION 1. NUMBER AND TERM. - The number of directors shall be at
least three and not more than nine, unless otherwise set by a resolution passed
by a vote of Directors comprising seventy-five (75%) percent of the Board of
Directors. The Board of Directors of the Company shall be divided into three
classes of directors, in such manner as the Board of Directors in its sole
discretion may determine, each class to be elected in annual sequences for terms
of three years each after the implementation of the classes (or until their
successors are duly elected and qualified). Until fully implemented, the term of
the office of the first class shall expire at the annual meeting next ensuing;
of the second class one year thereafter; of the third class two years
thereafter; and at each annual election held after such classification and
election, directors shall be chosen for a full term of three years. Vacancies
which occur during the year may be filled by a majority of the Board of
Directors in accordance with Section 6 of this Article III.
4
<PAGE>
SECTION 2. NOMINATIONS. - Nominations of persons for election to the
Board of Directors may be made at an annual meeting of stockholders (a) by or at
the direction of the Board of Directors by any nominating committee or person
appointed by the Board of Directors or (b) by any stockholder of the Corporation
entitled to vote for the election of directors at the annual meeting who
complies with the notice procedures set forth in this Section. Such nominations,
other than those made by or at the direction of the Board of Directors, shall be
made pursuant to timely notice in writing to the Secretary of the Corporation.
To be timely, a stockholder's notice must be delivered to, or mailed, by
registered or certified mail, return receipt requested, and received at, the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the scheduled annual meeting, regardless of any
postponements, deferrals or adjournments of the annual meeting to a later date;
provided, however, that, if less than 70 days' notice or prior public disclosure
of the date of the scheduled annual meeting is given or made, notice by the
stockholder, to be timely, must be so delivered or received not later than the
close of business on the tenth day following the earlier of the day on which
such notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A stockholder's notice to the Secretary
shall set forth (a) as to each person whom the stockholder proposes to nominate
for election or re-election as a director, (i) the name, age, business address
and residence address of the person, (ii) the principal occupation or employment
of the person, (iii) the class and number of shares of capital stock of the
corporation that are beneficially owned by the person and (iv) any other
information relating to the person that is required to be disclosed in
solicitations for proxies for the election of directors pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended, or any successor or
similar provision, and (b) as to the stockholder giving notice, (i) the name and
address, as they appear on the corporation's books, of the stockholder, and (ii)
the class and number of shares of the corporation's stock that are beneficially
owned by the stockholder on the date of such stockholder notice. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth in this Section.
The presiding officer of the annual meeting shall determine, in his
sole discretion, and declare at the annual meeting whether the nomination was
made in accordance with the terms of this Section. If the presiding officer
determines that a nomination was not made in accordance with the terms of this
Section, he or she shall so declare at the annual meeting and any such defective
nomination shall be disregarded.
SECTION 3. RESIGNATIONS. - Any director, member of a committee or
other officer may resign at any time. Such resignation shall be made in writing,
and shall take effect at the time specified therein, and if no time be
specified, at the time of its receipt by the President or Secretary. The
acceptance of a resignation shall not be necessary to make it effective.
5
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SECTION 4. REMOVAL. - Any director or directors may be removed for
cause at any time by the affirmative vote of the holders of a majority of all
the shares of stock outstanding and entitled to vote, at a special meeting of
the stockholders called for the purpose.
SECTION 5. INCREASE OF NUMBER. - The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of seventy-five
(75%) percent of the entire Board of Directors.
SECTION 6. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. - Newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies on the Board of Directors resulting from death, resignation,
retirement, disqualification or removal from office for cause shall be filled
only by the affirmative vote of seventy-five (75%) percent of the directors then
in office, and directors so chosen shall hold office for a term expiring at the
annual meeting of stockholders at which time the term of office of the class to
which they have been elected expires and until such director's successor shall
have been duly elected and qualified. If the office of any member of a committee
becomes vacant, the remaining directors in office, though less than a quorum, by
the affirmative vote of at least a majority of such directors, may appoint any
qualified person to fill such vacancy.
SECTION 7. COMPENSATION. - Unless otherwise restricted by the
Certificate of Incorporation, the Board of Directors shall have the authority to
fix the compensation of directors. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors any may be paid a
fixed sum for attendance at each meeting of the Board of Directors and/or a
stated salary as director. No such payment shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 8. ACTION WITHOUT MEETING. - Any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if, prior to such action, a written
consent thereto is signed by all members of the Board of Directors, or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board of Directors or such committee.
ARTICLE IV -- OFFICERS
SECTION 1. OFFICERS. - The Officers of the corporation shall consist
of a President, a Treasurer, and a Secretary, and shall be elected by the Board
of Directors and shall hold office until their successors are elected and
qualified. In addition, the Board of Directors may elect a Chairman, one or more
Vice-Presidents and such Assistant Secretaries and Assistant Treasurers as it
may deem proper. None of the officers of the corporation need be directors. The
officers shall be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same person.
6
<PAGE>
SECTION 2. OTHER OFFICERS AND AGENTS. - The Board of Directors may
appoint such officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such power and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 3. CHAIRMAN. - The Chairman of the Board of Directors, if one
be elected, shall preside at all meetings of the Board of Directors and he shall
have and perform such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 4. PRESIDENT. - The president shall be the chief executive
officer of the corporation and shall have the general powers and duties of
supervision and management usually vested in the office of President of a
Corporation. He shall preside at all meetings of the stockholders if present
thereat, and in the absences or nonelection of the Chairman of the Board of
Directors, at all meetings of the Board of Directors, and shall have general
supervision, direction and control of the business of the corporation. Except as
the Board of Directors shall authorize the execution thereof in some other
manner, he shall execute bonds, mortgages, and other contracts on behalf of the
corporation, and shall cause the seal to be affixed to any instrument requiring
it and when so affixed the seal shall be attested by the signature of the
Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer.
SECTION 5. VICE-PRESIDENT. - Each Vice-President shall have such power
and shall perform such duties as shall be assigned to him by the directors.
SECTION 6. TREASURER. -- The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the corporation. He shall
deposit all moneys and other valuables in the name and to the credit of the
corporation in such depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, or the President, taking proper vouchers for
such disbursements. He shall render to the President and Board of Directors at
the regular meetings of the Board of Directors, or whenever they may request it,
an account of all his transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he shall give the
corporation a bond for the faithful discharge of his duties in such amount and
with such surety as the board shall prescribe.
SECTION 7. SECRETARY. - The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these By-Laws, and in case of his absence or
refusal or neglect so to do, any such notice may be given by any person
thereunto directed by the President, or by the directors, or stockholders, upon
whose requisition the meeting is called as provided in these By-Laws. He shall
record all the proceedings of the meeting of the corporation and of directors in
a book to be kept for that purpose. He shall keep in safe custody the seal of
the corporation, and when authorized by the Board of Directors, affix the same
to any instrument requiring it, and when so affixed, it shall be attested by his
signature or by the signature of any Assistant Secretary.
7
<PAGE>
SECTION 8. ASSISTANT TREASURERS & ASSISTANT SECRETARIES. - Assistant
Treasurers and Assistant Secretaries, if any, shall be elected and shall have
such powers and shall perform such duties as shall be assigned to them,
respectively, by the directors.
ARTICLE V - MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK. - Every holder of stock in the
corporation shall be entitled to have a certificate, signed by, or in the name
of the corporation by, the Chairman or Vice-Chairman of the Board of Directors,
or the President or a Vice-President and the Treasurer or an Assistant
Treasurer, or the Secretary of the corporation, certifying the number of shares
owned by him, her or it in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations, or restrictions of such preferences and/or rights
shall be set forth in full or summarized on the face or back of the certificate
which the corporation shall issue to represent such class of series of stock,
provided that, except as otherwise provided in Section 202 of the General
Corporation Law of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Where a
certificate is countersigned (a) by a transfer agent other than the corporation
or its employee or (b) by a registrar other than the corporation or its
employee, the signature of such officers may be facsimiles.
SECTION 2. LOST CERTIFICATES. - New certificates of stock may be
issued in the place of any certificate previously issued by the corporation,
alleged to have been lost or destroyed, and the directors may, in their
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the corporation a bond, in such sum as they may direct,
not exceeding double the value of the stock, to indemnify the corporation
against it on account of the alleged loss of any such new certificate.
SECTION 3. TRANSFER OF SHARES. - The shares of stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates shall be surrendered to the corporation by
the delivery thereof to the person in charge of the stock and transfer books and
ledgers, or to such other persons as the directors may designate, by who they
shall be canceled, and new certificates shall thereupon be issued. A record
shall be made of each transfer and whenever a transfer shall be made for
collateral security, and not absolutely, it shall be so expressed in the entry
of the transfer.
SECTION 4. STOCKHOLDERS RECORD DATE. - In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or to express consent to corporate
8
<PAGE>
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 days nor less than 10
days before the day of such meeting, nor more than 60 days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. DIVIDENDS. - Subject to the provisions of the Certificate
of Incorporation, the Board of Directors may, out of funds legally available
therefor at any regular or special meeting, declare dividends upon the capital
stock of the corporation as and when they deem expedient. Before declaring any
dividends there may be set apart out of any funds of the corporation available
for dividends, such sum or sums as directors from time to time in their
discretion deem proper working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interest of the corporation.
SECTION 6. SEAL. - The corporate seal shall be circular in form and
shall contain the name of the corporation, the year of its creation and the
words "CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 7. FISCAL YEAR. - The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
SECTION 8. CHECKS. - All checks, drafts, or other orders for the
payment of money, notes or other evidence of indebtedness issued in the name of
the corporation shall be signed by the officer or officers, agent or agents of
the corporation, and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE. - Whenever, under applicable
law or the Certificate of Incorporation or these By-Laws, notice is required to
be given to any director or stockholder, such notice may be given by person, in
writing, or by mail, telegram, facsimile, telecommunication or other electronic
transmission, addressed to such director or stockholder, at his, her or its
address as it appears on the records of the corporation. Notice shall be deemed
to be given at the time when the same shall be (a) personally delivered, (b)
guaranteed to be delivered, if transmitted timely to a third party company or
governmental entity providing delivery services in the ordinary course of
business, (c) deposited in the United States mail, postage prepaid, or (d) when
electronically telecommunicated, each as the case may be. Notice to directors
also may be given by telegram, telephone or mailgram.
Whenever any notice is required to be given under applicable law or
the Certificate of Incorporation or these By-Laws, a waiver thereof, in writing,
signed by the person or persons entitled to said notice, whether before or after
9
<PAGE>
the time stated therein, shall be deemed equivalent thereto. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings except
as otherwise provided by statute.
SECTION 10. INVALID PROVISIONS. - If any part of these By-Laws shall
be held invalid or inoperative for any reason, the remaining parts, so far as it
is possible and reasonable, shall remain valid and operative.
ARTICLE VI - AMENDMENTS
These By-Laws may be altered and repealed and By-Laws may be made at
any annual meeting of the stockholders, or at any special meeting thereof if
notice thereof is contained in the notice of such special meeting, by the
affirmative vote of seventy-five (75%) percent of the stock issued and
outstanding or entitled to vote thereat. These By-Laws may be altered and
repealed and By-Laws may be made at any regular meeting of the Board of
Directors, or at any special meeting thereof of notice thereof is contained in
the notice of such special meeting, by the affirmative vote of seventy-five
(75%) percent of the entire Board of Directors
EX-4.1
================================================================================
INDENTURE
DATED AS OF SEPTEMBER 23, 1997
AMONG
NBTY, INC., AS ISSUER,
AND
IBJ SCHRODER BANK & TRUST COMPANY, AS TRUSTEE
------------------
$150,000,000
8 5/8% SENIOR SUBORDINATED SECURITIES DUE 2007, SERIES A
8 5/8% SENIOR SUBORDINATED SECURITIES DUE 2007, SERIES B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TRUST INDENTURE INDENTURE
ACT SECTION SECTION
- --------------- ---------
Section 310(a)(1)............................................. 7.10
(a)(2).................................................. 7.10
(a)(3).................................................. N.A.
(a)(4).................................................. N.A.
(a)(5).................................................. 7.08, 7.10.
(b)..................................................... 7.08; 7.10; 11.02
(c)..................................................... N.A.
Section 311(a)................................................ 7.11
(b)..................................................... 7.11
(c)..................................................... N.A.
Section 312(a)................................................ 2.05
(b)..................................................... 11.03
(c)..................................................... 11.03
Section 313(a)................................................ 7.06
(b)(1).................................................. 7.06
(b)(2).................................................. 7.06
(c)..................................................... 7.06; 11.02
(d)..................................................... 7.06
Section 314(a)................................................ 4.11; 4.12; 11.02
(b)..................................................... N.A.
(c)(1).................................................. 11.04
(c)(2).................................................. 11.04
(c)(3).................................................. N.A.
(d)..................................................... N.A.
(e)..................................................... 11.05
(f)..................................................... N.A.
Section 315(a)................................................ 7.01(b)
(b)..................................................... 7.05; 11.02
(c)..................................................... 7.01(a)
(d)..................................................... 7.01(c)
(e)..................................................... 6.11
Section 316(a)(last sentence)................................. 2.09
(a)(1)(A)............................................... 6.05
(a)(1)(B)............................................... 6.04
(a)(2).................................................. N.A.
(b)..................................................... 6.07
(c)..................................................... 10.04
Section 317(a)(1)............................................. 6.08
(a)(2).................................................. 6.09
(b)..................................................... 2.04
Section 318(a)................................................ 11.01
- ----------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of this Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions......................................................1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act...............16
SECTION 1.03. Rules of Construction...........................................17
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.................................................17
SECTION 2.02. Execution and Authentication....................................18
SECTION 2.03. Registrar and Paying Agent......................................18
SECTION 2.04. Paying Agent To Hold Assets in Trust............................19
SECTION 2.05. Holder Lists....................................................19
SECTION 2.06. Transfer and Exchange...........................................19
SECTION 2.07. Replacement Securities..........................................20
SECTION 2.08. Outstanding Securities..........................................20
SECTION 2.09. Treasury Securities.............................................21
SECTION 2.10. Temporary Securities............................................21
SECTION 2.11. Cancellation....................................................21
SECTION 2.12. Defaulted Interest..............................................21
SECTION 2.13. CUSIP Number....................................................22
SECTION 2.14. Deposit of Moneys...............................................22
SECTION 2.15. Book-Entry Provisions for Global Securities.....................22
SECTION 2.16. Registration of Transfers and Exchanges.........................23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee..............................................26
SECTION 3.02. Selection of Securities To Be Redeemed..........................26
SECTION 3.03. Notice of Redemption............................................27
SECTION 3.04. Effect of Notice of Redemption..................................27
SECTION 3.05. Deposit of Redemption Price.....................................28
SECTION 3.06. Securities Redeemed in Part.....................................28
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities...........................................28
SECTION 4.02. Maintenance of Office or Agency.................................28
SECTION 4.03. Transactions with Affiliates....................................29
SECTION 4.04. Limitation on Indebtedness......................................29
SECTION 4.05. Disposition of Proceeds of Asset Sales..........................30
SECTION 4.06. Limitation on Restricted Payments...............................32
SECTION 4.07. Corporate Existence.............................................33
SECTION 4.08. Limitation on the Sale or Issuance of Equity Interests of
Subsidiaries...................................................34
SECTION 4.09. Notice of Defaults..............................................34
SECTION 4.10. Limitation on Liens.............................................34
SECTION 4.11. Compliance Certificate..........................................34
SECTION 4.12. Provision of Financial Information..............................34
SECTION 4.13. Limitations on Dividend and Other Payment Restrictions
Affecting Subsidiaries.........................................35
SECTION 4.14. Offer to Purchase upon Change of Control........................36
SECTION 4.15. Limitation on Senior Subordinated Indebtedness..................36
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc....................................37
SECTION 5.02. Successor Corporation Substituted...............................37
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default...............................................37
SECTION 6.02. Acceleration....................................................38
SECTION 6.03. Other Remedies..................................................39
SECTION 6.04. Waiver of Past Default..........................................39
SECTION 6.05. Control by Majority.............................................40
SECTION 6.06. Limitation on Suits.............................................40
SECTION 6.07. Rights of Holders To Receive Payment............................40
SECTION 6.08. Collection Suit by Trustee......................................40
SECTION 6.09. Trustee May File Proofs of Claim................................41
SECTION 6.10. Priorities......................................................41
SECTION 6.11. Undertaking for Costs...........................................41
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee...............................................42
SECTION 7.02. Rights of Trustee...............................................43
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<PAGE>
SECTION 7.03. Individual Rights of Trustee....................................44
SECTION 7.04. Trustee's Disclaimer............................................44
SECTION 7.05. Notice of Defaults..............................................44
SECTION 7.06. Reports by Trustee to Holders...................................44
SECTION 7.07. Compensation and Indemnity......................................45
SECTION 7.08. Replacement of Trustee..........................................46
SECTION 7.09. Successor Trustee by Merger, etc................................46
SECTION 7.10. Eligibility; Disqualification...................................46
SECTION 7.11. Preferential Collection of Claims Against Company...............47
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. Securities Subordinated to Senior Indebtedness..................47
SECTION 8.02. Payment Over of Proceeds upon Dissolution, etc..................47
SECTION 8.03. No Payment on Securities in Certain Circumstances...............48
SECTION 8.04. Subrogation.....................................................49
SECTION 8.05. Obligations of Company Unconditional............................50
SECTION 8.06. Notice to Trustee...............................................50
SECTION 8.07. Reliance on Judicial Order or Certificate of Liquidating Agent..51
SECTION 8.08. Trustee's Relation to Senior Indebtedness.......................51
SECTION 8.09. Subordination Rights Not Impaired by Acts or Omissions of the
Company or Holders of Senior Indebtedness.....................51
SECTION 8.10. Holders Authorize Trustee To Effectuate Subordination of
Securities....................................................51
SECTION 8.11. This Article Not To Prevent Events of Default...................52
SECTION 8.12. Trustee's Compensation Not Prejudiced...........................52
SECTION 8.13. No Waiver of Subordination Provisions...........................52
SECTION 8.14. Subordination Provisions Not Applicable to Money Held in Trust
for Holders; Payments May Be Paid Prior to Dissolution.........52
SECTION 8.15. Acceleration of Securities......................................52
ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. Termination of Company's Obligations............................53
SECTION 9.02. Conditions to Legal Defeasance or Covenant Defeasance...........53
SECTION 9.03. Application of Trust Money; Trustee Acknowledgment and
Indemnity......................................................54
SECTION 9.04. Repayment to Company............................................55
SECTION 9.05. Reinstatement...................................................55
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.....................................55
SECTION 10.02. With Consent of Holders........................................56
SECTION 10.03. Compliance with Trust Indenture Act............................57
SECTION 10.04. Record Date for Consents and Effect of Consents................57
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SECTION 10.05. Notation on or Exchange of Securities..........................57
SECTION 10.06. Trustee To Sign Amendments, etc................................58
SECTION 10.07. Certain Amendments.............................................58
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls...................................58
SECTION 11.02. Notices........................................................58
SECTION 11.03. Communications by Holders with Other Holders...................59
SECTION 11.04. Certificate and Opinion as to Conditions Precedent.............60
SECTION 11.05. Statements Required in Certificate.............................60
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar......................60
SECTION 11.07. Governing Law..................................................60
SECTION 11.08. No Recourse Against Others.....................................60
SECTION 11.09. Successors.....................................................61
SECTION 11.10. Counterpart Originals..........................................61
SECTION 11.11. Severability...................................................61
SECTION 11.12. No Adverse Interpretation of Other Agreements..................61
SECTION 11.13. Legal Holidays.................................................61
SIGNATURES...................................................................S-1
EXHIBIT A Form of Series A Security.........................................A-1
EXHIBIT B Form of Series B Security.........................................B-1
EXHIBIT C Form of Legend for Global Securities..............................C-1
EXHIBIT D Form of Transfer Certificate......................................D-1
EXHIBIT E Form of Transfer Certificate for Institutional Accredited
Investors........................................................E-1
- -----------------
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of this Indenture.
-iv-
<PAGE>
INDENTURE dated as of September 23, 1997, among NBTY, INC., a Delaware
corporation (the "COMPANY"), and IBJ Schroder Bank & Trust Company, as trustee
(the "TRUSTEE").
Each party hereto agrees as follows for the benefit of each other party
and for the equal and ratable benefit of the Holders of the Securities:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) assumed in
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Subsidiary of the Company or is merged or consolidated with or
into the Company or any Subsidiary of the Company.
"ACQUIRED PERSON" means, with respect to any specified Person, any
other Person which merges with or into or becomes a Subsidiary of such specified
Person.
"ACQUISITION" means (i) any capital contribution (by means of transfers
of cash or other property to others or payments for property or services for the
account or use of others, or otherwise) by the Company or any Subsidiary of the
Company to any other Person, or any acquisition or purchase of Equity Interests
of any other Person by the Company or any Subsidiary of the Company, in either
case pursuant to which such Person shall become a Subsidiary of the Company or
shall be consolidated with or merged into the Company or any Subsidiary of the
Company or (ii) any acquisition by the Company or any Subsidiary of the Company
of the assets of any Person which constitute substantially all of an operating
unit or line of business of such Person or which is otherwise outside of the
ordinary course of business.
"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.
"AFFILIATE TRANSACTION" has the meaning provided in Section 4.03.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"ASSET SALE" means any direct or indirect sale, conveyance, transfer,
lease (that has the effect of a disposition) or other disposition (including,
without limitation, any merger, consolidation or sale-leaseback transaction) to
any Person other than the Company, in one transaction or a series of related
transactions, of (i) any Equity Interest of any Subsidiary of the Company (other
than directors' qualifying shares, to the extent mandated by applicable law);
(ii) any assets of the Company or any Subsidiary of the Company which constitute
substantially all of an operating unit or line of business of the Company or any
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Subsidiary of the Company; or (iii) any other property or asset of the Company
or any Subsidiary of the Company outside of the ordinary course of business
(including the receipt of proceeds paid on account of the loss of or damage to
any property or asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceedings). For the purposes of this
definition the term "Asset Sale" shall not include (a) any transaction
consummated in compliance with Article 5 and the creation of any Lien not
prohibited by Section 4.10; (b) sales of property or equipment that has become
worn out, obsolete or damaged or otherwise unsuitable for use in connection with
the business of the Company or any Subsidiary of the Company, as the case may
be; and (c) any transaction consummated in compliance with Section 4.06. In
addition, solely for purposes of Section 4.05, any sale, conveyance, transfer,
lease or other disposition of (i) the Company's cosmetic pencil business or (ii)
any property or asset, whether in one transaction or a series of related
transactions, involving assets with a Fair Market Value not in excess of
$100,000 in any fiscal year shall be deemed not to be an Asset Sale.
"ATTRIBUTABLE INDEBTEDNESS" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the present value
(discounted according to GAAP at the cost of indebtedness implied in the lease)
of the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Lease-Back Transaction (including
any period for which such lease has been extended).
"BANKRUPTCY LAW" has the meaning provided in Section 6.01.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of such Board of Directors.
"BOARD RESOLUTION" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"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 so required to be capitalized on the balance sheet in
accordance with GAAP.
"CASH EQUIVALENTS" means: (a) U.S. dollars; (b) securities issued or
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition; (c) 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 domestic commercial bank having capital and
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the
qualifications specified in clause (c) above; (e) commercial paper rated P-1,
A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, and in each case maturing within six months
after the date of acquisition; and (f) in the case of any Subsidiary of the
Company whose jurisdiction of incorporation is not the United States or any
state thereof or the District of Columbia, Investments: (i) in direct
obligations of the sovereign nation (or any agency thereof) in which such
foreign Subsidiary is organized and is conducting business or in obligations
fully and unconditionally guaranteed by such sovereign nation (or any agency
thereof) or (ii) of the type and maturity described in clauses (a) and (b) above
of foreign obligors, which Investment or obligors (or the parents of such
obligors) have ratings described in such clauses or equivalent ratings from
comparable foreign rating agencies.
"CHANGE OF CONTROL" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing of
securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other
than one or more Permitted Holders, is or becomes the "beneficial owner" (as
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defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all shares that any such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time, upon the happening of an event or otherwise),
directly or indirectly, of more than 35% of the total voting power of the then
outstanding Voting Equity Interests of the Company; (ii) the Company
consolidates with, or merges with or into, another Person (other than a Wholly
Owned Subsidiary) or the Company or any of its Subsidiaries sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
the assets of the Company and its Subsidiaries (determined on a consolidated
basis) to any Person (other than the Company or any Wholly Owned Subsidiary),
other than any such transaction where immediately after such transaction the
Person or Persons that "beneficially owned" (as defined in Rules 13d-3 and 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 exercisable immediately or only after the passage of time, upon
the happening of an event or otherwise), immediately prior to such transaction,
directly or indirectly, a majority of the total voting power of the then
outstanding Voting Equity Interests of the Company "beneficially own" (as so
determined), directly or indirectly, a majority of the total voting power of the
then outstanding Voting Equity Interests of the surviving or transferee Person;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with the provisions
described in Article 5.
"CHANGE OF CONTROL DATE" has the meaning provided in Section 4.14.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by its Chairman of the Board, its Vice
Chairman of the Board, its President, a Vice President or its Treasurer, and by
an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered
to the Trustee.
"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter
period of the most recent four consecutive fiscal quarters ending prior to the
date of such determination (the "Four Quarter Period") to (ii) Consolidated
Interest Expense for such Four Quarter Period; PROVIDED, HOWEVER, that (1) if
the Company or any Subsidiary of the Company has incurred any Indebtedness since
the beginning of such Four Quarter Period that remains outstanding on such date
of determination or if the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio is an Incurrence of Indebtedness, Consolidated
EBITDA and Consolidated Interest Expense for such Four Quarter Period shall be
calculated after giving effect on a pro forma basis to such Indebtedness as if
such Indebtedness had been Incurred on the first day of such Four Quarter Period
and the discharge of any other Indebtedness repaid, repurchased or otherwise
discharged with the proceeds of such new Indebtedness as if such discharge had
occurred on the first day of such Four Quarter Period, (2) if since the
beginning of such Four Quarter Period the Company or any Subsidiary of the
Company shall have made any Asset Sale, the Consolidated EBITDA for such Four
Quarter Period shall be reduced by an amount equal to the Consolidated EBITDA
(if positive) directly attributable to the assets that are the subject of such
Asset Sale for such Four Quarter Period or increased by an amount equal to the
Consolidated EBITDA (if negative) directly attributable thereto for such Four
Quarter Period and Consolidated Interest Expense for such Four Quarter Period
shall be reduced by an amount equal to the Consolidated Interest Expense
directly attributable to any Indebtedness of the Company or any Subsidiary of
the Company repaid, repurchased or otherwise discharged with respect to the
Company and the continuing Subsidiaries in connection with such Asset Sale for
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such Four Quarter Period (or, if the Equity Interests of any Subsidiary of the
Company are sold, the Consolidated Interest Expense for such Four Quarter Period
directly attributable to the Indebtedness of such Subsidiary to the extent the
Company and its continuing Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such Four Quarter
Period the Company or any Subsidiary of the Company (by merger or otherwise)
shall have made an Investment in any Subsidiary of the Company (or any Person
that becomes a Subsidiary of the Company) or an acquisition of assets, including
any acquisition of assets occurring in connection with a transaction causing a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, Consolidated EBITDA and Consolidated Interest
Expense for such Four Quarter Period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Indebtedness) as if such
Investment or acquisition occurred on the first day of such Four Quarter Period
and (4) if since the beginning of such Four Quarter Period any Person (that
subsequently became a Subsidiary or was merged with or into the Company or any
Subsidiary of the Company since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would
have required an adjustment pursuant to clause (2) or (3) above if made by the
Company or a Subsidiary of the Company during such Four Quarter Period,
Consolidated EBITDA and Consolidated Interest Expense for such Four Quarter
Period shall be calculated after giving pro forma effect thereto as if such
Asset Sale, Investment or acquisition of assets occurred on, with respect to any
Investment or acquisition, the first day of such Four Quarter Period and, with
respect to any Asset Sale, the day prior to the first day of such Four Quarter
Period. For purposes of this definition, whenever pro forma effect is to be
given to an acquisition of assets, the amount of income or earnings relating
thereto and the amount of Consolidated Interest Expense associated with any
Indebtedness Incurred in connection therewith, the pro forma calculations shall
be determined in accordance with Regulation S-X under the Securities Act as in
effect on the date of such calculation. If any Indebtedness bears a floating
rate of interest and is being given pro forma effect, the interest expense on
such Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any agreement under which Interest Rate Protection Obligations are
outstanding applicable to such Indebtedness if such agreement under which such
Interest Rate Protection Obligations are outstanding has a remaining term as at
the date of determination in excess of 12 months); PROVIDED, HOWEVER, that the
Consolidated Interest Expense of the Company attributable to interest on any
Indebtedness Incurred under a revolving credit facility computed on a pro forma
basis shall be computed based upon the average daily balance of such
Indebtedness during the Four Quarter Period.
"CONSOLIDATED EBITDA" means, for any period, the Consolidated Net
Income for such period, plus the following to the extent deducted in calculating
such Consolidated Net Income: (i) Consolidated Income Tax Expense for such
period; (ii) Consolidated Interest Expense for such period; and (iii)
Consolidated Non-cash Charges for such period less (A) all non-cash items
increasing Consolidated Net Income for such period and (B) all cash payments
during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to the Company
for any period, the provision for Federal, state, local and foreign income taxes
payable by the Company and its Subsidiaries for such period as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to the Company for
any period, without duplication, the sum of (i) the interest expense of the
Company and its Subsidiaries for such period as determined on a consolidated
basis in accordance with GAAP, including, without limitation, (a) any
amortization of debt discount, (b) the net cost under Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (e) all capitalized interest and all accrued interest, (f) non-cash
interest expense and (g) interest on indebtedness of another Person that is
guaranteed by the Company or any Subsidiary of the Company actually paid by the
Company or any Subsidiary of the Company and (ii) the interest component of
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Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and the Subsidiaries during such period as determined on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the consolidated net
income (loss) of the Company and its Subsidiaries; PROVIDED, HOWEVER, that there
shall not be included in such Consolidated Net Income: (i) any net income (loss)
of any Person if such person is not a Subsidiary of the Company, except the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income; (ii) any net income (loss)
of any person acquired by the Company or a Subsidiary of the Company in a
pooling of interests transaction for any period prior to the date of such
acquisition; (iii) any net income (but not loss) of any Subsidiary of the
Company if such Subsidiary is subject to restrictions, directly or indirectly,
on the payment of dividends or the making of distributions by such Subsidiary,
directly or indirectly, to the Company to the extent of such restrictions; (iv)
any gain or loss realized upon the sale or other disposition of any asset of the
Company or its Subsidiaries (including pursuant to any Sale and Lease-Back
Transaction) outside of the ordinary course of business including, without
limitation, on or with respect to Investments (and excluding dividends,
distributions or interest thereon); (v) any extraordinary gain or loss; (vi) the
cumulative effect of a change in accounting principles after the Issue Date; and
(vii) any restoration to income of any contingency reserve of an extraordinary,
non-recurring or unusual nature, except to the extent that provision for such
reserve was made out of Consolidated Net Income accrued at any time following
the Issue Date.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for
any period the sum of (A) depreciation, (B) amortization and (C) other non-cash
expenses of such Person and its Subsidiaries reducing Consolidated Net Income of
such Person and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP (excluding, for purposes of clause (C) only, such
charges which require an accrual of or a reserve for cash charges for any future
period).
"CORPORATE TRUST OFFICE OF THE TRUSTEE" shall be at the address of the
Trustee specified in Section 11.02 or such other address as the Trustee may give
notice to the Company.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Subsidiary of the Company against fluctuations in currency
values.
"CUSTODIAN" has the meaning provided in Section 6.01.
"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.
"DEFEASANCE TRUST PAYMENT" has the meaning provided in Section 8.02.
"DEPOSITORY" means, with respect to the Securities issued in the form
of one or more Global Securities, The Depository Trust Company or another Person
designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"DESIGNATED SENIOR INDEBTEDNESS" means (a) any Indebtedness outstanding
under the Revolving Credit Facility and (b) any other Senior Indebtedness which,
at the time of determination, has an aggregate principal amount outstanding,
together with any commitments to lend additional amounts, of at least $25.0
million, if the instrument governing such Senior Indebtedness expressly states
that such Indebtedness is "Designated Senior Indebtedness" for purposes of this
Indenture and a Board Resolution setting forth such designation by the Company
has been filed with the Trustee.
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"DISPOSITION" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"DISQUALIFIED EQUITY INTEREST" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable at the option of the holder 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, or exchangeable into Indebtedness on or prior to the earlier
of the maturity date of the Securities or the date on which no Securities remain
outstanding.
"EQUITY INTEREST" in any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock or other equity
participations, including partnership interests, whether general or limited, in
such Person, including any Preferred Equity Interests.
"EVENT OF DEFAULT" has the meaning provided in Section 6.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"EXCHANGE SECURITIES" means the 8 5/8% Senior Subordinated Notes due
2007, Series B, to be issued in exchange for the Initial Securities pursuant to
the Registration Rights Agreement.
"EXPIRATION DATE" has the meaning set forth in the definition of "OFFER
TO PURCHASE" below.
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such asset) which could be
negotiated in an arm's-length free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of which is under any
compulsion to complete the transaction; PROVIDED, HOWEVER, that the Fair Market
Value of any such asset shall be determined conclusively by the Board of
Directors of the Company acting in good faith, and shall be evidenced by the
resolutions of the Board of Directors of the Company delivered to the Trustee.
"FINAL MATURITY DATE" means September 15, 2007.
"FOUR QUARTER PERIOD" has the meaning set forth in the definition of
"CONSOLIDATED COVERAGE RATIO" above.
"GAAP" means, at any date of determination, generally accepted
accounting principles in effect in the United States which are applicable at the
date of determination and which are consistently applied for all applicable
periods.
"GLOBAL SECURITIES" means one or more 144A Global Securities or IAI
Global Securities.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of any part or all of
such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
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"HOLDERS" means the registered holders of the Securities.
"IAI GLOBAL SECURITY" means a permanent global security in registered
form representing the aggregate principal amount of Securities transferred after
the Issue Date to Institutional Accredited Investors.
"INCUR" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (including by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "INCURRENCE," "INCURRED" and "INCURRING" shall have meanings
correlative to the foregoing). Indebtedness of any Acquired Person or any of its
Subsidiaries existing at the time such Acquired Person becomes a Subsidiary of
the Company (or is merged into or consolidated with the Company or any
Subsidiary of the Company), whether or not such Indebtedness was Incurred in
connection with, as a result of, or in contemplation of, such Acquired Person
becoming a Subsidiary of the Company (or being merged into or consolidated with
the Company or any Subsidiary of the Company), shall be deemed Incurred at the
time any such Acquired Person becomes a Subsidiary of the Company or merges into
or consolidates with the Company or any Subsidiary of the Company.
"INDEBTEDNESS" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed; (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement
obligation of such Person with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of such Person; (d)
every obligation of such Person issued or assumed as the deferred purchase price
of property or services (but excluding trade accounts payable Incurred in the
ordinary course of business and payable in accordance with industry practices,
or other accrued liabilities arising in the ordinary course of business); (e)
every Capital Lease Obligation of such Person; (f) every net obligation under
Interest Rate Protection Obligations or similar agreements or Currency
Agreements of such Person; (g) Attributable Indebtedness; (h) every obligation
of the type referred to in clauses (a) through (g) of another Person and all
dividends of another Person the payment of which, in either case, such Person
has guaranteed or is responsible or liable for, directly or indirectly, as
obligor, guarantor or otherwise; and (i) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (a) through
(h) above. Indebtedness (i) shall not be calculated taking into account any cash
and cash equivalents held by such Person; (ii) shall not include obligations of
any Person (x) arising from the honoring by a bank or other financial
institution of a check, draft or similar instrument inadvertently drawn against
insufficient funds in the ordinary course of business, provided that such
obligations are extinguished within two Business Days of their incurrence, (y)
resulting from the endorsement of negotiable instruments for collection in the
ordinary course of business and consistent with past business practices and (z)
under stand-by letters of credit to the extent collateralized by cash or Cash
Equivalents; (iii) which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be
deemed to be Incurred or outstanding in an amount equal to the accreted value
thereof at the date of determination; (iv) shall include the liquidation
preference and any mandatory redemption payment obligations in respect of any
Disqualified Equity Interests of the Company or any Subsidiary of the Company;
and (v) shall not include obligations under performance bonds, performance
guarantees, surety bonds and appeal bonds, letters of credit or similar
obligations, incurred in the ordinary course of business.
"INDENTURE" means this Indenture, as amended or supplemented from time
to time.
"INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized
accounting, appraisal, investment banking firm or consultant (i) which does not,
and whose directors, officers and employees or Affiliates do not, have a direct
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or indirect financial interest in the Company and (ii) which, in the judgment of
the Board of Directors of the Company, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"INITIAL PURCHASER" means Chase Securities Inc.
"INITIAL SECURITIES" means the 8 5/8% Senior Subordinated Notes due
2007, Series A, of the Company.
"INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to any
Person, any liquidation, dissolution or winding up of such Person, or any
bankruptcy, reorganization, insolvency, receivership or similar proceeding with
respect to such Person, whether voluntary or involuntary.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"INTEREST" means, with respect to the Securities, the sum of any cash
interest and any Liquidated Damages on the Securities.
"INTEREST PAYMENT DATE" means each semiannual interest payment date on
March 15 and September 15 of each year, commencing March 15, 1998.
"INTEREST RATE PROTECTION 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.
"INTEREST RECORD DATE" for the interest payable on any Interest Payment
Date (except a date for payment of defaulted interest) means the March 1 or
September 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"INVESTMENT" means, with respect to any Person, any direct or indirect
loan, advance, guarantee or other extension of credit or capital contribution to
(by means of transfers of cash or other property or assets to others or payments
for property or services for the account or use of others, or otherwise), or
purchase or acquisition of capital stock, bonds, notes, debentures or other
securities or evidences of Indebtedness issued by, any other Person. For
purposes of Section 4.06, the amount of any Investment shall be the original
cost of such Investment, plus the cost of all additions thereto, but without any
other adjustments for increases or decreases in value, or write-ups, write-downs
or write-offs with respect to such Investment; reduced by the payment of
dividends or distributions in connection with such Investment or any other
amounts received in respect of such Investment; PROVIDED, HOWEVER, that no such
payment of dividends or distributions or receipt of any such other amounts shall
reduce the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included in Consolidated
Net Income. In determining the amount of any Investment involving a transfer of
any property or asset other than cash, such property shall be valued at its fair
market value at the time of such transfer, as determined in good faith by the
Board of Directors (or comparable body) of the Person making such transfer.
"ISSUE DATE" means the original issue date of the Securities, September
23, 1997.
"LIEN" means any lien, mortgage, charge, security interest,
hypothecation, assignment for security or encumbrance of any kind (including any
conditional sale or capital lease or other title retention agreement, any lease
in the nature thereof and any agreement to give any security interest).
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"LIQUIDATED DAMAGES" has the meaning provided in Section 3(a) of the
Registration Rights Agreement.
"MATURITY DATE" means the date, which is set forth on the face of the
Securities, on which the Securities will mature.
"NET CASH PROCEEDS" means the aggregate proceeds in the form of cash or
Cash Equivalents received by the Company or any Subsidiary of the Company in
respect of any Asset Sale, including all cash or Cash Equivalents received upon
any sale, liquidation or other exchange of proceeds of Asset Sales received in a
form other than cash or Cash Equivalents, net of (a) 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; (b) taxes paid or payable as a result thereof
(after taking into account any available tax credits or deductions and any tax
sharing arrangements); (c) amounts required to be applied to the repayment of
Indebtedness secured by a Lien on the asset or assets that were the subject of
such Asset Sale; (d) amounts deemed, in good faith, appropriate by the Board of
Directors of the Company to be provided as a reserve, in accordance with GAAP,
against any liabilities associated with such assets which are the subject of
such Asset Sale; including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale, all as reflected in an Officers' Certificate delivered to the
Trustee (provided that the amount of any such reserves shall be deemed to
constitute Net Cash Proceeds at the time such reserves shall have been reversed
or are not otherwise required to be retained as a reserve); and (e) with respect
to Asset Sales by Subsidiaries, the portion of such cash payments attributable
to Persons holding a minority interest in such Subsidiary.
"OBLIGATIONS" means any principal, interest (including, without
limitation, Post-Petition Interest), penalties, fees, indemnifications,
reimbursement obligations, damages and other liabilities payable under the
documentation governing any Indebtedness.
"OFFER" has the meaning set forth in the definition of "OFFER TO
PURCHASE" below.
"OFFER TO PURCHASE" means a written offer (the "OFFER") sent by or on
behalf of the Company by first-class mail, postage prepaid, to each Holder at
his address appearing in the register for the Securities on the date of the
Offer offering to purchase up to the principal amount of Securities specified in
such Offer at the purchase price specified in such Offer (as determined pursuant
to this Indenture). Unless otherwise required by applicable law, the Offer shall
specify an expiration date (the "EXPIRATION Date") of the Offer to Purchase,
which shall be not less than 20 Business Days nor more than 60 days after the
date of such Offer, and a settlement date (the "PURCHASE DATE") for purchase of
Securities to occur no later than five Business Days after the Expiration Date.
The Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain all the information required
by applicable law to be included therein. The Offer shall also contain
information concerning the business of the Company and its Subsidiaries which
the Company in good faith believes will enable such Holders to make an informed
decision with respect to the Offer to Purchase (which at a minimum will include
(i) the most recent annual and quarterly financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the documents required to be filed with the Trustee pursuant to
this Indenture (which requirements may be satisfied by delivery of such
documents together with the Offer), (ii) a description of material developments
in the Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein). The Offer
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shall contain all instructions and materials necessary to enable such Holders to
tender Securities pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the outstanding Securities
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Section of this Indenture requiring the Offer to
Purchase) (the "PURCHASE AMOUNT");
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Securities accepted for payment (as specified
pursuant to this Indenture) (the "PURCHASE PRICE");
(5) that the Holder may tender all or any portion of the Securities
registered in the name of such Holder and that any portion of a Security
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where Securities are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Security not tendered or tendered but not
purchased by the Company pursuant to the Offer to Purchase will continue to
accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Security being accepted for payment pursuant to the Offer
to Purchase and that interest thereon shall cease to accrue on and after
the Purchase Date;
(9) that each Holder electing to tender all or any portion of a
Security pursuant to the Offer to Purchase will be required to surrender
such Security at the place or places specified in the Offer prior to the
close of business on the Expiration Date (such Security being, if the
Company or the Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing);
(10) that Holders will be entitled to withdraw all or any portion of
Securities tendered if the Company (or its Paying Agent) receives, not
later than the close of business on the fifth Business Day next preceding
the Expiration Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Security
the Holder tendered, the certificate number of the Security the Holder
tendered and a statement that such Holder is withdrawing all or a portion
of his tender;
(11) that (a) if Securities in an aggregate principal amount less than
or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Securities and (b) if Securities in an aggregate principal amount in excess
of the Purchase Amount are tendered and not withdrawn pursuant to the Offer
to Purchase, the Company shall purchase Securities having an aggregate
principal amount equal to the Purchase Amount on a PRO RATA basis (with
such adjustments as may be deemed appropriate so that only Securities in
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denominations of $1,000 principal amount or integral multiples thereof
shall be purchased); and
(12) that in the case of any Holder whose Security is purchased only in
part, the Company shall execute and the Trustee shall authenticate and
deliver to the Holder of such Security without service charge, a new
Security or Securities, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unpurchased portion of the Security so tendered.
An Offer to Purchase shall be governed by and effected in accordance
with the provisions above pertaining to any Offer.
"OFFICER" means the Chairman, any Vice Chairman, the President, any
Vice President, the Chief Financial Officer, the Treasurer, or the Secretary of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer or Assistant Secretary of the Company
complying with Sections 11.04 and 11.05.
"144A GLOBAL SECURITY" means a permanent global security in registered
form representing the aggregate principal amount of Securities sold in reliance
on Rule 144A.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee. Each such opinion shall include, if
applicable, the statements provided for in TIA Section 314(c).
"PARTICIPANT" has the meaning provided in Section 2.15.
"PAYING AGENT" has the meaning provided in Section 2.03.
"PERMITTED HOLDER" means Scott Rudolph and Arthur Rudolph and members
of either of their immediate families and trusts of which such persons are the
beneficiaries.
"PERMITTED INDEBTEDNESS" has the meaning set forth in Section 4.04.
"PERMITTED INVESTMENTS" means (a) Cash Equivalents; (b) Investments in
prepaid expenses, negotiable instruments held for collection and lease, utility
and workers' compensation, performance and other similar deposits; (c) Interest
Rate Protection Obligations and Currency Agreements; (d) Investments received in
connection with the bankruptcy or reorganization of suppliers and customers and
in settlement of delinquent obligations of, and other disputes with, customers
and suppliers, in each case arising in the ordinary course of business; (e)
Investments in the Company and direct or indirect loans, advances, guarantees or
other extensions of credit in the ordinary course of business to or on behalf of
a Subsidiary of the Company and cash Investments in a Person that, as a result
of or in connection with such Investment, is merged with or into or consolidated
with the Company or a Wholly Owned Subsidiary; (f) Investments paid for in
Common Stock of the Company; and (g) loans or advances to officers or employees
of the Company and its Subsidiaries in the ordinary course of business for bona
fide business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $1 million in the aggregate at any one time
outstanding.
"PERMITTED JUNIOR SECURITIES" means any securities of the Company or
any other Person that are (i) equity securities without special covenants or
(ii) debt securities expressly subordinated in right of payment to all Senior
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Indebtedness that may at the time be outstanding, to substantially the same
extent as, or to a greater extent than, the Securities are subordinated as
provided in this Indenture, in any event pursuant to a court order so providing
and as to which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the Securities on the date of this Indenture, (b)
such securities shall not be entitled to the benefits of covenants or defaults
materially more beneficial to the holders of such securities than those in
effect with respect to the Securities on the date of this Indenture and (c) such
securities shall not provide for amortization (including sinking fund and
mandatory prepayment provisions) commencing prior to the date six months
following the final scheduled maturity date of the Senior Indebtedness (as
modified by the plan of reorganization or readjustment pursuant to which such
securities are issued).
"PERMITTED LIENS" means (a) 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, HOWEVER, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not secure any
property or assets of the Company or any Subsidiary of the Company other than
the property or assets subject to the Liens prior to such merger or
consolidation; (b) Liens imposed by law such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course of
business which secure payment of obligations not more than 30 days past due or
which are being contested in good faith and by appropriate proceedings; (c)
Liens existing on the Issue Date and Liens in favor of the lenders under the
Revolving Credit Facility; (d) Liens securing only the Securities; (e) Liens in
favor of the Company or any Subsidiary of the Company; (f) 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, HOWEVER, that any reserve or
other appropriate provision as shall be required in conformity with GAAP shall
have been made therefor; (g) easements, reservation of rights of way,
restrictions and other similar easements, licenses, restrictions on the use of
properties, or minor imperfections of title that in the aggregate are not
material in amount and do not in any case materially detract from the properties
subject thereto or interfere with the ordinary conduct of the business of the
Company and its Subsidiaries; (h) Liens resulting from the deposit of cash or
notes in connection with contracts, tenders or expropriation proceedings, or to
secure workers' compensation, surety or appeal bonds, costs of litigation when
required by law and public and statutory obligations or obligations under
franchise arrangements entered into in the ordinary course of business; (i)
Liens securing Indebtedness consisting of Capitalized Lease Obligations,
Purchase Money Indebtedness, mortgage financings, industrial revenue bonds or
other monetary obligations, in each case incurred solely for the purpose of
financing all or any part of the purchase price or cost of construction or
installation of assets used in the business of the Company or its Subsidiaries,
or repairs, additions or improvements to such assets; PROVIDED, HOWEVER, that
(I) such Liens secure Indebtedness in an amount not in excess of the original
purchase price or the original cost of any such assets or repair, addition or
improvement thereto (plus an amount equal to the reasonable fees and expenses in
connection with the incurrence of such Indebtedness), (II) such Liens do not
extend to any other assets of the Company or its Subsidiaries (and, in the case
of repair, addition or improvements to any such assets, such Lien extends only
to the assets (and improvements thereto or thereon) repaired, added to or
improved), (III) the Incurrence of such Indebtedness is permitted by Section
4.04 and (IV) such Liens attach within 90 days of such purchase, construction,
installation, repair, addition or improvement; and (j) Liens to secure any
refinancings, renewals, extensions, modifications or replacements (collectively,
"REFINANCINGS") (or successive refinancings), in whole or in part, of any
Indebtedness secured by Liens referred to in the clauses above so long as such
Lien does not extend to any other property (other than improvements thereto).
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, limited liability
limited partnership, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PHYSICAL SECURITIES" means one or more certificated Securities in
registered form.
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"POST-PETITION INTEREST" means, with respect to any Indebtedness of any
Person, all interest accrued or accruing on such Indebtedness after the
commencement of any Insolvency or Liquidation Proceeding against such Person in
accordance with and at the contract rate (including, without limitation, any
rate applicable upon default) specified in the agreement or instrument creating,
evidencing or governing such Indebtedness, whether or not, pursuant to
applicable law or otherwise, the claim for such interest is allowed as a claim
in such Insolvency or Liquidation Proceeding.
"PREFERRED EQUITY INTEREST," in any Person, means an Equity Interest of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over Equity
Interests of any other class in such Person.
"PRINCIPAL" of a debt security means the principal of the security
plus, when appropriate, the premium, if any, on the security.
"PRIVATE EXCHANGE SECURITIES" has the meaning provided in Section 1 of
the Registration Rights Agreement.
"PRIVATE PLACEMENT LEGEND" means the legend initially set forth on the
Initial Securities in the form set forth on EXHIBIT A hereto.
"PROMISSORY NOTES" means the two promissory notes in the aggregate
amount of approximately $169 million issued by the Company to Lloyds Chemists
plc or its affiliates as consideration for the purchase by the Company of all of
the outstanding capital stock of Holland & Barrett Holdings Ltd.
"PUBLIC EQUITY OFFERING" means, with respect to the Company, an
underwritten public offering of Qualified Equity Interests of the Company
pursuant to an effective registration statement filed under the Securities Act
(excluding registration statements filed on Form S-8).
"PURCHASE AGREEMENT" means the Purchase Agreement dated as of September
17, 1997 by and between the Company and the Initial Purchaser.
"PURCHASE AMOUNT" has the meaning set forth in the definition of "OFFER
TO PURCHASE" above.
"PURCHASE DATE" has the meaning set forth in the definition of "OFFER
TO PURCHASE" above.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company or any
Subsidiary of the Company Incurred for the purpose of financing in the ordinary
course of business all or any part of the purchase price or the cost of
construction or improvement of any property; PROVIDED, HOWEVER, that the
aggregate principal amount of such Indebtedness does not exceed the lesser of
the Fair Market Value of such property or such purchase price or cost, including
any refinancing of such Indebtedness that does not increase the aggregate
principal amount (or accreted amount, if less) thereof as of the date of
refinancing.
"PURCHASE PRICE" has the meaning set forth in the definition of "OFFER
TO PURCHASE" above.
"QUALIFIED EQUITY INTEREST" in any Person means any Equity Interest in
such Person other than any Disqualified Equity Interest.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" means a "qualified
institutional buyer" as that term is defined in Rule 144A under the Securities
Act.
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"REDEMPTION DATE," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture.
"REDEMPTION PRICE," when used with respect to any Security to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
as set forth in the form of Security annexed hereto as EXHIBIT A.
"REGISTRAR" has the meaning provided in Section 2.03.
"REGISTRATION" means a registered exchange offer for the Securities by
the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Exchange and Registration
Rights Agreement dated as of the Issue Date by and between the Company and the
Initial Purchaser.
"REPLACEMENT ASSETS" has the meaning provided in Section 4.05.
"REQUIRED FILING DATES" has the meaning provided in Section 4.12.
"RESTRICTED INVESTMENT" means any Investment other than a Permitted
Investment.
"RESTRICTED PAYMENTS" has the meaning provided in Section 4.06.
"RESTRICTED SECURITY" has the meaning set forth in Rule 144(a)(3) under
the Securities Act; PROVIDED, HOWEVER, that the Trustee shall be entitled to
request and conclusively rely upon an Opinion of Counsel with respect to whether
any Security is a Restricted Security.
"REVOLVING CREDIT FACILITY" means the credit and guarantee agreement,
dated as of the Issue Date, by and among the Company, the Subsidiaries of the
Company identified on the signature pages thereof and any Subsidiary of the
Company that is later added thereto, the lenders named therein, and The Chase
Manhattan Bank, N.A. as Agent, as amended, including any deferrals, renewals,
extensions, replacements, refinancings or refundings thereof, or amendments,
modifications or supplements thereto and any agreement providing therefor,
whether by or with the same or any other lender, creditor, group of lenders or
group of creditors, and including related notes, guarantee and note agreements
and other instruments and agreements executed in connection therewith.
"RULE 144A" means Rule 144A under the Securities Act.
"SALE AND LEASE-BACK TRANSACTION" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Subsidiary to such Person in contemplation of
such leasing.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES" means, collectively, the Initial Securities, the Private
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, as amended or supplemented from time to time in accordance with the
terms of this Indenture.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated by the SEC thereunder.
"SENIOR INDEBTEDNESS" means, at any date, (a) all Obligations of the
Company under the Revolving Credit Facility; (b) all Interest Rate Protection
Obligations of the Company and all Obligations of the Company under Currency
Agreements; (c) all Obligations of the Company under stand-by letters of credit;
and (d) all other Indebtedness of the Company, including principal, premium, if
any, and interest (including Post-Petition Interest) on such Indebtedness,
unless the instrument under which such Indebtedness of the Company is Incurred
expressly provides that such Indebtedness for money borrowed is not senior or
superior in right of payment to the Securities, and all renewals, extensions,
modifications, amendments or refinancings thereof. Notwithstanding the
foregoing, Senior Indebtedness shall not include (a) to the extent that it may
constitute Indebtedness, any Obligation for Federal, state, local or other
taxes; (b) any Indebtedness among or between the Company and any Subsidiary of
the Company or any Affiliate of the Company or any of such Affiliate's
Subsidiaries; (c) to the extent that it may constitute Indebtedness, any
Obligation in respect of any trade payable Incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business; (d)
that portion of any Indebtedness that is Incurred in violation of this
Indenture; (e) Indebtedness evidenced by the Securities; (f) Indebtedness of the
Company that is expressly subordinate or junior in right of payment to any other
Indebtedness of the Company; (g) to the extent that it may constitute
Indebtedness, any obligation owing under leases (other than Capitalized Lease
Obligations) or management agreements; and (h) any obligation that by operation
of law is subordinate to any general unsecured obligations of the Company. No
Indebtedness shall be deemed to be subordinated to other Indebtedness solely
because such other Indebtedness is secured.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, (a) any
Subsidiary of the Company that, together with its Subsidiaries (i) for the most
recent fiscal year of the Company accounted for more than 10.0% of the
consolidated revenues of the Company and its Subsidiaries or (ii) as of the end
of such fiscal year, owned more than 10.0% of the consolidated assets of the
Company and its Subsidiaries, all as set forth on the consolidated financial
statements of the Company and its Subsidiaries for such year prepared in
conformity with GAAP, and (b) any Subsidiary of the Company which, when
aggregated with all other Subsidiaries of the Company that are not otherwise
Significant Subsidiaries and as to which any event described in clause (h) or
clause (i) of Section 6.01 has occurred, would constitute a Significant
Subsidiary under clause (a) of this definition.
"STATED MATURITY" means, when used with respect to any Security or any
installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to the Company, any
Indebtedness of the Company which is expressly subordinated in right of payment
to the Securities.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which the outstanding Voting Equity Interests having at least a majority of the
votes entitled to be cast in the election of directors shall at the time be
owned, directly or indirectly, by such Person, or (b) any other Person of which
at least a majority of Voting Equity Interests are at the time, directly or
indirectly, owned by such first named Person.
"SURVIVING PERSON" means, with respect to any Person involved in or
that makes any Disposition, the Person formed by or surviving such Disposition
or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb), as amended, as in effect on the date of this Indenture (except as
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provided in Section 10.03) until such time as this Indenture is qualified under
the TIA, and thereafter as in effect on the date on which this Indenture is
qualified under the TIA.
"TRUSTEE" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
this Indenture and thereafter means such successor, including, but not limited
to, any corporation resulting from or surviving any consolidation or merger to
which it or its successors may be a party as provided in Section 7.09.
"TRUST OFFICER" means any officer within the corporate trust department
(or any successor group of the Trustee) including any vice president, assistant
vice president, assistant secretary or any other officer or assistant officer of
the Trustee customarily performing functions similar to those performed by the
persons who at that time shall be such officers, and also means, with respect to
a particular corporate trust matter, any other officer to whom such trust matter
is referred because of his knowledge of and familiarity with the particular
subject.
"UNITED STATES GOVERNMENT OBLIGATIONS" means direct non-callable
obligations of the United States of America for the payment of which the full
faith and credit of the United States is pledged.
"UNRESTRICTED SECURITIES" means one or more Securities that do not and
are not required to bear the Private Placement Legend in the form set forth in
EXHIBIT A hereto, including, without limitation, the Exchange Securities and any
Securities registered under the Securities Act pursuant to and in accordance
with the Registration Rights Agreement.
"UNUTILIZED NET CASH PROCEEDS" has the meaning provided in Section
4.05(a).
"VOTING EQUITY INTERESTS" means Equity Interests in a corporation or
other Person with voting power under ordinary circumstances entitling the
holders thereof to elect the Board of Directors or other governing body of such
corporation or Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the sum
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment of final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (b) the then outstanding
aggregate principal amount of such Indebtedness.
"WHOLLY OWNED SUBSIDIARY" means any Subsidiary of the Company all of
the outstanding Voting Equity Interests (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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:
"COMMISSION" means the SEC.
"INDENTURE SECURITIES" means the Securities.
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"INDENTURE SECURITY HOLDER" means a Holder.
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee.
"OBLIGOR" on this Indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. 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 generally accepted accounting principles in effect
from time to time, and any other reference in this Indenture to "generally
accepted accounting principles" refers to GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE TWO
THE SECURITIES
SECTION 2.01. FORM AND DATING.
The Initial Securities and the Trustee's certificate of authentication
thereof shall be substantially in the form of EXHIBIT A hereto, which is hereby
incorporated in and expressly made a part of this Indenture. The Exchange
Securities and the Trustee's certificate of authentication thereof shall be
substantially in the form of EXHIBIT B hereto, which is hereby incorporated in
and expressly made a part of this Indenture. The Securities may have notations,
legends or endorsements required by law, stock exchange rule or usage. The
Company and the Trustee shall approve the form of the Securities and any
notation, legend or endorsement on them. Each Security shall be dated the date
of its issuance and shall show the date of its authentication.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more Global Securities, substantially in the
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form set forth in EXHIBIT A hereto, deposited with the Trustee, as custodian for
the Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided and shall bear the legend set forth in EXHIBIT C hereto.
The aggregate principal amount of the Global Securities may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depository, as hereinafter provided.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers, or an Officer and an Assistant Secretary, shall sign, or
one Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to, the Securities for the Company by manual or facsimile
signature.
If an Officer or an Assistant Secretary whose signature is on a
Security was an Officer or an Assistant Secretary, as the case may be, at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Securities for original
issue in an aggregate principal amount not to exceed $150,000,000, (ii) Private
Exchange Securities from time to time only in exchange for a like principal
amount of Initial Securities and (iii) Unrestricted Securities from time to time
only in exchange for (A) a like principal amount of Initial Securities or (B) a
like principal amount of Private Exchange Securities, in each case upon a
written order of the Company in the form of an Officers' Certificate. Each such
written order shall specify the amount of Securities to be authenticated and the
date on which the Securities are to be authenticated, whether the Securities are
to be Initial Securities, Private Exchange Securities or Unrestricted Securities
and whether the Securities are to be issued as Physical Securities or Global
Securities and such other information as the Trustee may reasonably request. The
aggregate principal amount of Securities outstanding at any time may not exceed
$150,000,000, except as provided in Sections 2.07 and 2.08.
Notwithstanding the foregoing, all Securities issued under this
Indenture shall vote and consent together on all matters (as to which any of
such Securities may vote or consent) as one class and no series of Securities
will have the right to vote or consent as a separate class on any matter.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so upon a written order of the Company in the form of an
Officers' Certificate. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent shall
have the same rights as an Agent to deal with the Company and Affiliates of the
Company.
The Securities shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency, which may be in the
Borough of Manhattan, The City of New York, where (a) Securities may be
presented or surrendered for registration of transfer or for exchange (the
"REGISTRAR"), (b) Securities may be presented or surrendered for payment (the
"PAYING AGENT") and (c) notices and demands in respect of the Securities and
this Indenture may be served. The Registrar shall keep a register of the
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Securities and of their transfer and exchange. The Company, upon notice to the
Trustee, may appoint one or more co-Registrars and one or more additional Paying
Agents. The term "PAYING AGENT" includes any additional Paying Agent. Except as
provided herein, the Company may act as Paying Agent, Registrar or co-Registrar.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Company shall promptly notify the Trustee of the name
and address of any such Agent. If the Company fails to maintain a Registrar or
Paying Agent, or fails to give the foregoing notice, the Trustee shall act as
such and shall be entitled to appropriate compensation and indemnification in
accordance with Section 7.07.
The Company initially appoints the Trustee as Registrar and Paying
Agent until such time as the Trustee has resigned or a successor has been
appointed pursuant to Section 7.08.
SECTION 2.04. PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities, and shall notify the Trustee of
any Default by the Company in making any such payment. The Company at any time
may require a Paying Agent to distribute all assets held by it to the Trustee
and account for any assets disbursed and the Trustee may at any time during the
continuance of any payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it to the Trustee and
to account for any assets distributed. Upon distribution to the Trustee of all
assets that shall have been delivered by the Company to the Paying Agent (if
other than the Company), the Paying Agent shall have no further liability for
such assets. If the Company or any of its Affiliates acts as Paying Agent, it
shall, on or before each due date of the principal of or interest on the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal or interest so becoming due until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
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
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee before each Interest Record Date and at such other times as the Trustee
may request in writing all information in the possession or control of the
Company as to the names and addresses of Holders, which list may be conclusively
relied upon by the Trustee.
SECTION 2.06. TRANSFER AND EXCHANGE.
Subject to the provisions of Sections 2.15 and 2.16, when Securities
are presented to the Registrar or a co-Registrar with a request to register the
transfer of such Securities or to exchange such Securities for an equal
principal amount of Securities of other authorized denominations of the same
series, the Registrar or co-Registrar shall register the transfer or make the
exchange as requested if its requirements for such transaction are met;
PROVIDED, HOWEVER, that the Securities surrendered for transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer in
form satisfactory to the Company and the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing. To
permit registrations of transfers and exchanges, the Company shall execute and
the Trustee shall authenticate Securities at the Registrar's or co-Registrar's
written request. No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
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cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other governmental charge
payable upon exchanges or transfers pursuant to Section 2.02, 2.10, 3.06, 4.05,
4.14, or 10.05). The Registrar or co-Registrar shall not be required to register
the transfer or exchange of any Security (i) during a period beginning at the
opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to Article Three
hereof, except the unredeemed portion of any Security being redeemed in part.
Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee and any Agent of the Company shall treat the
person in whose name the Security is registered as the owner thereof for all
purposes whether or not the Security shall be overdue, and neither the Company,
the Trustee nor any such Agent shall be affected by notice to the contrary. Any
Holder of a beneficial interest in a Global Security shall, by acceptance of
such beneficial interest in a Global Security, agree that transfers of
beneficial interests in such Global Security may be effected only through a
book-entry system maintained by the Depository (or its agent), and that
ownership of a beneficial interest in a Global Security shall be required to be
reflected in a book entry.
SECTION 2.07. REPLACEMENT SECURITIES.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements for replacement of Securities are met. If
required by the Company or the Trustee, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee and any Agent from any loss,
liability, cost or expense which any of them may suffer if a Security is
replaced. The Company may charge such Holder for its reasonable out-of-pocket
expenses in replacing a Security, including reasonable fees and expenses of
counsel.
Every replacement Security is an additional obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES.
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding. Subject to Section 2.09, a Security does not cease to be
outstanding because the Company or any of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a BONA FIDE purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section
2.07.
If on a Redemption Date, Purchase Date or the Final Maturity Date the
Paying Agent holds money sufficient to pay all of the principal and interest due
on the Securities payable on that date, and is not prohibited from paying such
money to the Holders pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
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SECTION 2.09. TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company or any of its Affiliates shall be disregarded, except that, for
the purposes of determining whether the Trustee shall be protected in relying on
any such direction, waiver or consent, only Securities that a Trust Officer of
the Trustee actually knows are so owned by the Company or any of its Affiliates
shall be disregarded.
The Company shall promptly notify the Trustee, in writing, when it or
any of its Affiliates repurchases or otherwise acquires Securities, and of the
aggregate principal amount of such Securities so repurchased or otherwise
acquired.
SECTION 2.10. TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary (printed, typewritten or
lithographed) Securities upon receipt of a written order of the Company in the
form of an Officers' Certificate. The Officers' Certificate shall specify the
amount of temporary Securities to be authenticated and the date on which the
temporary Securities are to be authenticated.
Temporary Securities shall be substantially in the form of definitive
Securities but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate upon receipt of a written order of the Company
pursuant to Section 2.02 definitive Securities in exchange for temporary
Securities.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent,
and no one else, shall cancel, and only at the written direction of the Company,
destroy and deliver evidence of such destruction of all Securities surrendered
for transfer, exchange, payment or cancellation. Subject to Section 2.07, the
Company may not issue new Securities to replace Securities that it has paid or
delivered to the Trustee for cancellation. If the Company shall acquire any of
the Securities, such acquisition shall not operate as a redemption or
satisfaction of the Indebtedness represented by such Securities unless and until
the same are surrendered to the Trustee for cancellation pursuant to this
Section 2.11.
SECTION 2.12. DEFAULTED INTEREST.
The Company shall pay interest on overdue principal from time to time
on demand at the rate of interest then borne by the Securities. The Company
shall, to the extent lawful, pay interest on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the rate of interest then borne by the Securities.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a subsequent
special record date, which date shall be the fifteenth day preceding the date
fixed by the Company for the payment of defaulted interest or the next
succeeding Business Day if such date is not a Business Day. At least 15 days
before the subsequent special record date, the Company shall mail to each
Holder, with a copy to the Trustee, a notice that states the subsequent special
record date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid.
Notwithstanding the foregoing, any interest which is paid
prior to the expiration of the 30-day period set forth in Section 6.01(b) shall
be paid to Holders as of the Interest Record Date for the Interest Payment Date
for which interest has not been paid.
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SECTION 2.13. CUSIP NUMBER.
The Company in issuing the Securities will use a "CUSIP" number and the
Trustee shall use the CUSIP number in notices of redemption or exchange solely
as a convenience to Holders; PROVIDED, HOWEVER, that the Trustee may state in
such notice that no representation is made as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Securities, and that reliance
may be placed only on the other identification numbers printed on the
Securities. The Company shall promptly notify the Trustee of any changes in
CUSIP numbers.
SECTION 2.14. DEPOSIT OF MONEYS.
Prior to 12:00 noon New York City time on each Interest Payment Date,
Redemption Date, Purchase Date and the Final Maturity Date, the Company shall
deposit with the Paying Agent in immediately available funds money in U.S. legal
tender sufficient to make cash payments, if any, due on such Interest Payment
Date, Redemption Date, Purchase Date or Final Maturity Date, as the case may be,
in a timely manner which permits the Paying Agent to remit payment to the
Holders on such Interest Payment Date, Redemption Date, Purchase Date or Final
Maturity Date, as the case may be.
SECTION 2.15. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(a) The Global Securities initially shall (i) be registered in the name
of the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
EXHIBIT C.
Members of, or participants in, the Depository ("PARTICIPANTS") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository, or the Trustee as its custodian, or under the
Global Security, and the Depository may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of the Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and Participants, the operation of customary practices governing the exercise of
the rights of a Holder of any Security.
(b) Transfers of Global Securities shall be limited to transfers in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Securities may be
transferred or exchanged for Physical Securities in accordance with the rules
and procedures of the Depository and the provisions of Section 2.16; PROVIDED,
HOWEVER, that Physical Securities shall be transferred to all beneficial owners
in exchange for their beneficial interests in Global Securities if (i) the
Depository notifies the Company that it is unwilling or unable to continue as
Depository for any Global Security and a successor Depository is not appointed
by the Company within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a request from the
Depository to issue Physical Securities.
(c) In connection with the transfer of Global Securities as an entirety
to beneficial owners pursuant to paragraph (b) of this Section 2.15, the Global
Securities shall be deemed to be surrendered to the Trustee for cancellation,
and the Company shall execute, and the Trustee shall upon written instructions
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from the Company authenticate and deliver, to each beneficial owner identified
by the Depository in exchange for its beneficial interest in the Global
Securities, an equal aggregate principal amount of Physical Securities of
authorized denominations.
(d) Any Physical Security constituting a Restricted Security delivered
in exchange for an interest in a Global Security pursuant to paragraph (c) of
this Section 2.15 shall, except as otherwise provided by Section 2.16, bear the
Private Placement Legend.
(e) The Holder of any Global Security may grant proxies and otherwise
authorize any Person, including Participants and Persons that may hold interests
through Participants, to take any action which a Holder is entitled to take
under this Indenture or the Securities and the Trustee is entitled to
conclusively rely upon any electronic instructions from beneficial owners to the
Holder of any Global Security.
SECTION 2.16. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) TRANSFER AND EXCHANGE OF PHYSICAL SECURITIES. When Physical
Securities are presented to the Registrar or co-Registrar with a request:
(i) to register the transfer of the Physical Securities; or
(ii) to exchange such Physical Securities for an equal principal amount
of Physical Securities of other authorized denominations,
the Registrar or co-Registrar shall register the transfer or make the exchange
as requested if the requirements under this Indenture as set forth in this
Section 2.16 for such transactions are met; PROVIDED, HOWEVER, that the Physical
Securities presented or surrendered for Registration of transfer or exchange:
(I) shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Registrar or co-Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing;
and
(II) in the case of Physical Securities the offer and sale of which
have not been registered under the Securities Act, such Physical Securities
shall be accompanied, in the sole discretion of the Company, by the
following additional information and documents, as applicable:
(A) if such Physical Security is being delivered to the Registrar or
co-Registrar by a Holder for Registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (substantially in the form of EXHIBIT D hereto); or
(B) if such Physical Security is being transferred to a QIB in
accordance with Rule 144A, a certification to that effect
(substantially in the form of EXHIBIT D hereto); or
(C) if such Physical Security is being transferred to an Institutional
Accredited Investor, delivery of a certification to that effect
(substantially in the form of EXHIBIT D hereto) and a transferee
letter of representation (substantially in the form of EXHIBIT E
hereto) and, at the option of the Company, an Opinion of Counsel
reasonably satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such Physical Security is being transferred in reliance on Rule
144 under the Securities Act, delivery of a certification to that
effect (substantially in the form of EXHIBIT D hereto) and, at the
option of the Company, an Opinion of Counsel reasonably
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satisfactory to the Company to the effect that such transfer is in
compliance with the Securities Act; or
(E) if such Physical Security is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of EXHIBIT D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably acceptable to the Company to the
effect that such transfer is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A PHYSICAL SECURITY FOR A BENEFICIAL
INTEREST IN A GLOBAL SECURITY. A Physical Security the offer and sale of which
has not been registered under the Securities Act may not be exchanged for a
beneficial interest in a Global Security except upon satisfaction of the
requirements set forth below. Upon receipt by the Registrar or co-Registrar of a
Physical Security, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of EXHIBIT D hereto, that
such Physical Security is being transferred (I) to a QIB or (II) to
an Accredited Investor and, with respect to (II), at the option of
the Company, an Opinion of Counsel reasonably acceptable to the
Company to the effect that such transfer is in compliance with the
Securities Act; and
(B) written instructions directing the Registrar or co-Registrar to
make, or to direct the Depository to make, an endorsement on the
applicable Global Security to reflect an increase in the aggregate
amount of the Securities represented by the Global Security,
then the Registrar or co-Registrar shall cancel such Physical Security and
cause, or direct the Depository to cause, in accordance with the standing
instructions and procedures existing between the Depository and the Registrar or
co-Registrar, the principal amount of Securities represented by the applicable
Global Security to be increased accordingly. If no 144A Global Security or IAI
Global Security, as the case may be, is then outstanding, the Company shall,
unless either of the events in the proviso to Section 2.15(b) have occurred and
are continuing, issue and the Trustee shall, upon written instructions from the
Company in accordance with Section 2.02, authenticate such a Global Security in
the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository in accordance with this Indenture (including the
restrictions on transfer set forth herein) and the procedures of the Depository
therefor. Upon receipt by the Registrar or Co-Registrar of written instructions,
or such other instruction as is customary for the Depository, from the
Depository or its nominee, requesting the Registration of transfer of an
interest in a 144A Global Security or an IAI Global Security, as the case may
be, to another type of Global Security, together with the applicable Global
Securities (or, if the applicable type of Global Security required to represent
the interest as requested to be obtained is not then outstanding, only the
Global Security representing the interest being transferred), the Registrar or
Co-Registrar shall reflect on its books and records (and the applicable Global
Security) the applicable increase and decrease of the principal amount of
Securities represented by such types of Global Securities, giving effect to such
transfer. If the applicable type of Global Security required to represent the
interest as requested to be obtained is not outstanding at the time of such
request, the Company shall issue and the Trustee shall, upon written
instructions from the Company in accordance with Section 2.02, authenticate a
new Global Security of such type in principal amount equal to the principal
amount of the interest requested to be transferred.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
PHYSICAL SECURITY.
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(i) If the Depository is at any time unwilling or unable to continue as
a depositary for the Global Securities and a successor depositary is not
appointed by the Company within 90 days, Physical Securities will be issued
in exchange for the Global Securities. Upon receipt by the Registrar or
co-Registrar of written instructions, or such other form of instructions as
is customary for the Depository, from the Depository or its nominee on
behalf of any Person (subject to the previous sentence) having a beneficial
interest in a Global Security and upon receipt by the Trustee of a written
order or such other form of instructions as is customary for the Depository
or the Person designated by the Depository as having such a beneficial
interest containing registration instructions and, in the case of any such
transfer or exchange of a beneficial interest in Securities the offer and
sale of which have not been registered under the Securities Act, the
following additional information and documents:
(A) if such beneficial interest is being transferred in reliance on
Rule 144 under the Securities Act, delivery of a certification to
that effect (substantially in the form of EXHIBIT D hereto) and, at
the option of the Company, an Opinion of Counsel reasonably
satisfactory to the Company to the effect that such transfer is in
compliance with the Securities Act; or
(B) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect (substantially in
the form of EXHIBIT D hereto) and, at the option of the Company, an
Opinion of Counsel reasonably satisfactory to the Company to the
effect that such transfer is in compliance with the Securities Act,
then the Registrar or co-Registrar will cause, in accordance with the
standing instructions and procedures existing between the Depository
and the Registrar or co-Registrar, the aggregate principal amount of
the applicable Global Security to be reduced and, following such
reduction, the Company will execute and, upon receipt of an
authentication order in the form of an Officers' Certificate in
accordance with Section 2.02, the Trustee will authenticate and deliver
to the transferee a Physical Security in the appropriate principal
amount.
(ii) Securities issued in exchange for a beneficial interest
in a Global Security pursuant to this Section 2.16(d) shall be
registered in such names and in such authorized denominations as the
Depository, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Registrar or co-Registrar
in writing. The Registrar or co-Registrar shall deliver such Physical
Securities to the Persons in whose names such Physical Securities are
so registered.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture, a Global Security may
not be transferred as a whole except by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar or co-Registrar shall deliver Securities that do not bear the Private
Placement Legend. Upon the transfer, exchange or replacement of Securities
bearing the Private Placement Legend, the Registrar or co-Registrar shall
deliver only Securities that bear the Private Placement Legend unless, and the
Trustee is hereby authorized to deliver Securities without the Private Placement
Legend if, (i) there is delivered to the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act; (ii)
such Security has been sold pursuant to an effective registration statement
under the Securities Act (including pursuant to a Registration); or (iii) the
date of such transfer, exchange or replacement is two years after the later of
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(x) the Issue Date and (y) the last date that the Company or any affiliate (as
defined in Rule 144 under the Securities Act) of the Company was the owner of
such Securities (or any predecessor thereto).
(g) GENERAL. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Trustee shall have no obligation or duty to monitor, determine or
inquire as to compliance with any restrictions on transfer imposed under this
Indenture or under applicable law with respect to any transfer of any interest
in any Security (including any transfers between or among Participants or
beneficial owners of interests in any Global Security) other than to require
delivery of such certificates and other documentation or evidence as are
expressly required by, and to do so if and when expressly required by the terms
of, this Indenture, and to examine the same to determine substantial compliance
as to form with the express requirements hereof.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.15 or this Section 2.16.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company wants to redeem Securities pursuant to paragraph 5 or 6
of the Securities at the applicable redemption price set forth thereon, it shall
notify the Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed. The Company shall give such notice to the Trustee at
least 30 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee in writing), together with an Officers' Certificate
stating that such redemption will comply with the conditions contained herein.
SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a PRO RATA basis, by lot
or in such other manner as the Trustee in its sole discretion shall deem fair
and appropriate. Selection of the Securities to be redeemed pursuant to
paragraph 6 of the Securities shall be made by the Trustee only on a PRO RATA
basis or on as nearly a PRO RATA basis as is practicable (subject to the
procedures of the Depository) based on the aggregate principal amount of
Securities held by each Holder. The Trustee shall make the selection from the
Securities then outstanding, subject to redemption and not previously called for
redemption.
The Trustee may select for redemption pursuant to paragraph 5 or 6 of
the Securities portions of the principal amount of Securities that have
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denominations equal to or larger than $1,000 principal amount. Securities and
portions of them that the Trustee so selects shall be in amounts of $1,000
principal amount or integral multiples thereof. Provisions of this Indenture
that apply to Securities called for redemption also apply to portions of
Securities called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption Date,
the Company shall mail a notice of redemption by first-class mail to each Holder
whose Securities are to be redeemed at such Holder's registered address;
PROVIDED, HOWEVER, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 60 days after the date of the Closing of the relevant Public Equity
Offering of the Company.
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
(1) the Redemption Date;
(2) the redemption price;
(3) the name and address of the Paying Agent to which the Securities
are to be surrendered for redemption;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) that, unless the Company defaults in making the redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders is to
receive payment of the redemption price upon surrender to the Paying Agent;
(6) in the case of any redemption pursuant to paragraph 5 or 6 of the
Securities, if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion thereof will
be issued;
(7) the section of the Indenture or the Securities pursuant to which
they are being redeemed; and
(8) that on the Redemption Date the Redemption Price will become due
and payable upon each security, and that interest thereon shall cease to
accrue from and after said date.
At the Company's written request, the Trustee shall give the notice of
redemption on behalf of the Company, in the Company's name and at the Company's
expense; PROVIDED that such request by the Company to the Trustee is received by
the Trustee at least ten (10) business days prior to the date the Trustee is
requested to give notice to the Holders whose Securities are to be redeemed.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the redemption price. Upon
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surrender to the Paying Agent, such Securities shall be paid at the redemption
price, plus accrued interest thereon, if any, to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date
shall be payable to the Holders of record at the close of business on the
relevant Interest Record Date.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
At least one Business Day before the Redemption Date, the Company shall
deposit with the Paying Agent (or if the Company is its own Paying Agent, shall,
on or before the Redemption Date, segregate and hold in trust) money in U.S.
legal tender sufficient to pay the redemption price of and accrued interest, if
any, on all Securities to be redeemed on that date other than Securities or
portions thereof called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid on the Redemption Date due to the failure of
the Company to deposit with the Paying Agent money sufficient to pay the
redemption price thereof, the principal and accrued and unpaid interest, if any,
thereon shall, until paid or duly provided for, bear interest as provided in
Sections 2.12 and 4.01 with respect to any payment default.
SECTION 3.06. SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF SECURITIES.
The Company shall pay the principal of, premium, if any, and interest
on the Securities in the manner provided in the Securities and the Registration
Rights Agreement. An installment of principal or interest shall be considered
paid on the date due if the Trustee or Paying Agent (other than the Company or
any of its Affiliates) holds on that date money designated for and sufficient to
pay the installment in full and is not prohibited from paying such money to the
Holders of the Securities pursuant to the terms of this Indenture.
The Company shall pay cash interest on overdue principal at the same
rate per annum borne by the Securities. The Company shall pay cash interest on
overdue installments of interest at the same rate per annum borne by the
Securities, to the extent lawful, as provided in Section 2.12.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
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 address of the
Trustee set forth in Section 11. The Company hereby initially designates the
Trustee at its address set forth in Section 11.02 as its office or agency in The
Borough of Manhattan, The City of New York, for such purposes.
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SECTION 4.03. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not cause or permit any Subsidiary of
the Company to, directly or indirectly, conduct any business or enter into any
transaction (or series of related transactions) with or for the benefit of any
of their respective Affiliates or any officer, director or employee of the
Company or any Subsidiary of the Company (each an "AFFILIATE TRANSACTION"),
unless (i) such Affiliate Transaction is on terms which are no less favorable to
the Company or such Subsidiary of the Company, as the case may be, than would be
available in a comparable transaction with an unaffiliated third party and (ii)
if such Affiliate Transaction (or series of related Affiliate Transactions)
involves aggregate payments or other consideration having a Fair Market Value in
excess of $500,000, such Affiliate Transaction is in writing and a majority of
the disinterested members of the Board of Directors of the Company shall have
approved such Affiliate Transaction and determined that such Affiliate
Transaction complies with the foregoing provisions. In addition, any Affiliate
Transaction involving aggregate payments or other consideration having a Fair
Market Value in excess of $2.5 million will also require a written opinion from
an Independent Financial Advisor (filed with the Trustee) stating that the terms
of such Affiliate Transaction are fair, from a financial point of view, to the
Company or its Subsidiaries involved in such Affiliate Transaction, as the case
may be.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among the Company and any
Wholly Owned Subsidiary of the Company or between or among Wholly Owned
Subsidiaries; (ii) reasonable fees and compensation paid to and indemnity
provided on behalf of, officers, directors, employees or agents of the Company
or any Subsidiary of the Company as determined in good faith by the Company's
Board of Directors; (iii) any transactions undertaken pursuant to any
contractual obligations or rights in existence on the Issue Date (as in effect
on the Issue Date) and (iv) any Restricted Payments made in compliance with
Section 4.06.
SECTION 4.04. LIMITATION ON INDEBTEDNESS.
The Company shall not, and shall not cause or permit any Subsidiary to,
directly or indirectly, Incur any Indebtedness (including Acquired
Indebtedness), except for Permitted Indebtedness; PROVIDED, HOWEVER, that the
Company may Incur Indebtedness if, at the time of and immediately after giving
pro forma effect to such Incurrence of Indebtedness and the application of the
proceeds therefrom, the Consolidated Coverage Ratio would be greater than (x)
2.375 to 1.00 if such Indebtedness is Incurred prior to the first anniversary of
the Issue Date; (y) 2.5 to 1.00 if such Indebtedness is Incurred on or after the
first anniversary of the Issue Date and prior to the second anniversary of the
Issue Date; and (z) 2.625 to 1.00 if such Indebtedness is Incurred thereafter.
Notwithstanding the foregoing, after October 17, 1997, the Company shall not
permit to be outstanding the Promissory Notes or the letters of credit issued to
collateralize such Promissory Notes.
The limitations contained in the preceding paragraph will not apply to
the Incurrence of any of the following (collectively, "PERMITTED INDEBTEDNESS"),
each of which shall be given independent effect:
(a) Indebtedness under the Securities;
(b) Indebtedness of the Company Incurred under the Revolving Credit
Facility in an aggregate principal amount at any one time outstanding not
to exceed $60 million;
(c) Indebtedness of any Subsidiary of the Company owed to and held by
the Company or any Wholly Owned Subsidiary, and Indebtedness of the Company
owed to and held by any Wholly Owned Subsidiary that is unsecured and
subordinated in right of payment to the payment and performance of the
Company's obligations under any Senior Indebtedness, this Indenture and the
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Securities; PROVIDED, HOWEVER, that an Incurrence of Indebtedness that is
not permitted by this clause (c) shall be deemed to have occurred upon (i)
any sale or other disposition of any Indebtedness of the Company or any
Subsidiary of the Company referred to in this clause (c) to a Person (other
than the Company or a Wholly Owned Subsidiary) or (ii) any sale or other
disposition of Equity Interests of any Subsidiary which holds Indebtedness
of the Company or another Subsidiary;
(d) Interest Rate Protection Obligations; PROVIDED, HOWEVER, that such
Interest Rate Protection Obligations have been entered into for bona fide
business purposes and not for speculation;
(e) Purchase Money Indebtedness and Capitalized Lease Obligations of
the Company or any Subsidiary of the Company and other Indebtedness of the
Company, in an aggregate principal amount at any one time outstanding not
to exceed $20 million;
(f) Indebtedness of the Company under Currency Agreements; PROVIDED,
HOWEVER, (i) that such Currency Agreements have been entered into for bona
fide business purposes and not for speculation and (ii) that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Subsidiaries
outstanding other than as a result of fluctuations in foreign currency
exchange rates or by reason of fees, indemnities and compensation payable
thereunder;
(g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding
Indebtedness (other than Indebtedness Incurred under clauses (b), (c), (d),
(e), (f) or (h) of this covenant); PROVIDED, HOWEVER, that (i) any such
refinancing shall not exceed the sum of the principal amount (or accreted
amount (determined in accordance with GAAP), if less) of the Indebtedness
being refinanced, plus the amount of accrued interest thereon, plus the
amount of any reasonably determined prepayment premium necessary to
accomplish such refinancing and such reasonable fees and expenses incurred
in connection therewith, (ii) Indebtedness representing a refinancing of
Indebtedness other than Senior Indebtedness shall have a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of the Indebtedness being refinanced; (iii) Indebtedness that is
PARI PASSU with the Securities may only be refinanced with Indebtedness
that is made PARI PASSU with or subordinate in right of payment to the
Securities and Subordinated Indebtedness may only be refinanced with
Subordinated Indebtedness; and (iv) Indebtedness of the Company may only be
refinanced by Indebtedness of the Company and Indebtedness of a Subsidiary
of the Company may only be refinanced by Indebtedness of Subsidiaries or by
the Company; and
(h) guarantees by a Subsidiary of the Company of Senior Indebtedness
Incurred by the Company so long as the Incurrence of such Indebtedness is
otherwise permitted by the terms of this Indenture.
SECTION 4.05. DISPOSITION OF PROCEEDS OF ASSET SALES.
(a) The Company shall not, and shall not cause or permit any Subsidiary
of the Company to, directly or indirectly, make any Asset Sale, unless (i) the
Company or such Subsidiary of the Company, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value of the assets sold or otherwise disposed of and (ii) at least 85% of such
consideration consists of (A) cash or Cash Equivalents, or (B) properties and
capital assets that replace the properties and assets that were the subject of
such Asset Sale or in properties and capital assets that will be used in the
business of the Company and its Subsidiaries as existing on the Issue Date or in
businesses reasonably related thereto (as determined in good faith by the
Company's Board of Directors) ("REPLACEMENT ASSETS"), provided that if the
property or assets subject to such Asset Sale were directly owned by the Company
such Replacement Assets also shall be so directly owned. The amount of any
Indebtedness (other than any Subordinated Indebtedness) of the Company or any
Subsidiary of the Company that is actually assumed by the transferee in such
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Asset Sale and from which the Company and its Subsidiaries are fully and
unconditionally released shall be deemed to be cash for purposes of determining
the percentage of cash consideration received by the Company or its
Subsidiaries.
The Company or such Subsidiary of the Company, as the case may be, may
(i) apply the Net Cash Proceeds of any Asset Sale within 180 days of receipt
thereof to repay Senior Indebtedness and permanently reduce any related
commitment, or (ii) make an Investment in Replacement Assets; PROVIDED, HOWEVER,
that such Investment occurs or the Company or a Subsidiary of the Company enters
into contractual commitments to make such Investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 180th day
following the receipt of such Net Cash Proceeds and Net Cash Proceeds
contractually committed are so applied within 270 days following the receipt of
such Net Cash Proceeds.
To the extent all or part of the Net Cash Proceeds of any Asset Sale
are not applied as described in clause (i) or (ii) of the immediately preceding
paragraph within the time periods set forth therein (the "Net Proceeds
Utilization Date") (such Net Cash Proceeds, the "UNUTILIZED NET CASH PROCEEDS"),
the Company shall, within 20 days after such Net Proceeds Utilization Date, make
an Offer to Purchase all outstanding Securities up to a maximum principal amount
(expressed as a multiple of $1,000) of Securities equal to such Unutilized Net
Cash Proceeds, at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest thereon, if any, to the Purchase Date;
PROVIDED, HOWEVER, that the Offer to Purchase may be deferred until there are
aggregate Unutilized Net Cash Proceeds equal to or in excess of $5 million, at
which time the entire amount of such Unutilized Net Cash Proceeds, and not just
the amount in excess of $5 million, shall be applied as required pursuant to
this paragraph.
(b) With respect to any Offer to Purchase effected pursuant to this
covenant, among the Securities, to the extent the aggregate principal amount of
Securities tendered pursuant to such Offer to Purchase exceeds the Unutilized
Net Cash Proceeds to be applied to the repurchase thereof, such Securities shall
be purchased PRO RATA based on the aggregate principal amount of such Securities
tendered by the Holders of the Securities pursuant to such Offer to Purchase. To
the extent the Unutilized Net Cash Proceeds exceed the aggregate amount of
Securities tendered by the Holders of the Securities pursuant to such Offer to
Purchase, the Company may retain and utilize any portion of the Unutilized Net
Cash Proceeds not required to be applied to repurchase the Securities for any
purpose consistent with the other terms of this Indenture.
(c) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) subject to paragraph (b) of this Section 4.05,
accept for payment all Securities validly tendered pursuant to the Offer, (ii)
deposit with the Paying Agent or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 2.04, money sufficient
to pay the Purchase Price of all Securities or portions thereof so accepted and
(iii) deliver or cause to be delivered to the Trustee for cancellation all
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof accepted for payment by the Company. The Paying
Agent (or the Company, if so acting) shall promptly mail or deliver to Holders
of Securities so accepted, payment in an amount equal to the Purchase Price for
such Securities, and the Trustee shall promptly authenticate and mail or deliver
to each Holder of Securities a new Security or Securities equal in principal
amount to any unpurchased portion of the Security surrendered as requested by
the Holder. Any Security not accepted for payment shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Offer on or as soon as practicable after the
Purchase Date.
(d) In the event that the Company makes an Offer to Purchase the
Securities, the Company shall comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
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14e-1 under, the Exchange Act, and any violation of the provisions of this
Indenture relating to such Offer to Purchase occurring as a result of such
compliance shall not be deemed a Default or an Event of Default.
(e) Each Holder shall be entitled to tender all or any portion of the
Securities owned by such Holder pursuant to the Offer to Purchase, subject to
the requirement that any portion of a Note tendered must be tendered in an
integral multiple of $1,000 principal amount and subject to any proration among
tendering Holders as described above.
SECTION 4.06. LIMITATION ON RESTRICTED PAYMENTS.
The Company shall not, and shall not cause or permit any Subsidiary of
the Company to, directly or indirectly,
(i) declare or pay any dividend or any other distribution on any Equity
Interests of the Company or any Subsidiary of the Company or make any
payment or distribution to the direct or indirect holders (in their
capacities as such) of Equity Interests of the Company or any Subsidiary of
the Company (other than any dividends, distributions and payments made to
the Company or any Wholly Owned Subsidiary of the Company and dividends or
distributions payable to any Person solely in Qualified Equity Interests of
the Company or in options, warrants or other rights to purchase Qualified
Equity Interests of the Company);
(ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of the Company or any Subsidiary of the Company (other
than any such Equity Interests owned by the Company or any Subsidiary of
the Company); or
(iii) make any Investment in any Person (other than Permitted
Investments)
(any such payment or any other action (other than any exception thereto)
described in (i), (ii) or (iii), a "RESTRICTED PAYMENT"), unless
(a) no Default or Event of Default shall have occurred and be
continuing at the time or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving effect to such Restricted Payment, the
Company would be able to Incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the Consolidated Coverage Ratio of the first
paragraph of Section 4.04; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after
the Issue Date does not exceed an amount equal to the sum of (1) 50% of
cumulative Consolidated Net Income determined for the period (taken as one
period) from the beginning of the first fiscal quarter commencing after the
Issue Date and ending on the last day of the most recent fiscal quarter
immediately preceding the date of such Restricted Payment for which
consolidated financial information of the Company is available (or if such
cumulative Consolidated Net Income shall be a loss, minus 100% of such
loss), PLUS (2) the aggregate net cash proceeds received by the Company
either (x) as capital contributions to the Company after the Issue Date or
(y) from the issue and sale (other than to a Subsidiary of the Company) of
its Qualified Equity Interests after the Issue Date (excluding the net
proceeds from any issuance and sale of Qualified Equity Interests financed,
directly or indirectly, using funds borrowed from the Company or any
Subsidiary of the Company until and to the extent such borrowing is
repaid), PLUS (3) the principal amount (or accreted amount (determined in
accordance with GAAP), if less) of any Indebtedness of the Company or any
Subsidiary of the Company Incurred after the Issue Date which has been
converted into or exchanged for Qualified Equity Interests of the Company
(minus the amount of any cash or property distributed by the Company or any
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Subsidiary of the Company upon such conversion or exchange), PLUS (4) in
the case of the disposition or repayment of any Investment constituting a
Restricted Payment made after the Issue Date, an amount equal to 100% of
the net cash proceeds thereof (or dividends, distributions or interest
payments received in cash thereon).
The foregoing provisions will not prevent (i) the payment of any
dividend or distribution on, or redemption of, Equity Interests within 60 days
after the date of declaration of such dividend or distribution or the giving of
formal notice of such redemption, if at the date of such declaration or giving
of such formal notice such payment or redemption would comply with the
provisions of this Indenture; (ii) the purchase, redemption, retirement or other
acquisition of any Equity Interests of the Company in exchange for, or out of
the net cash proceeds of the substantially concurrent issue and sale (other than
to a Subsidiary of the Company) of, Qualified Equity Interests of the Company;
PROVIDED, HOWEVER, that any such net cash proceeds and the value of any
Qualified Equity Interests issued in exchange for such retired Equity Interests
are excluded from clause (c)(2) of the preceding paragraph (and were not
included therein at any time) and are not used to redeem the Securities pursuant
to paragraphs 5 or 6 of the Securities; (iii) the purchase, redemption or other
acquisition for value of shares of capital stock of the Company (other than
Disqualified Capital Stock) or options on such shares held by officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) upon the death, disability, retirement or termination of
employment of such current or former officers or employees pursuant to the terms
of an employee benefit plan or any other agreement pursuant to which such shares
of capital stock or options were issued or pursuant to a severance, buy-sell or
right of first refusal agreement with such current or former officer or
employee; PROVIDED, HOWEVER, that the aggregate cash consideration paid, or
distributions made, pursuant to this clause (iii) do not in any one fiscal year
exceed $1 million; and (iv) Investments constituting Restricted Payments made as
a result of the receipt of non-cash consideration from any Asset Sale made
pursuant to and in compliance with Section 4.05; PROVIDED, HOWEVER, that in the
case of each of clauses (ii), (iii) and (iv), no Default or Event of Default
shall have occurred and be continuing or would arise therefrom.
In determining the amount of Restricted Payments permissible under this
Section, amounts expended pursuant to clauses (i) and (iv) of the immediately
preceding paragraph shall be included as Restricted Payments. The amount of any
non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment.
SECTION 4.07. CORPORATE EXISTENCE.
Subject to Article Five, the Company shall do or shall cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Subsidiary
of the Company in accordance with the respective organizational documents of
each such Subsidiary of the Company and the rights (charter and statutory) and
material franchises of the Company and its Subsidiaries; PROVIDED, HOWEVER, that
the Company shall not be required to preserve any such right or franchise, or
the corporate existence of any Subsidiary of the Company, if the Board of
Directors of the Company 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; PROVIDED, FURTHER, HOWEVER, that a determination
of the Board of Directors of the Company shall not be required in the event of a
merger of one or more Wholly Owned Subsidiaries of the Company with or into
another Wholly Owned Subsidiary of the Company or another Person, if the
surviving Person is a Wholly Owned Subsidiary of the Company organized under the
laws of the United States or a State thereof or of the District of Columbia or,
in the case of a Foreign Subsidiary of the Company, the jurisdiction of
incorporation or organization of such Foreign Subsidiary of the Company. This
Section 4.07 shall not prohibit the Company from taking any other action
otherwise permitted by, and made in accordance with, the provisions of this
Indenture.
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SECTION 4.08. LIMITATION ON THE SALE OR ISSUANCE
OF EQUITY INTERESTS OF SUBSIDIARIES.
The Company shall not sell any Equity Interest of a Subsidiary of the
Company, and shall not cause or permit any Subsidiary of the Company, directly
or indirectly, to issue or sell or have outstanding any Equity Interests, except
to the Company or a Wholly Owned Subsidiary. Notwithstanding the foregoing, the
Company is permitted to sell all the Equity Interests of a Subsidiary of the
Company as long as the Company is in compliance with Section 4.05 and, if
applicable, Article Five.
SECTION 4.09. NOTICE OF DEFAULTS.
(a) In the event that any Indebtedness of the Company or any of its
Subsidiaries is declared due and payable before its maturity because of the
occurrence of any default (or any event which, with notice or lapse of time, or
both, would constitute such a default) under such Indebtedness, the Company
shall promptly give written notice to the Trustee of such declaration, the
status of such default or event and what action the Company is taking or
proposes to take with respect thereto.
(b) Upon becoming aware of any Default or Event of Default, the Company
shall promptly deliver an Officers' Certificate to the Trustee specifying the
Default or Event of Default.
SECTION 4.10. LIMITATION ON LIENS.
The Company shall not, and shall not cause or permit any Subsidiary of
the Company to, directly or indirectly, Incur any Liens of any kind against or
upon any of their respective properties or assets now owned or hereafter
acquired, or any proceeds therefrom or any income or profits therefrom, to
secure any Indebtedness unless contemporaneously therewith effective provision
is made to secure the Securities and all other amounts due under this Indenture
equally and ratably with such Indebtedness (or, in the event that such
Indebtedness is subordinated in right of payment to the Securities, prior to
such Indebtedness) with a Lien on the same properties and assets securing such
Indebtedness for so long as such Indebtedness is secured by such Lien, except
for (i) Liens securing Senior Indebtedness and (ii) Permitted Liens.
SECTION 4.11. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee within 120 days after the
close of each fiscal year a certificate signed by the principal executive
officer, principal financial officer or principal accounting officer stating
that a review of the activities of the Company has been made under the
supervision of the signing officers with a view to determining whether the
Company is in compliance with each of its covenants and other obligations under
the Indenture and the Securities and whether a Default or Event of Default has
occurred and whether or not the signers know of any breach of covenant or other
obligation or any Default or Event of Default by the Company that occurred
during such fiscal year. If they do know of such a breach of covenant or other
obligation or any Default or Event of Default, the certificate shall describe
all such breaches of covenants, other obligations or Defaults or Events of
Default, their status and the action the Company is taking or proposes to take
with respect thereto. The first certificate to be delivered by the Company
pursuant to this Section 4.11 shall be for the fiscal year ending September 30,
1997.
SECTION 4.12. PROVISION OF FINANCIAL INFORMATION.
Whether or not the Company is subject to Section 13(a) or 15(d) of the
Exchange Act, or any successor provision thereto, the Company shall file with
the SEC (if permitted by SEC practice and applicable law and regulations) the
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annual reports, quarterly reports and other documents which the Company would
have been required to file with the SEC pursuant to such Section 13(a) or 15(d)
or any successor provision thereto if the Company were so subject, such
documents to be filed with the SEC on or prior to the respective dates (the
"REQUIRED FILING DATES") by which the Company would have been required so to
file such documents if the Company were so subject. The Company shall also in
any event (a) within 15 days of each Required Filing Date (whether or not
permitted or required to be filed with the SEC) (i) transmit (or cause to be
transmitted) by mail to all Holders, as their names and addresses appear in the
Security Register, without cost to such Holders, and (ii) file with the Trustee,
copies of the annual reports, quarterly reports and other documents which the
Company is required to file with the SEC pursuant to the preceding sentence, or,
if such filing is not so permitted, information and data of a similar nature,
and (b) if, notwithstanding the preceding sentence, filing such documents by the
Company with the SEC is not permitted by SEC practice or applicable law or
regulations, promptly upon written request supply copies of such documents to
any Holder. In addition, for so long as any Securities remain outstanding and
prior to the later of the consummation of the Exchange Offer and the filing of
the Initial Shelf Registration Statement, if required, the Company will 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, and, to any beneficial holder of Securities, if not
obtainable from the SEC, information of the type that would be filed with the
SEC pursuant to the foregoing provisions, upon the request of any such Holder.
SECTION 4.13. LIMITATIONS ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING
SUBSIDIARIES.
The Company shall not, and shall not cause or permit any Subsidiary of
the Company to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary of the Company to (a) pay dividends or make any other distributions
to the Company or any other Subsidiary of the Company on its Equity Interests or
with respect to any other interest or participation in, or measured by, its
profits, or pay any Indebtedness owed to the Company or any other Subsidiary of
the Company, (b) make loans or advances to, or guarantee any Indebtedness or
other obligations of, or make any Investment in, the Company or any other
Subsidiary of the Company, or (c) transfer any of its properties or assets to
the Company or any other Subsidiary of the Company, EXCEPT for such encumbrances
or restrictions existing under or by reason of (i) the Revolving Credit Facility
as in effect on the Issue Date, any other agreement of the Company or its
Subsidiaries outstanding on the Issue Date as in effect on the Issue Date and
any other agreement of the Company or its Subsidiaries outstanding from time to
time governing Senior Indebtedness provided that such encumbrances or
restrictions are no more adverse to the Company than those contained in the
Revolving Credit Facility as in effect on the Issue Date, and any amendments,
restatements, renewals, replacements or refinancings thereof; PROVIDED, HOWEVER,
that any such amendment, restatement, renewal, replacement or refinancing is no
more restrictive in the aggregate with respect to such encumbrances or
restrictions than those contained in the agreement being amended, restated,
reviewed, replaced or refinanced; (ii) applicable law; (iii) any instrument
governing Indebtedness or Equity Interests of an Acquired Person acquired by the
Company or any Subsidiary of the Company as in effect at the time of such
acquisition (except to the extent such Indebtedness was Incurred by such
Acquired Person in connection with, as a result of or in contemplation of such
acquisition); PROVIDED, HOWEVER, that such encumbrances and restrictions are not
applicable to the Company or any Subsidiary of the Company, or the properties or
assets of the Company or any Subsidiary of the Company, other than the Acquired
Person; (iv) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices; (v) Purchase
Money Indebtedness for property acquired in the ordinary course of business that
only imposes encumbrances and restrictions on the property so acquired; (vi) any
agreement for the sale or disposition of the Equity Interests or assets of any
Subsidiary of the Company; PROVIDED, HOWEVER, that such encumbrances and
restrictions described in this clause (vi) are only applicable to such
Subsidiary or assets, as applicable, and any such sale or disposition is made in
compliance with Section 4.05 to the extent applicable thereto; (vii) refinancing
Indebtedness permitted under clause (g) of the second paragraph of Section 4.04;
PROVIDED, HOWEVER, that such encumbrances and restrictions contained in the
agreements governing such Indebtedness are no more restrictive in the aggregate
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than those contained in the agreements governing the Indebtedness being
refinanced immediately prior to such refinancing; or (viii) this Indenture.
SECTION 4.14. OFFER TO PURCHASE UPON CHANGE OF CONTROL.
(a) Following the occurrence of a Change of Control (the date of such
occurrence being the "CHANGE OF CONTROL DATE"), the Company shall notify the
Holders of the Securities of such occurrence in the manner prescribed by this
Indenture and shall, within 20 days after the Change of Control Date, make an
Offer to Purchase all Securities then outstanding at a purchase price in cash
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the relevant Interest Record Date to receive interest due on the
relevant Interest Payment Date). Each Holder shall be entitled to tender all or
any portion of the Securities owned by such Holder pursuant to the Offer to
Purchase, subject to the requirement that any portion of a Security tendered
must be tendered in an integral multiple of $1,000 principal amount.
(b) On or prior to the Purchase Date specified in the Offer to
Purchase, the Company shall (i) accept for payment all Securities or portions
thereof validly tendered pursuant to the Offer, (ii) deposit with the Paying
Agent or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 2.04, money sufficient to pay the Purchase Price
of all Securities or portions thereof so accepted and (iii) deliver or cause to
be delivered to the Trustee for cancellation all Securities so accepted together
with an Officers' Certificate stating the Securities or portions thereof
accepted for payment by the Company. The Paying Agent (or the Company, if so
acting) shall promptly mail or deliver to Holders of Securities so accepted,
payment in an amount equal to the Purchase Price for such Securities, and the
Trustee shall promptly authenticate and mail or deliver to each Holder of
Securities a new Security or Securities equal in principal amount to any
unpurchased portion of the Security surrendered as requested by the Holder. Any
Security not accepted for payment shall be promptly mailed or delivered by the
Company to the Holder thereof. The Company shall publicly announce the results
of the Offer on or as soon as practicable after the Purchase Date.
(c) If the Company makes an Offer to Purchase, the Company will comply
with all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable Federal or state securities laws and regulations and any applicable
requirements of any securities exchange on which the Securities are listed, and
any violation of the provisions of this Indenture relating to such Offer to
Purchase occurring as a result of such compliance shall not be deemed a Default
or an Event of Default.
SECTION 4.15. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS.
The Company shall not, directly or indirectly, Incur any Indebtedness
that by its terms would expressly rank senior in right of payment to the
Securities and subordinate in right of payment to any other Indebtedness of the
Company.
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ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. MERGERS, SALE OF ASSETS, ETC.
The Company shall not consolidate with or merge with or into (whether
or not the Company is the Surviving Person) any other entity and the Company
shall not and shall not cause or permit any Subsidiary of the Company to, sell,
convey, assign, transfer, lease or otherwise dispose of all or substantially all
of the Company's and its Subsidiaries' properties and assets (determined on a
consolidated basis for the Company and its Subsidiaries) to any entity in a
single transaction or series of related transactions, unless: (i) either (x) the
Company shall be the Surviving Person or (y) the Surviving Person (if other than
the Company) shall be a corporation organized and validly existing under the
laws of the United States of America or any State thereof or the District of
Columbia and shall, in any such case, expressly assume by a supplemental
indenture, the due and punctual payment of the principal of, premium, if any,
and interest on all the Securities and the performance and observance of every
covenant of this Indenture and the Registration Rights Agreement to be performed
or observed on the part of the Company; and (ii) immediately thereafter, no
Default or Event of Default shall have occurred and be continuing.
For purposes of the foregoing, the transfer (by lease, assignment, sale
or otherwise, in a single transaction or series of transactions) of all or
substantially all the properties and assets of one or more Subsidiaries of the
Company the Equity Interests of which constitutes all or substantially all the
properties and assets of the Company shall be deemed to be the transfer of all
or substantially all the properties and assets of the Company.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in Section 5.01 in which the Company is not
the Surviving Person and the Surviving Person is to assume all the Obligations
of the Company under the Securities, this Indenture and the Registration Rights
Agreement pursuant to a supplemental indenture, such Surviving Person shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company and the Company shall be discharged from its Obligations under this
Indenture and the Securities.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following shall be an "Event of Default" for purposes of
this Indenture:
(a) failure to pay principal of (or premium, if any, on) any Security
when due (whether or not prohibited by the provisions of Article Eight);
(b) failure to pay any interest on any Security when due, continued for
30 days or more (whether or not prohibited by the provisions of Article
Eight);
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(c) default in the payment of principal of or interest on any Security
required to be purchased pursuant to any Offer to Purchase required by this
Indenture when due and payable or failure to pay on the Purchase Date the
Purchase Price for any Security validly tendered pursuant to any Offer to
Purchase (whether or not prohibited by the provisions of Article Eight);
(d) failure to perform or comply with any of the provisions of Section
5.01;
(e) failure to perform any other covenant, warranty or agreement of the
Company under this Indenture or in the Securities continued for 30 days or
more after written notice to the Company by the Trustee or the Holders of
at least 25% in aggregate principal amount of the outstanding Securities;
(f) default or defaults under the terms of one or more instruments
evidencing or securing Indebtedness of the Company or any of its
Subsidiaries having an outstanding principal amount of $5.0 million or more
individually or in the aggregate that has resulted in the acceleration of
the payment of such Indebtedness or failure by the Company or any of its
Subsidiaries to pay principal when due at the stated maturity of any such
Indebtedness and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived;
(g) the rendering of a final judgment or judgments (not subject to
appeal) against the Company or any of its Subsidiaries in an amount of $5.0
million or more (net of any amounts covered by reputable and creditworthy
insurance companies) which remains undischarged or unstayed for a period of
60 days after the date on which the right to appeal has expired;
(h) the Company or any of its Significant Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law: (i) admits in writing its
inability to pay its debts generally as they become due; (ii) commences a
voluntary case or proceeding; (iii) consents to the entry of an order for
relief against it in an involuntary case or proceeding; (iv) consents or
acquiesces in the institution of a bankruptcy or insolvency proceeding
against it; (v) consents to the appointment of a Custodian of it or for all
or substantially all of its property; or (vi) makes a general assignment
for the benefit of its creditors, or any of them takes any action to
authorize or effect any of the foregoing;
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that: (i) is for relief against the Company or any
Significant Subsidiary of the Company in an involuntary case or proceeding;
(ii) appoints a Custodian of the Company or any Significant Subsidiary of
the Company for all or substantially all of its property; or (iii) orders
the liquidation of the Company or any Significant Subsidiary of the
Company; and in each case the order or decree remains unstayed and in
effect for 60 days; PROVIDED, HOWEVER, that if the entry of such order or
decree is appealed and dismissed on appeal, then the Event of Default
hereunder by reason of the entry of such order or decree shall be deemed to
have been cured.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors. The term "CUSTODIAN"
means any receiver, trustee, assignee, liquidator, sequestrator or similar
official under any Bankruptcy Law.
SECTION 6.02. ACCELERATION.
If an Event of Default with respect to the Securities (other than an
Event of Default specified in clause (h) or (i) of Section 6.01 with respect to
the Company) occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the outstanding Securities by notice in
writing to the Company (and to the Trustee if given by the Holders) may declare
the unpaid principal of (and premium, if any) and accrued interest to the date
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of acceleration on all outstanding Securities to be due and payable immediately
and, upon any such declaration, such principal amount (and premium, if any) and
accrued interest, notwithstanding anything contained in this Indenture or the
Securities to the contrary, shall become immediately due and payable.
If an Event of Default specified in clause (h) or (i) of Section 6.01
with respect to the Company occurs, all unpaid principal of and accrued interest
on all outstanding Securities shall IPSO FACTO become immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
Any such declaration with respect to the Securities may be rescinded
and annulled by the Holders of a majority in aggregate principal amount of the
Securities then outstanding by written notice to the Trustee if all existing
Events of Default (other than the nonpayment of principal of and interest on the
Securities which has become due solely by virtue of such acceleration) have been
cured or waived and if the rescission would not conflict with any judgment or
decree. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy by proceeding at law or in equity to collect the payment of
principal of or interest on the Securities or to enforce the performance of any
provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy maturing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. WAIVER OF PAST DEFAULT.
Subject to Sections 2.09, 6.07 and 10.02, prior to the declaration of
acceleration of the Securities, the Holders of not less than a majority in
aggregate principal amount of the outstanding Securities by written notice to
the Trustee may waive an existing Default or Event of Default and its
consequences, except a Default in the payment of principal of or interest on any
Security as specified in clauses (a), (b) and (c) of Section 6.01 or a Default
in respect of any term or provision of this Indenture that may not be amended or
modified without the consent of each Holder affected as provided in Section
10.02. The Company shall deliver to the Trustee an Officers' Certificate stating
that the requisite percentage of Holders have consented to such waiver and
attaching copies of such consents. In case of any such waiver, the Company, the
Trustee and the Holders shall be restored to their former positions and rights
hereunder and under the Securities, respectively. This paragraph of this Section
6.04 shall be in lieu of Section 316(a)(1)(B) of the TIA and such Section 316(a)
(1)(B) of the TIA is hereby expressly excluded from this Indenture and the
Securities, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture and the Securities, but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon.
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SECTION 6.05. CONTROL BY MAJORITY.
Subject to Section 2.09, the Holders of a majority in principal amount
of the outstanding Securities may direct the time, method and place of
conducting any proceeding for 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 another Holder, it being
understood that the Trustee shall have no duty (subject to Section 7.01) to
ascertain whether or not such actions or forebearances are unduly prejudicial to
such Holders, or that may involve the Trustee in personal liability; PROVIDED,
HOWEVER, that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. In the event the Trustee takes
any action or follows any direction pursuant to this Indenture, the Trustee
shall be entitled to indemnification satisfactory to it in its sole discretion
against any loss or expense caused by taking such action or following such
direction. This Section 6.05 shall be in lieu of Section 316(a)(1)(A) of the
TIA, and such ss. 316(a)(1)(A) of the TIA is hereby expressly excluded from
this Indenture and the Securities, as permitted by the TIA.
SECTION 6.06. LIMITATION ON SUITS.
A Holder may not pursue any remedy with respect to this Indenture or
the Securities unless:
(i) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of the
outstanding Securities make a written request to the Trustee to pursue a
remedy;
(iii) such Holder or Holders offer and, if requested, provide to the
Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(iv) 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
(v) during such 60-day period the Holders of a majority in principal
amount of the outstanding Securities do not give the Trustee a direction
which, in the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, but subject in
any event to the provisions of Article Eight, the right of any Holder to receive
payment of principal of or interest on a Security, on or after the respective
due dates expressed in the Security, 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 the Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal or interest specified in
Section 6.01(a), (b) or (c) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the Company
or any other obligor on the Securities for the whole amount of principal and
accrued interest remaining unpaid, together with interest overdue on principal
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and to the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate PER ANNUM borne by the
Securities 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 may 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 allowed in
any judicial proceedings relative to the Company (or any other obligor upon the
Securities), its creditors or its property and shall be entitled and empowered
to collect and receive any monies or other property payable or deliverable on
any such claims and to distribute the same, and any Custodian in any such
judicial proceedings 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 agent and counsel, and any other amounts due the Trustee under
Section 7.07. 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
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; PROVIDED,
HOWEVER, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and may be a member of the
creditors' committee.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money or property pursuant to this Article
Six, it shall pay out the money or property in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: subject to Article Eight, to Holders for amounts due and unpaid
on the Securities for principal and interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to the Holders 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 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 and expenses, 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 6.11 shall not apply to a suit by the Trustee, a suit by
a Holder or group of Holders of more than 10% in aggregate principal amount of
the outstanding Securities, or to any suit instituted by any Holder for the
enforcement or the payment of the principal or interest on any Securities on or
after the respective due dates expressed in the Security.
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ARTICLE SEVEN
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If a 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 their 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 a Default:
(1) The Trustee shall not be liable except for the performance of
such duties as are specifically set forth herein and no implied covenants
or obligations shall be read into this Indenture or the TIA against the
Trustee; and
(2) 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 conforming to
the requirements of this Indenture; however, in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall examine such
certificates and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01;
(2) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(3) 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.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or take any action at the request or direction of Holders
if it shall have reasonable grounds for believing that repayment of such funds
is not assured to it or it does not receive from such Holders an indemnity
satisfactory to it in its sole discretion against such risk, liability, loss,
fee or expense which might be incurred by it in compliance with such request or
direction.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.
(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.
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SECTION 7.02. RIGHTS OF TRUSTEE.
Subject to Section 7.01:
(a) The Trustee may rely on any document including, without limitation,
any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, note or coupon, 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 and/or an Opinion of Counsel, which shall conform to the
provisions of Section 11.05. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or opinion.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or through attorneys and agents of
its selection and shall not be responsible for the misconduct or negligence of
any agent or attorney (other than an agent who is an employee of the Trustee)
appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.
(e) Before the Trustee acts or refrains from acting, it may consult
with counsel and the advice or opinion of such counsel as to matters of law
shall be full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors may be sufficiently evidenced by a Board Resolution.
(g) 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 pursuant to this Indenture, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney;
PROVIDED, HOWEVER, that if the payment within a reasonable time to the Trustee
of the costs, expenses or liabilities likely to be incurred by it in the making
of such investigation is, in the opinion of the Trustee, not reasonably assured
to the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity from the Holders against such
expenses or liabilities as a condition to so proceeding. The reasonable expenses
of every such examination shall be paid by the Company, or, if paid by the
Trustee, shall be repaid by the Company on demand.
(i) The Trustee shall not be deemed to have notice of any Event of
Default unless a Trust Officer of the Trustee has actual knowledge thereof or
unless the Trustee shall have received written notice thereof at the Corporate
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Trust Office of the Trustee, and such notice references the Securities and this
Indenture. As used herein, the term "ACTUAL KNOWLEDGE" means the actual fact or
statement of knowing, without any duty to make any investigation with regard
thereto.
(j) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
(k) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty and the Trustee shall not be
answerable for other than its negligence or willful misconduct.
(l) The Trustee shall not be liable for any consequential loss or
damage of any kind whatsoever (including but not limited to lost profits), even
if the Trustee had been advised of the likelihood of such loss or damage and
regardless of the form of action, other than losses or damages resulting from
the Trustee's willful misconduct or gross negligence.
(m) The Trustee may rely on the list of Holders provided to it by the
Company and shall not be responsible for any information contained in any notice
provision provided to the Trustee by the Company for distribution to the
Holders.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee, subject to
Section 7.10 hereof. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 7.10 and 7.11.
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 Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture, the
Securities or any document issued in connection with the sale of Securities
other than the Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or an Event of Default occurs and is continuing and the
Trustee has actual knowledge of such Defaults or Events of Default, the Trustee
shall mail to each Holder notice of the Default or Event of Default within 30
days after the occurrence thereof. Except in the case of a Default or an Event
of Default in payment of principal of or interest on any Security or a Default
or Event of Default in complying with Section 5.01, the Trustee may withhold the
notice if and so long as its board of directors, executive committee or a trust
committee of directors and/or responsible officers of the Trustee in good faith
determines that withholding the notice is in the interest of Holders. This
Section 7.05 shall be in lieu of the proviso to Section 315(b) of the TIA and
such proviso to Section 315(b) of the TIA is hereby expressly excluded
from this Indenture and the Securities, as permitted by the TIA.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.
If required by TIA Section 313(a), within 60 days after each May 15
beginning with the May 15 following the date of this Indenture, the Trustee
shall mail to each Holder a report dated as of such May 15 that complies with
TIA Section 313(a). The Trustee also shall comply with TIA Sections 313(b), (c)
and (d).
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A copy of each such report at the time of its mailing to Holders shall
be filed with the SEC and each stock exchange, if any, on which the Securities
are listed.
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or of any delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time, and the Trustee
shall be entitled to, such compensation as the Company and the Trustee shall
from time to time agree in writing for all services rendered by it in any
capacity. 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 upon request for all reasonable disbursements, expenses and advances,
including all costs and expenses of collection (including reasonable fees,
disbursements and expenses of its agents and outside counsel) incurred or made
by it in addition to the compensation for its services except any such
disbursements, expenses and advances as may be attributable to the Trustee's
negligence or willful misconduct. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and outside counsel and any taxes or other expenses incurred by a trust
created pursuant to Section 9.01 hereof.
The Company shall indemnify the Trustee (including, for the purposes of
the rest of this Section 7.07, its agents and any authenticating agent in any
capacity under this Indenture) for, and hold it harmless against any and all
loss, damage, claims, liability or expense, including taxes (other than
franchise taxes imposed on the Trustee and taxes based upon, measured by or
determined by the income of the Trustee), arising out of or in connection with
the acceptance or administration of the trust or trusts hereunder or in any
other capacity hereunder, including the costs and expenses of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder, except to the extent
that such loss, damage, claim, liability or expense is due to its own negligence
or willful misconduct. The Trustee shall notify the Company promptly of any
claim asserted against the Trustee for which it may seek indemnity. However, the
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 (and may employ its own counsel) at the Company's
expense; PROVIDED, HOWEVER, that the Company's reimbursement obligation with
respect to counsel employed by the Trustee will be limited to the reasonable
fees and expenses of such counsel.
The Company need not pay for any settlement made without its written
consent, which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss or liability incurred by the
Trustee as a result of its own negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities against all money or property
held or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of or interest on particular Securities
or the Purchase Price or redemption price of any Securities to be purchased
pursuant to an Offer to Purchase or redeemed.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(h) or (i) occurs, the expenses (including the
reasonable fees and expenses of its agents and counsel) and the compensation for
the services shall be preferred over the status of the Holders in a proceeding
under any Bankruptcy Law and are intended to constitute expenses of
administration under any Bankruptcy Law. The Company's obligations under this
Section 7.07 and any claim arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's obligations pursuant to
Article Nine and any rejection or termination under any Bankruptcy Law.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
The Trustee may resign at any time by so notifying the Company in
writing. The Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Trustee and the Company in
writing and may appoint a successor Trustee with the Company's consent. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent under any
Bankruptcy Law;
(c) a custodian or other 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 Trustee in such event being referred to
herein as the retiring Trustee), 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 Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. As promptly as
practicable after that, the retiring Trustee shall transfer, after payment of
all sums then owing to the Trustee pursuant to Section 7.07, all property held
by it as Trustee to the successor Trustee, subject to the Lien provided in
Section 7.07, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have the rights, powers and duties of
the Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
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 at least 10% in principal amount of the outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another corporation
or banking corporation, the resulting, surviving or transferee corporation or
banking corporation without any further act shall be the successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee which shall be eligible to
act as Trustee under TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The
Trustee shall have a combined capital and surplus of at least $500,000,000 as
set forth
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in its most recent published annual report of condition. If the Trustee has or
shall acquire any "conflicting interest" within the meaning of TIA Sections
310(b), the Trustee and the Company shall comply with the provisions of TIA
Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which other
securities or certificates of interest or participation in other securities of
the Company are outstanding if the requirements for such exclusion set forth in
TIA Section 310(b)(1) are met. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.10, the Trustee
shall resign immediately in the manner and with the effect hereinbefore
specified in this Article Seven.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with 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.
ARTICLE EIGHT
SUBORDINATION OF SECURITIES
SECTION 8.01. SECURITIES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company covenants and agrees, and the Trustee and each Holder of
the Securities by his acceptance thereof likewise covenant and agree, that all
Securities shall be issued subject to the provisions of this Article Eight; and
each person holding any Security, whether upon original issue or upon transfer,
assignment or exchange thereof, accepts and agrees that all payments of the
principal of and interest on the Securities by the Company shall, to the extent
and in the manner set forth in this Article Eight, be subordinated and junior in
right of payment to the prior payment in full in cash of all amounts payable
under Senior Indebtedness.
SECTION 8.02. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
(a) Upon any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any payment from funds deposited in accordance with, and held in trust
for the benefit of Holders pursuant to, Article Nine (a "DEFEASANCE TRUST
PAYMENT")), upon any dissolution or winding up or total liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all Senior
Indebtedness then due shall first be paid in full in cash before the Holders of
the Securities or the Trustee on behalf of such Holders shall be entitled to
receive any payment by the Company of the principal of, premium, if any, or
interest on the Securities, or any payment by the Company to acquire any of the
Securities for cash, property or securities, or any distribution by the Company
with respect to the Securities of any cash, property or securities (excluding
any payment or distribution of Permitted Junior Securities and excluding any
Defeasance Trust Payment). Before any payment may be made by, or on behalf of,
the Company of the principal of, premium, if any, or interest on the Securities
upon any such dissolution or winding up or total liquidation or reorganization,
whether voluntary or involuntary or in bankruptcy, insolvency, receivership or
other proceedings, any payment or distribution of assets or securities of the
Company of any kind or character, whether in cash, property or securities
(excluding any payment or distribution of Permitted Junior Securities and
excluding any Defeasance Trust Payment), to which the Holders of the Securities
or the Trustee on their behalf would be entitled, but for the subordination
provisions of this Indenture, shall be made by the Company or by any receiver,
trustee in bankruptcy, liquidation trustee, agent or other Person making such
payment or distribution, directly to the holders of the Senior Indebtedness (PRO
RATA to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders) or their representatives or to the trustee or
trustees or agent or agents under any agreement or indenture pursuant to which
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any of such Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all such Senior
Indebtedness in full in cash after giving effect to any prior or concurrent
payment, distribution or provision therefor to or for the holders of such Senior
Indebtedness.
(b) In the event that, notwithstanding the foregoing provision
prohibiting such payment or distribution, any payment or distribution of assets
or securities of the Company of any kind or character, whether in cash, property
or securities (excluding any payment or distribution of Permitted Junior
Securities and excluding any Defeasance Trust Payment), shall be paid by the
Company to the Trustee or any Holder of Securities at a time when such payment
or distribution is prohibited by Section 8.02(a) and before all obligations then
due in respect of Senior Indebtedness are paid in full in cash, such payment or
distribution shall be received and held in trust for the benefit of, and shall
be paid over or delivered by the Trustee (if the Notice required by Section 8.06
has been received by the Trustee) or the Holder to, the holders of Senior
Indebtedness (PRO RATA to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders) or their respective representatives,
or to the trustee or trustees or agent or agents under any indenture pursuant to
which any of such Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of Senior Indebtedness
remaining unpaid until all such Senior Indebtedness has been paid in full in
cash after giving effect to any prior or concurrent payment, distribution or
provision therefor to or for the holders of such Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided in Article Five shall not be deemed a dissolution, winding
up, liquidation or reorganization for the purposes of this Section 8.02 if such
other corporation shall, as a part of such consolidation, merger, conveyance or
transfer, comply with the conditions stated in Article Five.
SECTION 8.03. NO PAYMENT ON SECURITIES IN CERTAIN CIRCUMSTANCES.
(a) No direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment) by or on behalf of the Company of principal of, premium, if any, or
interest on the Securities, whether pursuant to the terms of the Securities,
upon acceleration, pursuant to an Offer to Purchase or otherwise, shall be made
if, at the time of such payment, there exists a default in the payment of all or
any portion of the obligations on any Senior Indebtedness, whether at maturity,
on account of mandatory redemption or prepayment, acceleration or otherwise, and
such default shall not have been cured or waived or the benefits of this
sentence waived by or on behalf of the holders of such Senior Indebtedness. In
addition, during the continuance of any non-payment event of default with
respect to any Designated Senior Indebtedness pursuant to which the maturity
thereof may be immediately accelerated, and upon receipt by the Trustee of
written notice (a "PAYMENT BLOCKAGE NOTICE") from the holder or holders of such
Designated Senior Indebtedness or the trustee or agent acting on behalf of such
Designated Senior Indebtedness, then, unless and until such non-payment event of
default has been cured or waived or has ceased to exist or such Designated
Senior Indebtedness has been discharged or repaid in full in cash or the
benefits of these provisions have been waived by the holders of such Designated
Senior Indebtedness, no direct or indirect payment (excluding any payment or
distribution of Permitted Junior Securities and excluding any Defeasance Trust
Payment) shall be made by or on behalf of the Company of principal of, premium,
if any, or interest on the Securities, whether pursuant to the terms of the
Securities, upon acceleration, pursuant to an Offer to Purchase or otherwise, to
such Holders, during a period (a "PAYMENT BLOCKAGE PERIOD") commencing on the
date of receipt of such notice by the Trustee and ending 179 days thereafter.
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Notwithstanding anything in this Article Eight or in the Securities to
the contrary, (x) in no event shall a Payment Blockage Period extend beyond 179
days from the date the Payment Blockage Notice in respect thereof was given, (y)
there shall be a period of at least 181 consecutive days in each 360-day period
when no Payment Blockage Period is in effect and (z) not more than one Payment
Blockage Period may be commenced with respect to the Securities during any
period of 360 consecutive days. No event of default that existed or was
continuing on the date of commencement of any Payment Blockage Period with
respect to the Designated Senior Indebtedness initiating such Payment Blockage
Period (to the extent the holder of Designated Senior Indebtedness, or trustee
or agent, giving notice commencing such Payment Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for
the commencement of any other Payment Blockage Period by the holder or holders
of such Designated Senior Indebtedness or the trustee or agent acting on behalf
of such Designated Senior Indebtedness, whether or not within a period of 360
consecutive days, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days.
(b) In the event that, notwithstanding the foregoing, the Company shall
have made payment to the Trustee or any Holder when such payment is prohibited
by Section 8.03(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered by the Trustee (if the Notice required by
Section 8.06 has been received by the Trustee) or the Holder to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear, but only to the
extent that, upon notice from the Trustee to the holders of Senior Indebtedness
that such prohibited payment has been made, the holders of the Senior
Indebtedness (or their representative or representatives or a trustee or
trustees) notify the Trustee in writing of the amounts then due and owing on the
Senior Indebtedness, if any, and only the amounts specified in such notice to
the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 8.04. SUBROGATION.
Upon the payment in full in cash of all Senior Indebtedness, or
provision for payment, the Holders of the Securities shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property or securities of the Company made on such Senior
Indebtedness until the principal of and interest on the Securities shall be paid
in full in cash; and, for the purposes of such subrogation, no payments or
distributions to the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee on their behalf
would be entitled except for the provisions of this Article Eight, and no
payment over pursuant to the provisions of this Article Eight to the holders of
Senior Indebtedness by Holders of the Securities or the Trustee on their behalf
shall, as between the Company, its creditors other than holders of Senior
Indebtedness, and the Holders of the Securities, be deemed to be a payment by
the Company to or on account of the Senior Indebtedness. It is understood that
the provisions of this Article Eight are and are intended solely for the purpose
of defining the relative rights of the Holders of the Securities, on the one
hand, and the holders of the Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders of the Securities
would otherwise have been entitled but for the provisions of this Article Eight
shall have been applied, pursuant to the provisions of this Article Eight, to
the payment of all amounts payable under Senior Indebtedness, then and in such
case, the Holders of the Securities shall be entitled to receive from the
holders of such Senior Indebtedness any payments or distributions received by
such holders of Senior Indebtedness in excess of the amount required to make
payment in full in cash of such Senior Indebtedness.
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SECTION 8.05. OBLIGATIONS OF COMPANY UNCONDITIONAL.
Nothing contained in this Article Eight or elsewhere in this Indenture
or in the Securities is intended to or shall impair, as among the Company and
the Holders of the Securities, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders of the Securities the principal of and
interest on the Securities as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders of the Securities and creditors of the Company other than
the holders of the Senior Indebtedness, nor shall anything herein or therein
prevent the Holder of any Security or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article Eight of the
holders of the Senior Indebtedness in respect of cash, property or securities of
the Company received upon the exercise of any such remedy.
Without limiting the generality of the foregoing, nothing contained in
this Article Eight shall restrict the right of the Trustee or the Holders of
Securities to take any action to declare the Securities to be due and payable
prior to their stated maturity pursuant to Section 6.01 or to pursue any rights
or remedies hereunder; PROVIDED, HOWEVER, that all Senior Indebtedness then due
and payable shall first be paid in full in cash before the Holders of the
Securities or the Trustee are entitled to receive any direct or indirect payment
from the Company of principal of or interest on the Securities.
SECTION 8.06. NOTICE TO TRUSTEE.
The Company shall give prompt written notice in the form of an
Officers' Certificate to the Trustee of any fact known to the Company which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article Eight. The Trustee shall
not be charged with knowledge of the existence of any event of default with
respect to any Senior Indebtedness or of any other facts which would prohibit
the making of any payment to or by the Trustee unless and until the Trustee
shall have received notice in writing at its Corporate Trust Office to that
effect signed by an Officer of the Company, or by a holder of Senior
Indebtedness or trustee or agent therefor (who shall have been certified by the
Company or otherwise established to the reasonable satisfaction of the Trustee
to be such holder or trustee); and prior to the receipt of any such written
notice, the Trustee shall, subject to Article Seven, be entitled to assume that
no such facts exist; PROVIDED, HOWEVER, that if the Trustee shall not have
received the notice provided for in this Section 8.06 at least one full Business
Day prior to the date upon which by the terms of this Indenture any moneys shall
become payable for any purpose (including, without limitation, the payment of
the principal of or interest on any Security), then, regardless of anything
herein to the contrary, the Trustee shall have full power and authority to
receive any moneys from the Company and to apply the same to the purpose for
which they were received, and shall not be affected by any notice to the
contrary which may be received by it on or after such prior date. Nothing
contained in this Section 8.06 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by Section 8.03. The Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself or itself to be a holder of any Senior Indebtedness (or a
trustee on behalf of, or other representative of, such holder) to establish that
such notice has been given by a holder of such Senior Indebtedness or a trustee
or representative on behalf of any such holder.
In the event that the Trustee determines in good faith that any
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article Eight, the Trustee may request such Person to furnish evidence to
the reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article Eight, and if such evidence is not
furnished, the Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such payment.
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SECTION 8.07. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets or securities referred to in
this Article Eight, the Trustee and the Holders of the Securities shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which bankruptcy, dissolution, winding-up, liquidation or
reorganization proceedings are pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, delivered to the Trustee or to the Holders of the
Securities 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 Eight.
SECTION 8.08. TRUSTEE'S RELATION TO SENIOR INDEBTEDNESS.
The Trustee and any Paying Agent shall be entitled to all the rights
set forth in this Article Eight with respect to any Senior Indebtedness which
may at any time be held by it in its individual or any other capacity to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee or any Paying Agent of any of its rights as
such holder.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article Eight, 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 (except as provided in
Section 8.03(b)). The Trustee shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other person cash, property or securities
to which any holders of Senior Indebtedness shall be entitled by virtue of this
Article Eight or otherwise.
SECTION 8.09. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE
COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior Indebtedness to
enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms of this Indenture, regardless of any
knowledge thereof which any such holder may have or otherwise be charged with.
The provisions of this Article Eight are intended to be for the benefit of, and
shall be enforceable directly by, the holders of Senior Indebtedness.
SECTION 8.10. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
SECURITIES.
Each Holder of Securities by his acceptance of such Securities
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provided in
this Article Eight, and appoints the Trustee his attorney-in-fact for such
purposes, including, in the event of any dissolution, winding up, total
liquidation or reorganization of the Company (whether in bankruptcy, insolvency,
receivership, reorganization or similar proceedings or upon an assignment for
the benefit of creditors or otherwise) tending towards liquidation of the
business and assets of the Company, the filing of a claim for the unpaid balance
of its or his Securities in the form required in those proceedings.
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SECTION 8.11. THIS ARTICLE NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment or distribution for or on account of the
Securities by reason of any provision of this Article Eight shall not be
construed as preventing the occurrence of an Event of Default in respect of the
Securities.
SECTION 8.12. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article Eight shall apply to amounts due to the Trustee
pursuant to other sections in this Indenture.
SECTION 8.13. NO WAIVER OF SUBORDINATION PROVISIONS.
Without in any way limiting the generality of Section 8.09, the holders
of Senior Indebtedness may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article Eight or the obligations
hereunder of the Holders of the Securities to the holders of Senior
Indebtedness, do any one or more of the following: (a) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding or secured; (b) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (c) release any Person liable in any manner for the collection of
Senior Indebtedness; and (d) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 8.14. SUBORDINATION PROVISIONS NOT APPLICABLE TO MONEY HELD IN TRUST FOR
HOLDERS; PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.
All money and United States Government Obligations deposited in trust
with the Trustee pursuant to and in accordance with Article Nine shall be for
the sole benefit of the Holders and shall not be subject to this Article Eight.
Nothing contained in this Article Eight or elsewhere in this Indenture
shall prevent (i) the Company, except under the conditions described in Sections
8.02 and 8.03, from making payments of principal of and interest on the
Securities or from depositing with the Trustee any moneys for such payments or
from effecting a termination of the Company's obligations under the Securities
and this Indenture as provided in Article Nine, or (ii) the application by the
Trustee of any moneys deposited with it for the purpose of making such payments
of principal of and interest on the Securities, to the Holders entitled thereto
unless at least one full Business Day prior to the date upon which such payment
becomes due and payable, the Trustee shall have received the written notice
provided for in Section 8.02(b) or in Section 8.06. The Company shall give
prompt written notice to the Trustee of any dissolution, winding up, liquidation
or reorganization of the Company.
SECTION 8.15. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of the Senior Indebtedness of
the acceleration.
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ARTICLE NINE
DISCHARGE OF INDENTURE
SECTION 9.01. TERMINATION OF COMPANY'S OBLIGATIONS.
(a) Subject to the provisions of Article Eight, the Company may
terminate its obligations in respect of the Securities by delivering all
outstanding Securities to the Trustee for cancellation and paying all sums
payable by it on account of principal of and interest on all Securities or
otherwise. In addition to the foregoing, the Company may, at its option, at any
time elect to have either paragraph (b) or (c) below be applied to all
outstanding Securities, subject in either case to compliance with the conditions
set forth in Section 9.02.
(b) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (b), the Company shall, subject to the
satisfaction of conditions set forth in Section 9.02, be deemed to have paid and
discharged the entire indebtedness represented by the outstanding Securities,
except for (i) the rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on the Securities when such payments
are due, (ii) the Company's obligations with respect to the Securities under
Sections 2.02 through 2.07, inclusive, 2.10, 2.13 and 4.02, (iii) the rights,
powers, trust, duties and immunities of the Trustee under this Indenture and the
Company's obligations in connection therewith and (iv) Article Nine of this
Indenture (hereinafter, "LEGAL DEFEASANCE"). Subject to compliance with this
Article Nine, the Company may exercise its option under this paragraph (b)
notwithstanding the prior exercise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 9.02, be released from its
obligations under the covenants contained in Sections 4.03 through 4.06,
inclusive, 4.08 through 4.15, inclusive, and Article Five with respect to the
outstanding Securities (hereinafter, "COVENANT DEFEASANCE") and thereafter any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Securities. In addition, upon the Company's
exercise under paragraph (a) hereof of the option applicable to this paragraph
(c), subject to the satisfaction of the conditions set forth in Section 9.02,
those events described in Section 6.01 (except those events described in
Sections 6.01(a), (b), (f), (g), (h) and (i)) shall not constitute Events of
Default.
SECTION 9.02. CONDITIONS TO LEGAL DEFEASANCE OR COVENANT
DEFEASANCE.
In order to exercise either Legal Defeasance pursuant to Section
9.01(b) or Covenant Defeasance pursuant to Section 9.01(c):
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in U.S. dollars or United States
Government Obligations, 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 on the Securities on the stated date for payment thereof or on
the applicable redemption date, as the case may be;
(b) in the case of an election under Section 9.01(b), 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
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a ruling or (B) since the date of this 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 Securities 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;
(c) in the case of an election under Section 9.01(c), 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
Securities 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 or insofar as Sections 6.01(h) and
6.01(i) are concerned, at any time in the period ending on the 91st day
after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of or constitute a Default under this Indenture or any
other material 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;
(f) 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 or others;
(g) 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; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to any
rights of holders of Senior Indebtedness, including, without limitation,
those arising under this Indenture, and (ii) assuming no intervening
bankruptcy or insolvency of the Company between the date of deposit and the
91st day following the deposit and that no Holder is an insider of the
Company, after the 91st day following the deposit, the trust funds will not
be subject to the effect of any applicable Bankruptcy Law.
Notwithstanding the foregoing, the opinion of counsel required by
clause (b) above need not be delivered if all Securities not theretofore
delivered to the Trustee for cancellation (x) have become due and payable, (y)
will become due and payable on the maturity date within one year or (z) are to
be called for redemption within one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company.
SECTION 9.03. APPLICATION OF TRUST MONEY; TRUSTEE ACKNOWLEDGMENT AND INDEMNITY.
The Trustee shall hold in trust money or United States Government
Obligations deposited with it pursuant to Section 9.02, and shall apply the
deposited money and the money from United States Government Obligations in
accordance with this Indenture solely to the payment of principal of and
interest on the Securities.
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After such delivery or irrevocable deposit and delivery of an Officers'
Certificate and Opinion of Counsel, the Trustee upon request shall acknowledge
in writing the discharge of the Company's obligations under the Securities and
this Indenture except for those surviving obligations specified above.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the United States Government
Obligations deposited pursuant to Section 9.02 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 outstanding Securities.
SECTION 9.04. REPAYMENT TO COMPANY.
Subject to Sections 7.07 and 9.03, the Trustee shall promptly pay to
the Company upon written request any excess money held by it at any time. The
Trustee shall pay to the Company upon written request any money held by it for
the payment of principal or interest that remains unclaimed for two years;
PROVIDED, HOWEVER, that the Trustee before being required to make any payment
may at the expense of the Company cause to be published once in a newspaper of
general circulation in The City of New York or mail to each Holder entitled to
such money notice that such money remains unclaimed and that, after a date
specified therein which shall be at least 30 days from the date of such
publication or mailing, any unclaimed balance of such money then remaining shall
be repaid to the Company. After payment to the Company, (i) Holders entitled to
money must look solely to the Company for payment as general creditors unless an
applicable abandoned property law designates another person, and (ii) all
liability of the Trustee or Paying Agent with respect to such money shall
thereupon cease.
SECTION 9.05. REINSTATEMENT.
If the Trustee is unable to apply any money or United States Government
Obligations in accordance with Section 9.01 by reason of any legal proceeding or
by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, the Company's
obligations under this Indenture and the Securities shall be revived and
reinstated as though no deposit had occurred pursuant to Section 9.01 until such
time as the Trustee is permitted to apply all such money or United States
Government Obligations in accordance with Section 9.01; PROVIDED, HOWEVER, that
if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or United States Government Obligations held by the
Trustee.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. WITHOUT CONSENT OF HOLDERS.
The Company, when authorized by a resolution of the Board of Directors,
and the Trustee may amend or supplement this Indenture or the Securities without
notice to or consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency; PROVIDED, HOWEVER,
that such amendment or supplement does not adversely affect the rights of
any Holder;
55
<PAGE>
(b) to effect the assumption by a successor Person of all obligations
of the Company under the Securities and this Indenture in connection with
any transaction complying with Article Five of this Indenture;
(c) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(d) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(e) to make any change that would provide any additional benefit or
rights to the Holders;
(f) to make any other change that does not adversely affect the rights
of any Holder under this Indenture;
(g) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon the
Company; or
(h) to secure the Securities pursuant to the requirements of Section
4.10 or otherwise;
PROVIDED, HOWEVER, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 10.01.
SECTION 10.02. WITH CONSENT OF HOLDERS.
Subject to Section 6.07, the Company, when authorized by a resolution
of the Board of Directors, and the Trustee may modify, amend or supplement, or
waive compliance by the Company with any provision of, this Indenture or the
Securities with the written consent of the Holders of at least a majority in
principal amount of the outstanding Securities. However, without the consent of
each Holder affected, no such modification, amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may:
(a) change the Stated Maturity of the principal of or any installment
of interest on such Security or alter the optional redemption or repurchase
provisions of any such Security or this Indenture in a manner adverse to
the Holders of the Securities;
(b) reduce the principal amount of (or the premium of) any such
Security;
(c) reduce the rate of or extend the time for payment of interest on
any such Security;
(d) change the place or currency of payment of principal of (or
premium) or interest on any such Security;
(e) modify any provisions of Section 6.04 (other than to add sections
of this Indenture or the Securities subject thereto) or 6.07 or this
Section 10.02 (other than to add sections of this Indenture or the
Securities which may not be modified, amended, supplemented or waived
without the consent of each Holder affected);
(f) reduce the percentage of the principal amount of outstanding
Securities necessary for amendment to or waiver of compliance with any
provision of this Indenture or the Securities or for waiver of any Default
in respect thereof;
56
<PAGE>
(g) waive a Default in the payment of principal of, interest on, or
redemption payment with respect to, the Securities (except a rescission of
acceleration of the Securities by the Holders thereof as provided in
Section 6.02 and a waiver of the payment default that resulted from such
acceleration);
(h) modify the ranking or priority of any Security or modify the
definition of Senior Indebtedness or amend or modify any of the provisions
of Article Eight in any manner adverse to the Holders of the Securities; or
(i) modify the provisions of Section 4.05 or 4.14 (or the related
definitions) in a manner materially adverse to the Holders of Securities
affected thereby otherwise than in accordance with this Indenture.
An amendment under this Section 10.02 may not make any change under
Article Eight hereof that adversely affects in any material respect the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any representative thereof authorized to give a consent)
shall have consented to such change.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders 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 amendment, supplement or
waiver.
SECTION 10.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture or the Securities
shall comply with the TIA as then in effect.
SECTION 10.04. RECORD DATE FOR CONSENTS AND EFFECT OF CONSENTS.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then those persons
who were Holders of Securities at such record date (or their duly designated
proxies), and only those persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such persons continue to be Holders of such Securities after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date. The Trustee is entitled to rely upon any electronic
instruction from beneficial owners to the Holders of any Global Security.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (a)
through (i) of Section 10.02. In that case the amendment, supplement or waiver
shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security.
SECTION 10.05. NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
57
<PAGE>
The Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Failure to make the appropriate notation or issue a new Security shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 10.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement or waiver authorized pursuant to this Article Ten is
authorized or permitted by this Indenture and that such amendment, supplement or
waiver constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms (subject to customary exceptions). The
Trustee may, but shall not be obligated to, execute any such amendment,
supplement or waiver which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise. In signing any amendment,
supplement or waiver, the Trustee shall be entitled to receive an indemnity
reasonably satisfactory to it.
SECTION 10.07. CERTAIN AMENDMENTS.
Without the consent of each holder of Senior Indebtedness of the
Company affected, no amendment, modification, supplement or waiver may change
the provisions of Article Eight in any manner adverse to such holders of Senior
Indebtedness.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are
required to be a part of this Indenture, and shall, to the extent applicable, be
governed by such provisions. If any provision of this Indenture modifies any TIA
provision that may be so modified, such TIA provision shall be deemed to apply
to this Indenture as so modified. If any provision of this Indenture excludes
any TIA provision that may be so excluded, such TIA provision shall be excluded
from this Indenture.
The provisions of TIA Sections 310 through 317 that impose duties on
any Person (including the provisions automatically deemed included unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.02. NOTICES.
Any notice or communication shall be sufficiently given if in writing
and delivered in person, by facsimile and confirmed by overnight courier, or
mailed by first-class mail addressed as follows:
if to the Company:
NBTY, Inc.
90 Orville Drive
Bohemia, NY 11716
58
<PAGE>
Attention: Chief Financial Officer
Facsimile: (516) 567-7148
Telephone: (516) 567-9500
with a copy, which shall not constitute notice, to:
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, D.C. 20036
Attention: Thomas F. Cooney, Esq.
Facsimile: (202) 778-9100
Telephone: (202) 778-9076
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Department
Facsimile: (212) 858-2952
Telephone: (212) 858-2000
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed, first-class, postage prepaid, to a
Holder including any notice delivered in connection with TIA Section 310(b), TIA
Section 313(c), TIA Section 314(a) and TIA Section 315(b), shall be mailed to
him at his address as set forth on the Security Register and shall be
sufficiently given to him if so mailed within the time prescribed. To the extent
required by the TIA, any notice or communication shall also be mailed to any
Person described in TIA Section 313(c).
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. Except for a
notice to the Trustee, which is deemed given only when received, if a notice or
communication is mailed in the manner provided above, it is duly given, whether
or not the addressee receives it.
SECTION 11.03. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other
Holders with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c) with respect to the disclosure of any
information as to the names and addresses of the Holders. The Trustee shall not
be held accountable by reason of mailing any material pursuant to a request made
under TIA Section 312(b).
59
<PAGE>
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take
or refrain from taking any action under this Indenture, the Company shall
furnish to the Trustee at the request of the Trustee:
(1) an Officers' Certificate or opinion in form and substance
satisfactory to the Trustee stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with; and
(2) an Opinion of Counsel in form and substance satisfactory to the
Trustee stating that, in the opinion of such counsel, all such conditions
precedent have been complied with; PROVIDED, HOWEVER, that with respect to
matters of fact an Opinion of Counsel may rely on an Officers' Certificate
or certificates of public officials.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE.
Each certificate with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate has read such
covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements contained in such certificate are
based;
(3) a statement that, in the opinion of such person, he 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
complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 11.06. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 11.07. GOVERNING LAW.
The laws of the State of New York shall govern this Indenture and the
Securities without regard to principles of conflicts of law.
SECTION 11.08. NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company
or any of its Affiliates shall not have any liability for any obligations of the
Company or any of its Affiliates under the Securities or 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 Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
60
<PAGE>
SECTION 11.09. SUCCESSORS.
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.10. 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 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Securities 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,
and a Holder shall have no claim therefor against any party hereto.
SECTION 11.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary of the Company. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.13. LEGAL HOLIDAYS.
If a payment date is a not a Business Day at a place of payment,
payment may be made at that place on the next succeeding Business Day, and no
interest shall accrue for the intervening period.
[Signature Pages Follow]
61
<PAGE>
S-1
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the date first written above.
NBTY, INC.
By:/s/ Harvey Kamil
--------------------------------------
Name: Harvey Kamil
Title: Executive Vice President,
Chief Financial Officer
and Secretary
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:/s/ Luis Perez
--------------------------------------
Name: Luis Perez
Title: Assistant Vice President
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL, OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A. TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1),(2)(3) OR (7) UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A
MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE ISSUER'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND, IN THE
CASE OF THE FOREGOING CLAUSE (D), A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THE OTHER SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE ISSUER AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
NBTY, INC.
8 5/8% Senior Subordinate Note
due September 15, 2007, Series A
CUSIP No.:[ ]
No. [ ] $[ ]
NBTY, INC., a Delaware corporation (the "COMPANY", which term includes
any successor corporation), for value received promises to pay to [ ] or
registered assigns, the principal sum of [ ] Dollars, on September 15, 2007.
Interest Payment Dates: March 15 and September 15, commencing on March
15, 1998.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this security to be signed manually
or by facsimile by its duly authorized officer.
NBTY, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
Dated: [ ]
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 8 5/8% Senior Subordinated Notes due
September 15, 2007, Series A, described in the within-mentioned Indenture.
Dated: [ ]
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
-------------------------------------
Authorized Signatory
A-3
<PAGE>
(REVERSE OF SECURITY)
NBTY, INC.
8 5/8% Senior Subordinated Note
due September 15, 2007, Series A
1. INTEREST.
--------
NBTY, INC., a Delaware corporation (the "COMPANY"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from and including the
most recent date to which interest has been paid or, if no interest has been
paid, from the Issue Date. The Company will pay interest semi-annually in
arrears on each Interest Payment Date, commencing March 15, 1998 to the stated
payment date. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal from time
to time on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities
2. METHOD OF PAYMENT.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. LEGAL
TENDER"). However, the Company may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
--------------------------
Initially, IBJ Schroder Bank & Trust Company (the "TRUSTEE")
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar.
4. INDENTURE.
---------
The Company issued the Securities under an Indenture, dated as
of September 23, 1997 (the "INDENTURE"), by and between the Company and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. This Security is one of a duly authorized issue of
Securities of the Company designated as its 8 5/8% Senior Subordinated Notes due
A-4
<PAGE>
2007, Series A (the "INITIAL SECURITIES"), limited (except as otherwise provided
in the Indenture) in aggregate principal amount to $150,000,000, which may be
issued under the Indenture. The Securities include the Initial Securities, the
Private Exchange Securities (as defined in the Indenture) and the Unrestricted
Securities (as defined below) issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement. The Initial Securities and the
Unrestricted Securities are treated as a single class of securities under the
Indenture. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of 1939
(15 U.S.C. Sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture (except as otherwise indicated in the Indenture) until such time as
the Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such terms, and
holders of Securities are referred to the Indenture and the TIA for a statement
of them. The Securities are general unsecured obligations of the Company. The
Securities are subordinated in right of payment to all Senior Indebtedness of
the Company to the extent and in the manner provided in the Indenture. Each
Holder of a Security, by accepting a Security, agrees to such subordination,
authorizes the Trustee to give effect to such subordination and appoints the
Trustee as attorney-in-fact for such purpose.
5. OPTIONAL REDEMPTION.
-------------------
The Securities will be redeemable at the option of the
Company, in whole or in part, at any time on or after September 15, 2002, at the
redemption prices (expressed as a percentage of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the Redemption Date
(subject to the right of holders of record on the relevant Interest Record Date
to receive interest due on the relevant Interest Payment Date) if redeemed
during the 12-month period commencing on September 15 of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2002 104.313%
2003 102.875%
2004 101.438%
2005 and thereafter 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS.
------------------------------------------------
In addition, at any time and from time to time on or prior to
September 15, 2000, the Company may redeem in the aggregate up to 33 1/3% of the
originally issued aggregate principal amount of the Securities with the net cash
proceeds of one or more Public Equity Offerings by the Company at a redemption
price in cash equal to 108.625% of the principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date); PROVIDED, HOWEVER, that at
least 66 2/3% of the originally issued aggregate principal amount of the
Securities must remain outstanding immediately after giving effect to each such
redemption (excluding any Securities held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
7. NOTICE OF REDEMPTION.
--------------------
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
A-5
<PAGE>
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. CHANGE OF CONTROL OFFER.
-----------------------
Following the occurrence of a Change of Control (the date of
such occurrence being the "CHANGE OF CONTROL DATE"), the Company shall, within
20 days after the Change of Control Date, make an Offer to Purchase all
Securities then outstanding at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Purchase Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
9. LIMITATION ON DISPOSITION OF ASSETS.
-----------------------------------
The Company is, subject to certain conditions and certain
exceptions, obligated to make an Offer to Purchase Securities at a purchase
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the Interest Relevant Record Date to receive interest due on the
relevant Interest Payment Date) with the proceeds of certain asset dispositions.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
---------------------
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. UNCLAIMED FUNDS.
---------------
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its written request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
A-6
<PAGE>
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
----------------------------------------
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. SUBORDINATION.
-------------
All obligations of the Company under and in respect of the
Securities are subordinated and junior in right of payment to the extent and in
the manner provided in Article Eight of the Indenture, to the prior payment in
full in cash of all amounts payable under Senior Indebtedness of the Company.
15. AMENDMENT; SUPPLEMENT; WAIVER.
-----------------------------
Subject to certain exceptions, the Indenture and the
Securities may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture and the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
16. RESTRICTIVE COVENANTS.
---------------------
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to sell assets, to permit
restrictions on dividends and other payments by Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets and to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must report annually to the
Trustee on compliance with such limitations.
17. DEFAULTS AND REMEDIES.
---------------------
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of certain continuing Defaults or Events of Default
if it determines that withholding notice is in their interest.
A-7
<PAGE>
18. TRUSTEE DEALINGS WITH COMPANY.
-----------------------------
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
--------------------------
No director, officer, employee or stockholder, as such, of the
Company or any of its Affiliates shall have any liability for any obligation of
the Company or any of its Affiliates under the Securities 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 Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
20. AUTHENTICATION.
--------------
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
21. ABBREVIATIONS AND DEFINED TERMS.
-------------------------------
Customary abbreviations may be used in the name of a Holder of
a Security 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).
22. 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 Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
23. REGISTRATION RIGHTS.
-------------------
Pursuant to the Registration Rights Agreement, the Company
will be obligated upon the occurrence of certain events to consummate an
exchange offer pursuant to which the Holder of this Security shall have the
right to exchange this Security for an 8 5/8% Senior Subordinated Note due 2007,
Series B, of the Company (an "UNRESTRICTED SECURITY") which has been registered
under the Securities Act, in like principal amount and having terms identical in
all material respects to the Initial Securities. The Holders shall be entitled
to receive certain Liquidated Damages payments in the event such exchange offer
is not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
24. GOVERNING LAW.
-------------
The laws of the State of New York shall govern the Indenture
and this Security without regard to principles of conflicts of laws.
A-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint
---------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
----------------- ------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $
----------------
Dated: Signed:
----------------- ------------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: ----------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B SECURITY]
NBTY, INC.
8 5/8% Senior Subordinated Note
due September 15, 2007, Series B
CUSIP No.:[ ]
No. [ ] $[ ]
NBTY, INC., a Delaware corporation (the "COMPANY", which term
includes any successor corporation), for value received promises to pay to [ ]
or registered assigns, the principal sum of [ ] Dollars, on September 15, 2007.
Interest Payment Dates: March 15 and September 15, commencing on
March 15, 1998.
Interest Record Dates: March 1 and September 1.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
NBTY, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
Dated: [ ]
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 8 5/8% Senior Subordinated Notes due
September 15 , 2007, Series B, described in the within-mentioned Indenture.
Dated: [ ]
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
NBTY, INC.
8 5/8% Senior Subordinated Note
due September 15, 2007, Series B
1. INTEREST.
--------
NBTY, INC., a Delaware corporation (the "COMPANY"), promises
to pay interest on the principal amount of this Security at the rate per annum
shown above. Cash interest on the Securities will accrue from and including the
most recent date to which interest has been paid or, if no interest has been
paid, from the Issue Date to the stated payment date. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing
March 15, 1998. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal from time
to time on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities
2. METHOD OF PAYMENT.
-----------------
The Company shall pay interest on the Securities (except
defaulted interest) to the persons who are the registered Holders at the close
of business on the Interest Record Date immediately preceding the Interest
Payment Date even if the Securities are canceled on registration of transfer or
registration of exchange after such Interest Record Date. Holders must surrender
Securities to a Paying Agent to collect principal payments. The Company shall
pay principal and interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts ("U.S. LEGAL
TENDER"). However, the Company may pay principal and interest by wire transfer
of Federal funds (provided that the Paying Agent shall have received wire
instructions on or prior to the relevant Interest Record Date), or interest by
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. PAYING AGENT AND REGISTRAR.
--------------------------
Initially, IBJ Schroder Bank & Trust Company (the "TRUSTEE")
will act as Paying Agent and Registrar. The Company may change any Paying Agent
or Registrar without notice to the Holders. The Company or any of its
Subsidiaries may, subject to certain exceptions, act as Registrar.
4. INDENTURE.
---------
The Company issued the Securities under an Indenture, dated as
of September 23, 1997 (the "INDENTURE"), by and between the Company and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. This Security is one of a duly authorized issue of
Securities of the Company designated as its 8 5/8% Senior Subordinated Notes due
B-3
<PAGE>
2007, Series B (the "UNRESTRICTED SECURITIES"), limited (except as otherwise
provided in the Indenture) in aggregate principal amount to $150,000,000, which
may be issued under the Indenture. The Securities include the 8 5/8% Senior
Subordinated Notes due 2007, Series A (the "INITIAL SECURITIES"), the Private
Exchange Securities (as defined in the Indenture) and the Unrestricted
Securities. The Initial Securities and the Unrestricted Securities are treated
as a single class of securities under the Indenture. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture (except as otherwise
indicated in the Indenture) until such time as the Indenture is qualified under
the TIA, and thereafter as in effect on the date on which the Indenture is
qualified under the TIA. Notwithstanding anything to the contrary herein, the
Securities are subject to all such terms, and holders of Securities are referred
to the Indenture and the TIA for a statement of them. The Securities are general
unsecured obligations of the Company. The Securities are subordinated in right
of payment to all Senior Indebtedness of the Company to the extent and in the
manner provided in the Indenture. Each Holder of a Security, by accepting a
Security, agrees to such subordination, authorizes the Trustee to give effect to
such subordination and appoints the Trustee as attorney-in-fact for such
purpose.
5. OPTIONAL REDEMPTION.
-------------------
The Securities will be redeemable at the option of the
Company, in whole or in part, at any time on or after September 15, 2002, at the
redemption prices (expressed as a percentage of principal amount) set forth
below, plus accrued and unpaid interest thereon, if any, to the Redemption Date
(subject to the right of holders of record on the relevant Interest Record Date
to receive interest due on the relevant Interest Payment Date) if redeemed
during the 12-month period commencing on September 15 of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2002 104.313%
2003 102.875%
2004 101.438%
2005 and thereafter 100.000%
6. OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS.
------------------------------------------------
In addition, at any time and from time to time on or prior to
September 15, 2000, the Company may redeem in the aggregate up to 33 1/3% of the
originally issued aggregate principal amount of the Securities with the net cash
proceeds of one or more Public Equity Offerings by the Company at a redemption
price in cash equal to 108.625% of the principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Interest Record Date to receive
interest due on the relevant Interest Payment Date); PROVIDED, HOWEVER, that at
least 66 2/3% of the originally issued aggregate principal amount of the
Securities must remain outstanding immediately after giving effect to each such
redemption (excluding any Securities held by the Company or any of its
Affiliates). Notice of any such redemption must be given within 60 days after
the date of the closing of the relevant Public Equity Offering of the Company.
7. NOTICE OF REDEMPTION.
--------------------
Notice of redemption will be mailed by first-class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Securities to be redeemed at its registered address. The Trustee may
select for redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
B-4
<PAGE>
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Security. On and after the Redemption
Date, interest will cease to accrue on Securities or portions thereof called for
redemption so long as the Company has deposited with the Paying Agent for the
Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. CHANGE OF CONTROL OFFER.
-----------------------
Following the occurrence of a Change of Control (the date of
such occurrence being the "CHANGE OF CONTROL DATE"), the Company shall, within
20 days after the Change of Control Date, make an Offer to Purchase all
Securities then outstanding at a purchase price in cash equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the Purchase Date (subject to the right of Holders of record on the
relevant Interest Record Date to receive interest due on the relevant Interest
Payment Date).
9. LIMITATION ON DISPOSITION OF ASSETS.
-----------------------------------
The Company is, subject to certain conditions and certain
exceptions, obligated to make an Offer to Purchase Securities at a purchase
price equal to 100% of the principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Purchase Date (subject to the right of Holders
of record on the Interest Relevant Record Date to receive interest due on the
relevant Interest Payment Date) with the proceeds of certain asset dispositions.
10. DENOMINATIONS; TRANSFER; EXCHANGE.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. PERSONS DEEMED OWNERS.
---------------------
The registered Holder of a Security shall be treated as the
owner of it for all purposes.
12. UNCLAIMED FUNDS.
---------------
If funds for the payment of principal or interest remain
unclaimed for two years, the Trustee and the Paying Agent will repay the funds
to the Company at its written request. After that, all liability of the Trustee
and such Paying Agent with respect to such funds shall cease.
B-5
<PAGE>
13. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.
----------------------------------------
The Company may be discharged from its obligations under the
Indenture and the Securities, except for certain provisions thereof, and may be
discharged from obligations to comply with certain covenants contained in the
Indenture and the Securities, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. SUBORDINATION.
-------------
All obligations of the Company under and in respect of the
Securities are subordinated and junior in right of payment to the extent and in
the manner provided in Article Eight of the Indenture, to the prior payment in
full in cash of all amounts payable under Senior Indebtedness of the Company.
15. AMENDMENT; SUPPLEMENT; WAIVER.
-----------------------------
Subject to certain exceptions, the Indenture and the
Securities may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without notice
to or consent of any Holder, the parties thereto may amend or supplement the
Indenture and the Securities to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Securities in addition to or in
place of certificated Securities or comply with any requirements of the SEC in
connection with the qualification of the Indenture under the TIA, or make any
other change that does not materially adversely affect the rights of any Holder
of a Security.
16. RESTRICTIVE COVENANTS.
---------------------
The Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Subsidiaries to make restricted
payments, to incur indebtedness, to create liens, to sell assets, to permit
restrictions on dividends and other payments by Subsidiaries to the Company, to
consolidate, merge or sell all or substantially all of its assets and to engage
in transactions with affiliates. The limitations are subject to a number of
important qualifications and exceptions. The Company must report annually to the
Trustee on compliance with such limitations.
17. DEFAULTS AND REMEDIES.
---------------------
If an Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the
Securities unless it has received indemnity satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Securities then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Securities notice of certain continuing Defaults or Events of Default
if it determines that withholding notice is in their interest.
B-6
<PAGE>
18. TRUSTEE DEALINGS WITH COMPANY.
-----------------------------
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
19. NO RECOURSE AGAINST OTHERS.
--------------------------
No director, officer, employee or stockholder, as such, of the
Company or any of its Affiliates shall have any liability for any obligation of
the Company or any of its Affiliates under the Securities 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 Security waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Securities.
20. AUTHENTICATION.
--------------
This Security shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on this Security.
21. ABBREVIATIONS AND DEFINED TERMS.
-------------------------------
Customary abbreviations may be used in the name of a Holder of
a Security 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).
22. 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 Securities as a convenience to the Holders of the
Securities. No representation is made as to the accuracy of such numbers as
printed on the Securities and reliance may be placed only on the other
identification numbers printed hereon.
23. GOVERNING LAW.
-------------
The laws of the State of New York shall govern the Indenture
and this Security without regard to principles of conflicts of laws.
B-7
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee or transferee)
- --------------------------------------------------------------------------------
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint---------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated: Signed:
------------------- ------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:
------------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor program
reasonably acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the
Company pursuant to Section 4.05 or Section 4.14 of the Indenture, check the
appropriate box:
Section 4.05 [ ]
Section 4.14 [ ]
If you want to elect to have only part of this Security
purchased by the Company pursuant to Section 4.05 or Section 4.14 of the
Indenture, state the amount: $
---------------
Dated: Your Signature:
---------------- -----------------------------------
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee:------------------------------------------------------------
Participant in a recognized Signature Guarantee
Medallion Program (or other signature guarantor
program reasonably acceptable to the Trustee)
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder
shall bear a legend (which would be in addition to any other legends required in
the case of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 8 5/8% Senior Subordinated Notes due 2007
(the "Securities") of NBTY, Inc.
-----------------------------------------
This Certificate relates to $_______ principal amount of
Securities held in the form of* ___ a beneficial interest in a Global Security
or* _______ Physical Securities by ______ (the "TRANSFEROR").
The Transferor:*
| | has requested by written order that the Registrar deliver in
exchange for its beneficial interest in the Global Security held by the
Depositary a Physical Security or Physical Securities in definitive, registered
form of authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
| | has requested that the Registrar by written order exchange or
register the transfer of a Physical Security or Physical Securities.
| | In connection with such request and in respect of each such
Security, the Transferor does hereby certify that the Transferor is familiar
with the Indenture relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 2.16 of such Indenture,
and that the transfer of the Securities does not require registration under the
Securities Act of 1933, as amended (the "ACT"), because*:
| | Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
| | Such Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Act), in reliance on
Rule 144A.
| | Such Security is being transferred to an institutional
"accredited investor" (within the meaning of subparagraph (a)(1), (2), (3) or
(7) of Rule 501 under the Act) which delivers a certificate to the Trustee in
the form of EXHIBIT E to the Indenture.
| | Such Security is being transferred in reliance on Rule 144 under
the Act.
| | Such Security is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act other
than Rule 144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require Registration under the Securities Act accompanies this
certification.]
-------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------
[Authorized Signatory]
Date:
-----------------------
*Check applicable box.
D-1
<PAGE>
EXHIBIT E
---------
FORM OF TRANSFEREE LETTER OF REPRESENTATION
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Dear Sirs:
This certificate is delivered to request a transfer of
$________ principal amount of the 8 5/8% Senior Subordinated Notes due 2007 (the
"SECURITIES") of NBTY, Inc. (the "COMPANY"). Upon transfer, the Securities would
be registered in the name of the new beneficial owner as follows:
Name:
------------------------------
Address:
------------------------------
Taxpayer ID Number:
------------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the
"SECURITIES ACT")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Securities, and we are acquiring the Securities not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act.
We have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Securities
and we invest in or purchase securities similar to the Securities in the normal
course of our business. We and any accounts for which we are acting are each
able to bear the economic risk of our or its investment.
2. We understand that the Securities have not been registered
under the Securities Act and, unless so registered, may not be sold except as
permitted in the following sentence. We agree on our own behalf and on behalf of
any investor account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two years after
the later of the date of original issue and the last date on which the Company
or any affiliate of the Company was the owner of such Securities (or any
predecessor thereto) (the "RESALE RESTRICTION TERMINATION DATE") only (a) to the
Company, (b) pursuant to a registration statement which has been declared
effective under the Securities Act, (c) in a transaction complying with the
requirements of Rule 144A under the Securities Act, to a person we reasonably
believe is a qualified institutional buyer under Rule 144A (a "QIB") that
purchases for its own account or for the account of a QIB and to whom notice is
given that the transfer is being made in reliance on Rule 144A, (d) to an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act that is purchasing for its own account or
for the account of such an institutional "accredited investor," in each case in
a minimum principal amount of Securities of $250,000 or (e) pursuant to any
other available exemption from the registration requirements of the Securities
Act, subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Securities is proposed to be made pursuant to clause (d)
above prior to the Resale Restriction Termination Date, the transferor shall
deliver a letter from the transferee substantially in the form of this letter to
E-1
<PAGE>
the Company and the Trustee, which shall provide, among other things, that the
transferee is an institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in violation of
the Securities Act. Each purchaser acknowledges that the Company and the Trustee
reserve the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Securities pursuant to clause (d) or (e)
above to require the delivery of an opinion of counsel, certificates and/or
other information satisfactory to the Company and the Trustee.
Dated: TRANSFEREE:
----------------------- ------------------------------
By:
--------------------------------------
E-2
EX-4.4
NBTY, INC.
$150,000,000
8-5/8% Senior Subordinated Notes due 2007
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
September 23, 1997
CHASE SECURITIES INC.
270 Park Avenue, 4th floor
New York, New York 10017
Ladies and Gentlemen:
NBTY, Inc., a Delaware corporation (the "COMPANY"), proposes to issue
and sell to Chase Securities Inc. (the "Initial Purchaser"), upon the terms and
subject to the conditions set forth in a purchase agreement dated September 17,
1997 (the "PURCHASE AGREEMENT") between the Company and the Initial Purchaser
$150,000,000 aggregate principal amount of its 8-5/8% Senior Subordinated Notes
due 2007 (the "SECURITIES"). Capitalized terms used but not defined herein shall
have the meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchaser to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchaser thereunder, the Company agrees with the Initial Purchaser, for the
benefit of the holders (including the Initial Purchaser) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "HOLDERS"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall (i) prepare and, not
later than 60 days following the date of original issuance of the Securities
(the "ISSUE DATE"), file with the Commission a registration statement (the
"EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate form under the
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "REGISTERED EXCHANGE OFFER") to issue and deliver to such Holders, in
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company that are identical in all material respects to the
Securities (the "EXCHANGE SECURITIES"), except for the transfer restrictions
relating to the Securities, (ii) use its reasonable best efforts to cause the
Exchange Offer Registration Statement to become effective under the Securities
Act no later than 150 days after the Issue Date and the Registered Exchange
Offer to be consummated no later than 185 days after the Issue Date and (iii)
keep the Exchange Offer Registration Statement effective for not less than 30
days (or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders (such period being
called the "EXCHANGE OFFER REGISTRATION PERIOD"). The Exchange Securities will
be issued under the Indenture or an indenture (the "EXCHANGE SECURITIES
INDENTURE") between the Company and the Trustee or such other bank or trust
company that is reasonably satisfactory to the Initial Purchaser, as trustee
<PAGE>
(the "EXCHANGE SECURITIES TRUSTEE"), such indenture to be identical in all
material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities (assuming that such Holder (a) is
not an affiliate of the Company, or an Exchanging Dealer (as defined herein) not
complying with the requirements of the next sentence, (b) is not the Initial
Purchaser holding Securities that have, or that are reasonably likely to have,
the status of an unsold allotment in an initial distribution, (c) acquires the
Exchange Securities in the ordinary course of such Holder's business, and (d)
has no arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Company, the Initial Purchaser and
each Exchanging Dealer acknowledge that, pursuant to current interpretations by
the Commission's staff of Section 5 of the Securities Act, each Holder that is a
broker-dealer electing to exchange Securities acquired for its own account as a
result of market-making activities or other trading activities for Exchange
Securities (an "EXCHANGING DEALER"), is required to deliver a prospectus
containing substantially the information set forth in ANNEX A hereto on the
cover of such prospectus, in ANNEX B hereto in the "Exchange Offer Procedures"
and "Purpose of the Exchange Offer" sections of such prospectus, and in ANNEX C
hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Registered
Exchange Offer, the Company shall, upon the request of any such Holder,
simultaneously with the delivery of the Exchange Securities in the Registered
Exchange Offer, issue and deliver to any such Holder, in exchange for the
Securities held by such Holder (the "PRIVATE EXCHANGE"), a like aggregate
principal amount of debt securities of the Company that are identical in all
material respects to the Exchange Securities (the "PRIVATE EXCHANGE
SECURITIES"), except for the transfer restrictions relating to such Private
Exchange Securities. The Private Exchange Securities will be issued under the
same indenture as the Exchange Securities, and the Company shall use its
reasonable best efforts to cause the Private Exchange Securities to bear the
same CUSIP number as the Exchange Securities.
In connection with the Registered Exchange Offer, the Company shall:
2
<PAGE>
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 30 days
(or longer, if required by applicable law) after the date on which notice
of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior to
the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are applicable
to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange Offer
and any Private Exchange, as the case may be, the Company shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Securities so accepted
for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
prospectus contained therein in order to permit such prospectus to be used by
all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; PROVIDED that (i) in the case where
such prospectus and any amendment or supplement thereto must be delivered by an
Exchanging Dealer, such period shall be the lesser of 180 days and the date on
which all Exchanging Dealers have sold all Exchange Securities held by them and
(ii) the Company shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 180 days after the
consummation of the Registered Exchange Offer.
3
<PAGE>
The Indenture or the Exchange Securities Indenture, as the case may be,
shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security issued
pursuant to the Registered Exchange Offer and in the Private Exchange will
accrue from the last interest payment date on which interest was paid on the
Securities surrendered in exchange therefor or, if no interest has been paid on
the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Company that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of the Company or,
if it is such an affiliate, such Holder will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit 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.
2. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff the Company is not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 300 days after
the Issue Date, or (iii) the Initial Purchaser so requests with respect to
Securities or Private Exchange Securities not eligible to be exchanged for
Exchange Securities in the Registered Exchange Offer and held by it following
the consummation of the Registered Exchange Offer, or (iv) any applicable laws
or interpretations do not permit any Holder to participate in the Registered
Exchange Offer, or (v) any Holder that participates in the Registered Exchange
Offer does not receive freely transferable Exchange Securities in exchange for
tendered Securities (other than due solely to the status of a Holder (other than
the Initial Purchaser) as an affiliate of the Company within the meaning of the
4
<PAGE>
Securities Act, and other than any state securities law restrictions which,
individually or in the aggregate, do not materially adversely affect the ability
of any such Holder to resell the securities held by such Holder), or (vi) the
Company so elects, then the following provisions shall apply:
(a) The Company shall use its reasonable best efforts to file as
promptly as practicable (but in no event more than 30 days after so required or
requested, in each case pursuant to this Section 2) with the Commission, and
thereafter shall use its reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "SHELF REGISTRATION STATEMENT" and, together with any
Exchange Offer Registration Statement, a "REGISTRATION STATEMENT").
(b) The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be used by Holders of Transfer Restricted Securities for
a period ending on the earlier of (i) two years from the Issue Date or such
shorter period that will terminate when all the Transfer Restricted Securities
covered by the Shelf Registration Statement have been sold pursuant thereto and
(ii) the date on which the Securities become eligible for resale without volume
restrictions pursuant to Rule 144 under the Securities Act (in any such case,
such period being called the "SHELF REGISTRATION PERIOD"). The Company shall be
deemed not to have used its reasonable best efforts to keep the Shelf
Registration Statement effective during the requisite period if it voluntarily
takes any action that would result in Holders of Transfer Restricted Securities
covered thereby not being able to offer and sell such Transfer Restricted
Securities during that period, unless such action is required by applicable law;
PROVIDED, HOWEVER, that the foregoing shall not apply to actions taken by the
Company in good faith and for valid business reasons (not including avoidance of
their obligations hereunder), including, without limitation, the acquisition or
divestiture of assets, so long as the Company within 60 days thereafter complies
with the requirements of Section 4(j) hereof. Any such period during which the
Company fails to keep the registration statement effective and usable for offers
and sales of Securities and Exchange Securities is referred to as a "SUSPENSION
PERIOD." A Suspension Period shall commence on and include the date that the
Company gives notice to the Holders to the effect that, in the reasonable
judgment of the Company, the use of the Shelf Registration Statement would
materially interfere with a valid business purpose of the Company and that the
Shelf Registration Statement is no longer effective or the prospectus included
therein is no longer usable for offers and sales of Securities and Exchange
Securities and shall end on the date when each Holder of Securities and Exchange
Securities covered by such registration statement either receives the copies of
the supplemented or amended prospectus contemplated by Section 4(j) hereof or is
advised in writing by the Company that use of the prospectus may be resumed. If
one or more Suspension Periods occur, the two year time period referenced above
shall be extended by the number of days included in each such Suspension Period;
5
<PAGE>
PROVIDED that the aggregate number of days of any Suspension Periods shall not
exceed 60 days in any 12-month period.
(c) The Company will ensure that (i) any Shelf Registration Statement
and any amendment thereto and any prospectus forming part thereof and any
supplement thereto complies in all material respects with the Securities Act and
the rules and regulations of the Commission thereunder, (ii) any Shelf
Registration Statement and any amendment thereto (in either case, other than
with respect to information included therein in reliance upon or in conformity
with written information furnished to the Company by or on behalf of any Holder
specifically for use therein (the "HOLDERS' INFORMATION")) does not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Shelf Registration Statement, and any
supplement to such prospectus (in either case, other than with respect to
Holders' Information), does not include an untrue statement of a material fact
or omit 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.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the Holders of
Transfer Restricted Securities will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) the Exchange Offer Registration Statement or the Shelf Registration
Statement, as the case may be, is not filed with the Commission on or prior to
60 days after the Issue Date, (ii) the Exchange Offer Registration Statement or
the Shelf Registration Statement, as the case may be, is not declared effective
on or prior to 150 days after the Issue Date, (iii) the Registered Exchange
Offer is not consummated on or prior to 185 days after the Issue Date, or (iv)
the Shelf Registration Statement is filed and declared effective on or prior to
150 days after the Issue Date but shall thereafter cease to be effective (at any
time that the Company is obligated to maintain the effectiveness thereof)
without being succeeded within 60 days by an additional Registration Statement
filed and declared effective (each such event referred to in clauses (i) through
(iv), a "REGISTRATION DEFAULT"), the Company will be obligated to pay liquidated
damages to each Holder of Transfer Restricted Securities, during the period of
one or more such Registration Defaults, in an amount equal to $ 0.192 per week
per $1,000 principal amount of Transfer Restricted Securities held by such
Holder until (a) the applicable Registration Statement is filed, (b) the
Exchange Offer Registration Statement is declared effective and the Registered
Exchange Offer is consummated, (c) the Shelf Registration Statement is declared
effective or (d) the Shelf Registration Statement again becomes effective, as
the case may be. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease. As used herein, the term "TRANSFER RESTRICTED
SECURITIES" means (i) each Security until the date on which such Security has
been exchanged for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) each Security or Private Exchange Security until the date
on which it has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Security or Private Exchange Security until the date on which it is distributed
to the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to
the contrary in this Section 3(a), the Company shall not be required to pay
6
<PAGE>
liquidated damages to a Holder of Transfer Restricted Securities if such Holder
failed to comply with its obligations to make the representations set forth in
the second to last paragraph of Section 1 or failed to provide the information
required to be provided by it, if any, pursuant to Section 4(n). Liquidated
damages shall not accrue during any Suspension Period permitted pursuant to
Section 2(b).
(b) The Company shall notify the Trustee and the Paying Agent under the
Indenture immediately upon the happening of each and every Registration Default.
The Company shall pay the liquidated damages due on the Transfer Restricted
Securities by depositing with the Paying Agent (which may not be the Company for
these purposes), in trust, for the benefit of the Holders thereof, prior to
10:00 a.m., New York City time, on the next interest payment date specified by
the Indenture and the Securities, sums sufficient to pay the liquidated damages
then due. The liquidated damages due shall be payable on each interest payment
date specified by the Indenture and the Securities to the record holder entitled
to receive the interest payment to be made on such date. Each obligation to pay
liquidated damages shall be deemed to accrue from and including the date of the
applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. REGISTRATION PROCEDURES. In connection with any Registration
Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration Statement and
each amendment thereof and each supplement, if any, to the prospectus included
therein and shall use its reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as the Initial
Purchaser may reasonably propose; (ii) include the information set forth in
ANNEX A hereto on the cover, in ANNEX B hereto in the "Exchange Offer
Procedures" and "Purpose of the Exchange Offer" sections and in ANNEX C hereto
in the "Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set forth in
ANNEX D hereto in the Letter of Transmittal delivered pursuant to the Registered
Exchange Offer; and (iii) if requested by the Initial Purchaser, include the
information required by Items 507 or 508 of Regulation S-K, as applicable, in
the prospectus forming a part of the Exchange Offer Registration Statement.
7
<PAGE>
(b) The Company shall advise the Initial Purchaser, each Exchanging
Dealer and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v) hereof
shall be accompanied by an instruction to suspend the use of the prospectus
until the requisite changes have been made):
(i) when any Registration Statement and any amendment thereto has
been filed with the Commission and when such Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of any
changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Company will, during the Shelf Registration Period, furnish to
each Holder of Transfer Restricted Securities included within the coverage of
any Shelf Registration Statement, without charge, at least one conformed copy of
such Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules and, if any such Holder so requests
in writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Company will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within the
coverage of any Shelf Registration Statement, without charge, as many copies of
the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents (except during the continuance
of any event described in Sections 4(b)(ii) through and including (v)) to the
use of such prospectus or any amendment or supplement thereto by each of the
8
<PAGE>
selling Holders of Transfer Restricted Securities in connection with the offer
and sale of the Transfer Restricted Securities covered by such prospectus or any
amendment or supplement thereto.
(f) The Company will furnish to the Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge, at
least one conformed copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules
and, if the Initial Purchaser or Exchanging Dealer or any such Holder so
requests in writing, all exhibits thereto (including those, if any, incorporated
by reference).
(g) The Company will, during the Exchange Offer Registration Period or
the Shelf Registration Period, as applicable, promptly deliver to the Initial
Purchaser, each Exchanging Dealer and such other persons that are required to
deliver a prospectus following the Registered Exchange Offer, without charge, as
many copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or supplement
thereto as such Initial Purchaser, Exchanging Dealer or other persons may
reasonably request; and the Company consents (except during the continuance of
any event described in Sections 4(b)(ii) through and including (v))to the use of
such prospectus or any amendment or supplement thereto by the Initial Purchaser
or such Exchanging Dealer or other persons, as applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Company will use its reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein and their respective counsel in connection
with the registration or qualification of, such Securities, Exchange Securities
or Private Exchange Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities, Exchange Securities or
Private Exchange Securities covered by such Registration Statement; PROVIDED
that the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or to taxation in any such jurisdiction
where it is not then so subject.
(i) The Company will cooperate with the Holders of Securities, Exchange
Securities or Private Exchange Securities to facilitate the timely preparation
and delivery of certificates representing Securities, Exchange Securities or
Private Exchange Securities to be sold pursuant to any Registration Statement
free of any restrictive legends and in such denominations and registered in such
names as the Holders thereof may request in writing prior to sales of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Registration Statement.
9
<PAGE>
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Company is required to maintain an effective
Registration Statement, the Company will promptly prepare and file with the
Commission a post-effective amendment to the Registration Statement or a
supplement to the related prospectus or file any other required document so
that, as thereafter delivered to purchasers of the Securities, Exchange
Securities or Private Exchange Securities from a Holder, the prospectus 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, in the light of the
circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may be, and
provide the applicable trustee with printed certificates for the Securities, the
Exchange Securities or the Private Exchange Securities, as the case may be, in a
form eligible for deposit with The Depository Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earning statement satisfying the provisions of Section 11(a) of the
Securities Act; PROVIDED that in no event shall such earning statement be
delivered later than 45 days after the end of a 12-month period (or 90 days, if
such period is a fiscal year) beginning with the first month of the Company's
first fiscal quarter commencing after the effective date of the applicable
Registration Statement, which statement shall cover such 12-month period.
(m) The Company will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Company may from time
to time reasonably require for inclusion in such Shelf Registration Statement,
and the Company may exclude from such registration the Transfer Restricted
Securities of any Holder that fails to furnish such information within a
reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of any
notice from the Company pursuant to Section 4(b)(ii) through (v), such Holder
will discontinue disposition of such Transfer Restricted Securities until such
Holder's receipt of copies of the supplemental or amended prospectus
10
<PAGE>
contemplated by Section 4(j) or until advised in writing (the "ADVICE") by the
Company that the use of the applicable prospectus may be resumed. If the Company
shall give any notice under Section 4(b)(ii) through (v) during the period that
the Company is required to maintain an effective Registration Statement (the
"EFFECTIVENESS PERIOD"), such Effectiveness Period shall be extended by the
number of days during such period from and including the date of the giving of
such notice to and including the date when each seller of Transfer Restricted
Securities covered by such Registration Statement shall have received (x) the
copies of the supplemental or amended prospectus contemplated by Section 4(j)
(if an amended or supplemental prospectus is required) or (y) the Advice (if no
amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Company shall
enter into such customary agreements (including, if requested, an underwriting
agreement in customary form) and take all such other action, if any, as Holders
of a majority in aggregate principal amount of the Securities, Exchange
Securities and Private Exchange Securities being sold or the managing
underwriters (if any) shall reasonably request in order to facilitate any
disposition of Securities, Exchange Securities or Private Exchange Securities
pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel (as defined below) acting for, Holders of a majority in aggregate
principal amount of the Securities, Exchange Securities and Private Exchange
Securities being sold and any underwriter participating in any disposition of
Securities, Exchange Securities or Private Exchange Securities pursuant to such
Shelf Registration Statement, all relevant financial and other records,
pertinent corporate documents and properties of the Company and its subsidiaries
and (ii) use its reasonable best efforts to have its officers, directors,
employees, accountants and counsel supply all relevant information reasonably
requested by such representative, Special Counsel or any such underwriter (an
"INSPECTOR") in connection with such Shelf Registration Statement; PROVIDED,
HOWEVER, that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information shall be
kept confidential by such Holders or any such underwriter, attorney, accountant
or agent, unless such disclosure is made in connection with a court proceeding
or required by law, or such information becomes available to the public
generally or through a third party without an accompanying obligation of
confidentiality and the Company may require that such Holders or any such
underwriter, attorney, accountant and agent execute a confidentiality agreement
with respect to such information.
(r) In the case of a Shelf Registration Statement, the Company shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel or the managing underwriters (if any) in connection with
such Shelf Registration Statement, use its reasonable best efforts to cause (i)
its counsel to deliver an opinion relating to the Shelf Registration Statement
and the Securities, Exchange Securities or Private Exchange Securities, as
applicable, in customary form, (ii) its officers to execute and deliver all
customary documents and certificates requested by Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and Private
Exchange Securities being sold, their Special Counsel or the managing
11
<PAGE>
underwriters (if any) and (iii) its independent public accountants to provide a
comfort letter or letters in customary form, in form and substance reasonably
satisfactory to the managing underwriters subject to receipt of appropriate
documentation as contemplated, and only if permitted, by Statement of Auditing
Standards No. 72.
5. REGISTRATION EXPENSES. The Company will bear all expenses incurred
in connection with the performance of its obligations under Sections 1, 2, 3 and
4 and the Company will reimburse the Initial Purchaser and the Holders for the
reasonable fees and disbursements of one firm of attorneys (in addition to any
local counsel) chosen by the Holders of a majority in aggregate principal amount
of the Securities, the Exchange Securities and the Private Exchange Securities
to be sold pursuant to each Registration Statement (the "SPECIAL COUNSEL")
acting for the Initial Purchaser or Holders in connection therewith.
6. INDEMNIFICATION. (a) In the event of a Shelf Registration Statement
or in connection with any prospectus delivery pursuant to an Exchange Offer
Registration Statement by the Initial Purchaser or an Exchanging Dealer, as
applicable, the Company shall indemnify and hold harmless each Holder
(including, without limitation, the Initial Purchaser or any such Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and PROVIDED,
FURTHER, that with respect to any such untrue statement in or omission from any
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
12
<PAGE>
from the fact that both (A) a copy of the final prospectus was not sent or given
to such person at or prior to the written confirmation of the sale of such
Securities, Exchange Securities or Private Exchange Securities to such person
and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder,
severally and not jointly, shall indemnify and hold harmless the Company, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 6(b) and Section 7 as the Company), from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company may become subject, whether commenced or threatened, under
the Securities Act, the Exchange Act, any other federal or state statutory law
or regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company promptly upon demand
for any legal or other expenses reasonably incurred by the Company in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Securities, Exchange
Securities or Private Exchange Securities pursuant to such Shelf Registration
Statement.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 6(a) or 6(b), notify the indemnifying party in writing
of the claim or the commencement of that action; PROVIDED, HOWEVER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have under this Section 6 except to the extent that it has been
materially prejudiced (through the forfeiture of substantive rights or defenses)
by such failure; and PROVIDED, FURTHER, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 6. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
13
<PAGE>
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; PROVIDED, HOWEVER,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. Notwithstanding the
immediately preceding sentence, if at any time an indemnified party shall have
requested an indemnifying party to reimburse the indemnified party for the fees,
disbursements and other charges of counsel as contemplated by the third sentence
of this paragraph (c), the indemnifying party agrees that it shall be liable for
any settlement of any action without its written consent if (i) such settlement
is entered into more than 30 days after receipt of such indemnifying party of
the aforesaid request for reimbursement and (ii) such indemnifying party shall
not have reimbursed the indemnified party in accordance with such request prior
to the date of such settlement; PROVIDED, HOWEVER, that such indemnifying party
shall not be liable for any settlement effected without its consent pursuant to
this sentence if such indemnifying party is contesting, in good faith, the
request for reimbursement. No indemnifying party shall, without the prior
written consent of the indemnified party (which consent shall not be
unreasonably withheld), effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
14
<PAGE>
party from all liability on claims that are the subject matter of such
proceeding.
7. CONTRIBUTION. If the indemnification provided for in Section 6 is
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Company from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Memorandum, on
the one hand, bear to the total proceeds received by such Holder with respect to
its sale of Securities, Exchange Securities or Private Exchange Securities, on
the other. The relative fault 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 the Company or
information supplied by the Company on the one hand or to any Holders'
Information supplied by such Holder on the other, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 7 were
to be determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to herein.
The amount paid or payable by an indemnified party as a result of the loss,
claim, damage or liability, or action in respect thereof, referred to above in
this Section 7 shall be deemed to include, for purposes of this Section 7, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such
action or claim. Notwithstanding the provisions of this Section 7, an
indemnifying party that is a Holder of Securities, Exchange Securities or
Private Exchange Securities shall not be required to contribute any amount in
excess of the amount by which the total price at which the Securities, Exchange
Securities or Private Exchange Securities sold by such indemnifying party to any
purchaser exceeds the amount of any damages which such indemnifying party has
otherwise paid or become liable to pay by reason of any 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 Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
15
<PAGE>
8. RULES 144 AND 144A. The Company shall use its reasonable best
efforts to file the reports required to be filed by it under the Securities Act
and the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it shall, upon the written request of any Holder
of Transfer Restricted Securities, provide other information so long as
necessary to permit sales of such Holder's securities pursuant to Rules 144 and
144A. The Company covenants that it will take such further reasonable action as
any Holder of Transfer Restricted Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Transfer
Restricted Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rules 144 and 144A (including, without
limitation, the requirements of Rule 144A(d)(4)). Notwithstanding the foregoing,
nothing in this Section 8 shall be deemed to require the Company to register any
of its securities pursuant to the Exchange Act.
9. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by the Holders of
a majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of this
Agreement may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of Holders of a majority in aggregate principal
amount of the Securities, the Exchange Securities and the Private Exchange
Securities, taken as a single class. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a matter that
relates exclusively to the rights of Holders whose Securities, Exchange
Securities or Private Exchange Securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly materially
affect the rights of other Holders may be given by Holders of a majority in
aggregate principal amount of the Securities, the Exchange Securities and the
Private Exchange Securities being sold by such Holders pursuant to such
Registration Statement.
16
<PAGE>
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(1) if to a Holder, at the most current address given by such Holder to
the Company in accordance with the provisions of this Section 10(b), which
address initially is, with respect to each Holder, the address of such
Holder maintained by the Registrar under the Indenture, with a copy in like
manner to Chase Securities Inc.;
(2) if to the Initial Purchaser, initially at its address set forth in
the Purchase Agreement; and
(3) if to the Company, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, the Initial Purchaser and the Holders and their respective successors
and assigns.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts (which may be delivered in original form or by telecopier) 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.
(e) DEFINITION OF TERMS. For purposes of this Agreement, (a) the term
"business day" means any day on which the New York Stock Exchange, Inc. is open
for trading, (b) the term "subsidiary" has the meaning set forth in Rule 405
under the Securities Act and (c) except where otherwise expressly provided, the
term "affiliate" has the meaning set forth in Rule 405 under the Securities Act.
(f) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(h) REMEDIES. In the event of a breach by the Company or by any Holder
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law, including recovery of damages (other than the recovery of damages for a
breach by the Company of its obligations under Sections 1 or 2 hereof for which
17
<PAGE>
liquidated damages have been paid pursuant to Section 3 hereof), will be
entitled to specific performance of its rights under this Agreement. The Company
and each Holder agree that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of any of the provisions of
this Agreement and hereby further agree that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(i) NO INCONSISTENT AGREEMENTS. The Company represents, warrants and
agrees that (i) it has not entered into, and shall not, on or after the date of
this Agreement, enter into any agreement that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Company to register any
debt securities of the Company under the Securities Act unless the rights so
granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its
security holders (other than the Holders of Transfer Restricted Securities in
such capacity) shall have the right to include any securities of the Company in
any Shelf Registration or Registered Exchange Offer other than Transfer
Restricted Securities.
(k) SEVERABILITY. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
18
<PAGE>
S-1
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the Initial Purchaser.
Very truly yours,
NBTY, INC.
By: /s/ Harvey Kamil
-----------------------------
Name: Harvey Kamil
Title: Executive Vice President,
Chief Financial Officer and
Secretary
Accepted:
CHASE SECURITIES INC.
By: /s/ James P. Casey
------------------------------
Name: James P. Casey
Title: Managing Director
<PAGE>
ANNEX A
-------
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
-------
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities 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 Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
-------
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
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 Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers for
their own account pursuant to the Registered 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
Securities 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 at 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 or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission 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.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Registered Exchange Offer (including the expenses of one counsel
for the Holders of the Securities) other than commissions or concessions of any
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act. The Company will be indemnified by the Holders, severally,
against certain liabilities, including liabilities under the Securities Act.
<PAGE>
ANNEX D
-------
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO.
Name:
Address:
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
EX-5.1
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Second Floor
Washington, D.C. 20036-1800
November 5, 1997
NBTY, Inc.
90 Orville Drive
Bohemia, NY 11716
Ladies and Gentlemen:
You have requested our opinion as special securities counsel to NBTY, Inc.,
a Delaware corporation (the "Company"), in connection with the preparation and
filing of the Company's Registration Statement on Form S-4 (the "Registration
Statement") relating to the proposed offer to exchange (the "Exchange Offer")
the Company's 8-5/8% Senior Subordinated Notes due 2007, Series B (the "Exchange
Notes"), for all outstanding 8-5/8% Senior Subordinated Notes due 2007 (the
"Original Notes") of the Company, to be issued pursuant to an Indenture, dated
as of September 23, 1997, by and between the Company and IBJ Schroder Bank &
Trust Company (the "Trustee").
We have participated in the preparation of the Registration Statement and,
in connection therewith, have examined and relied upon the originals or copies
of such records, agreements, documents and other instruments, including the
Restated Certificate of Incorporation, the Bylaws of the Company, the minutes of
the meetings of the Company's Board of Directors to date relating to the
authorization and issuance of the Exchange Notes and have made such inquiries of
such officers and representatives as we have deemed relevant and necessary as
the basis for the opinion hereinafter set forth. In such examination, we have
assumed, without independent verification, the genuineness of all signatures
(whether original or photostatic), the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, and the conformity
to authentic original documents of all documents submitted to us as certified or
photostatic copies. We have assumed, without independent verification, the
accuracy of the relevant facts stated therein.
<PAGE>
NBTY, Inc.
November 5, 1997
Page 2
As to any other facts material to the opinion expressed herein that were
not independently established or verified, we have relied upon statements and
representations of officers and employees of the Company.
Based upon the foregoing and subject to the qualifications set forth below,
we are of the opinion that:
The Exchange Notes have been duly authorized, executed and delivered by the
Company, authenticated in accordance with the terms of the Indenture, and when
issued in the manner described in the Registration Statement against payment
therefor, the Exchange Notes will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms, except to
the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization or other laws relating to or affecting enforcement of creditors'
rights or by general equity principles.
To the extent that the obligations of the Company under the Indenture may
be dependent upon such matters, we assume for purposes of this opinion that the
Trustee is duly organized, validly existing and in good standing under the
applicable laws of the jurisdiction of organization of the Trustee; that the
Trustee is in compliance generally with respect to acting as a trustee under the
Indenture, and with all applicable laws and regulations; and that the Trustee
has the requisite organizational and legal power and authority to perform its
obligation under the Indenture.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm and this opinion under
the heading "Legal Matters" in the prospectus comprising a part of such
Registration Statement and any amendment thereto. In giving such consent, we do
not hereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
KIRKPATRICK & LOCKHART LLP
By: /S/ SIMON M. NADLER
-----------------------
Simon M. Nadler
EX-10.1
Execution Copy
================================================================================
CREDIT AND GUARANTEE AGREEMENT
Dated as of September 23, 1997
among
NBTY, INC.,
A BORROWER,
HOLLAND & BARRETT HOLDINGS LIMITED,
AS FOREIGN SUBSIDIARY BORROWER,
The Several Lenders from Time
to Time Parties Hereto,
and
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
------------------------------------
CHASE SECURITIES INC.,
AS ARRANGER
================================================================================
[LOGO] CHASE
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS...................................................... 1
1.1 Defined Terms.................................................. 1
1.2 Other Definitional Provisions.................................. 18
SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS.............................................. 19
2.1 Revolving Credit Commitments................................... 19
2.2 Procedure for Revolving Credit Borrowing....................... 19
2.3 Repayment of Revolving Credit Loans;
Evidence of Debt....................................... 20
2.4 Termination or Reduction of Revolving
Credit Commitments..................................... 21
2.5 Swing Line Commitment.......................................... 21
SECTION 3. AMOUNT AND TERMS OF POUNDS STERLING
COMMITMENT............................................... 23
3.1 Pounds Sterling Commitments.................................... 23
3.2 Making the Pounds Sterling Loans............................... 23
3.3 Repayment of Pounds Sterling Loans;
Evidence of Debt....................................... 24
SECTION 4. LETTERS OF CREDIT................................................ 25
4.1 Letters of Credit.............................................. 25
4.2 Procedure for Issuance of Letters of Credit.................... 26
4.3 Participating Interests........................................ 26
4.4 Payments....................................................... 26
4.5 Further Assurances............................................. 27
4.6 Obligations Absolute........................................... 27
4.7 Letter of Credit Application................................... 28
4.8 Purpose of Letters of Credit................................... 28
SECTION 5. GENERAL PROVISIONS............................................... 28
5.1 Interest Rates and Payment Dates............................... 28
5.2 Conversion and Continuation Options............................ 29
5.3 Minimum Amounts of Tranches.................................... 30
5.4 Optional and Mandatory Prepayments............................. 30
5.5 Commitment Fees; Other Fees.................................... 31
5.6 Computation of Interest and Fees............................... 32
5.7 Inability to Determine Interest Rate........................... 32
5.8 Pro Rata Treatment and Payments................................ 33
5.9 Illegality..................................................... 35
5.10 Requirements of Law........................................... 35
5.11 Indemnity..................................................... 36
5.12 Taxes......................................................... 37
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5.13 Use of Proceeds............................................... 39
5.14 Change in Lending Office; Replacement of
Lender................................................. 39
SECTION 6. REPRESENTATIONS AND WARRANTIES................................... 39
6.1 Financial Condition............................................ 39
6.2 No Change...................................................... 40
6.3 Corporate Existence; Compliance with Law....................... 40
6.4 Corporate Power; Authorization;
Enforceable Obligations................................ 41
6.5 No Legal Bar................................................... 41
6.6 No Material Litigation......................................... 41
6.7 No Default..................................................... 41
6.8 Ownership of Property; Liens................................... 41
6.9 Intellectual Property.......................................... 42
6.10 No Burdensome Restrictions.................................... 42
6.11 Taxes......................................................... 42
6.12 Federal Regulations........................................... 42
6.13 ERISA......................................................... 43
6.14 Investment Company Act; Other Regulations..................... 43
6.15 Subsidiaries.................................................. 43
6.16 Environmental Matters......................................... 43
6.17 Solvency...................................................... 44
6.18 Security Documents............................................ 44
6.19 Accuracy of Information....................................... 45
SECTION 7. CONDITIONS PRECEDENT............................................. 45
7.1 Conditions to Closing Date..................................... 45
7.2 Conditions to Each Extension of Credit......................... 48
7.3 Conditions to Initial Extension of Credit
to the Foreign Subsidiary Borrower..................... 49
SECTION 8. AFFIRMATIVE COVENANTS............................................ 50
8.1 Financial Statements........................................... 50
8.2 Certificates; Other Information................................ 51
8.3 Payment of Obligations......................................... 52
8.4 Maintenance of Existence....................................... 52
8.5 Maintenance of Property; Insurance............................. 52
8.6 Inspection of Property; Books and Records;
Discussions............................................ 52
8.7 Notices........................................................ 52
8.8 Environmental Laws ............................................ 53
8.9 Additional Subsidiaries........................................ 53
SECTION 9. NEGATIVE COVENANTS............................................... 54
9.1 Financial Condition Covenants.................................. 54
9.2 Limitation on Indebtedness..................................... 56
9.3 Limitation on Liens............................................ 57
9.4 Limitation on Guarantee Obligations............................ 58
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9.5 Limitation on Fundamental Changes.............................. 59
9.6 Limitation on Sale of Assets................................... 59
9.7 Limitation on Dividends and Other
Restricted Payments.................................... 59
9.8 Limitation on Capital Expenditures............................. 60
9.9 Limitation on Investments, Loans and
Advances............................................... 60
9.10 Limitation on Optional Payments and
Modifications of Debt Instruments...................... 60
9.11 Limitation on Transactions with Affiliates.................... 60
9.12 Limitation on Sales and Leasebacks............................ 61
9.13 Limitation on Changes in Fiscal Year.......................... 61
9.14 Limitation on Negative Pledge Clauses......................... 61
9.15 Limitation on Lines of Business............................... 61
SECTION 10. GUARANTEE....................................................... 61
10.1 Guarantee..................................................... 61
10.2 No Subrogation................................................ 62
10.3 Amendments, etc. with respect to the
Foreign Subsidiary Obligations;
Waiver of Rights....................................... 62
10.4 Guarantee Absolute and Unconditional.......................... 63
10.5 Reinstatement................................................. 64
10.6 Payments...................................................... 64
SECTION 11. EVENTS OF DEFAULT............................................... 64
SECTION 12. THE ADMINISTRATIVE AGENT AND THE ARRANGER....................... 68
12.1 Appointment................................................... 68
12.2 Delegation of Duties.......................................... 68
12.3 Exculpatory Provisions........................................ 68
12.4 Reliance by Administrative Agent.............................. 68
12.5 Notice of Default............................................. 69
12.6 Non-Reliance on Administrative Agent and
Other Lenders.......................................... 69
12.7 Indemnification............................................... 70
12.8 Administrative Agent in Its Individual
Capacity............................................... 70
12.9 Successor Administrative Agent................................ 70
12.10 Issuing Lender and Collateral Agent.......................... 71
SECTION 13. MISCELLANEOUS................................................... 71
13.1 Amendments and Waivers........................................ 71
13.2 Notices....................................................... 72
13.3 No Waiver; Cumulative Remedies................................ 73
13.4 Survival of Representations and Warranties.................... 73
13.5 Payment of Expenses and Taxes................................. 73
13.6 Successors and Assigns; Participation and
Assignments............................................ 74
13.7 Adjustments; Set-off.......................................... 76
13.8 Counterparts.................................................. 77
13.9 Severability.................................................. 77
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13.10 Integration.................................................. 77
13.11 GOVERNING LAW................................................ 77
13.12 Submission to Jurisdiction; Waivers.......................... 77
13.13 Acknowledgements............................................. 78
13.14 WAIVERS OF JURY TRIAL........................................ 78
13.15 Power of Attorney............................................ 78
13.16 Judgment..................................................... 79
13.17 Confidentiality.............................................. 79
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SCHEDULES:
I Commitments; Addresses
II Domestic Subsidiaries; Foreign Subsidiaries
6.1 Contingent Liabilities
6.6 Litigation
6.8 Real Property Owned and Leased
9.2 Existing Indebtedness
9.3 Existing Liens
9.4 Existing Guarantee Obligations
EXHIBITS:
A-1 Form of Revolving Credit Note
A-2 Form of Swing Line Note
B Form of Guarantee and Collateral Agreement
C Form of Swing Line Loan Participation
Certificate
E Form of Assignment and Acceptance
F-1 Form of Opinion of Michael C. Duban
F-2 Form of Opinion of Allen and Overy
G Form of Closing Certificate
H Form of Tax Certificate
I Form of Solvency Certificate
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CREDIT AND GUARANTEE AGREEMENT, dated as of September 23, 1997, among
NBTY, INC., a Delaware corporation (the "COMPANY"), HOLLAND & BARRETT HOLDINGS
LIMITED (the "FOREIGN SUBSIDIARY BORROWER" and together with the Company, the
"BORROWERS"), the several banks and other financial institutions from time to
time parties hereto (the "LENDERS") and THE CHASE MANHATTAN BANK, a New York
banking corporation, as administrative agent for the Lenders hereunder (as
hereinafter defined, the "ADMINISTRATIVE AGENT").
W I T N E S S E T H :
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WHEREAS, on August 7, 1997, the Company acquired (the "HOLLAND &
BARRETT ACQUISITION") all of the outstanding capital stock of Holland & Barrett
Holdings Limited; and
WHEREAS, the Borrowers have requested the Lenders to establish a
$50,000,000 revolving credit facility (the "REVOLVING CREDIT FACILITY") pursuant
to which revolving credit loans may be made, subject to the limits set forth
herein, to the Borrowers and letters of credit may be issued under the Revolving
Credit Facility for the account of the Borrowers; and
WHEREAS, the proceeds of the Revolving Credit Facility will be used to
refinance a portion of the interim indebtedness incurred in connection with the
Holland & Barrett Acquisition and to finance the continuing operations of the
Borrowers; and
WHEREAS, the Lenders are willing to provide such Revolving Credit
Facility but only on the terms and conditions hereof;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein set forth, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ABR LOANS": Loans, the rate of interest applicable to which is based
upon the Alternate Base Rate.
"ACQUISITION": any transaction or series of related transactions by
which the Company or any of its Subsidiaries (a) acquires any going
business or all or substantially all of the assets of any Person, whether
through purchase of assets, merger or otherwise or (b) directly or
indirectly acquires (in one transaction or in a series of related
transactions) at least (i) a majority (in number of votes) of the Capital
Stock having ordinary voting power for the election of directors (or other
managers) of any Person or (ii) a majority of the ownership interests in
any Person.
"ACQUISITION DOCUMENTS": all agreements, instruments or certificates
delivered in connection with the Holland & Barrett Acquisition.
"AFFILIATE": of any Person, (a) any other Person (other than a wholly
owned Subsidiary of such Person) which, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person
or (b) any other Person who is a director or officer of (i) such Person,
(ii) any Subsidiary of such Person or (iii) any Person described in clause
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(a) above. For purposes of this definition, a Person shall be deemed to be
"controlled by" such other Person if such other Person possesses, directly
or indirectly, power either to (A) vote 10% or more of the securities
having ordinary voting power for the election of directors of such first
Person or (B) direct or cause the direction of the management and policies
of such first Person whether by contract or otherwise.
"AGGREGATE AVAILABLE REVOLVING CREDIT COMMITMENTS": as at any date of
determination with respect to all Lenders, an amount in U.S. Dollars equal
to the Available Revolving Credit Commitments of all Lenders on such date.
"AGGREGATE POUNDS STERLING OUTSTANDING": as at any date of
determination with respect to any Lender, an amount in Pounds Sterling
equal to the aggregate unpaid principal amount of such Lender's Pounds
Sterling Loans.
"AGGREGATE REVOLVING CREDIT COMMITMENTS": the aggregate amount of the
Revolving Credit Commitments of all the Lenders.
"AGGREGATE REVOLVING CREDIT OUTSTANDING": as at any date of
determination with respect to any Lender, the sum of (a) the aggregate
unpaid principal amount of such Lender's Revolving Credit Loans on such
date and (b) such Lender's Revolving Credit Commitment Percentage of the
aggregate Letter of Credit Obligations and Swing Line Loans on such date
and (c) the U.S. Dollar Equivalent of the Aggregate Pounds Sterling
Outstanding of such Lender.
"AGREEMENT": this Credit and Guarantee Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"AGREEMENT CURRENCY": as defined in subsection 13.16(b).
"ALTERNATE BASE RATE": for any day, a rate of interest per annum equal
to the higher of (i) the Prime Rate for such day and (ii) the sum of
Federal Funds Effective Rate for such day plus 1/2% per annum. For purposes
hereof: "PRIME RATE" means a rate per annum equal to the prime rate of
interest announced by Chase from time to time, changing when and as said
prime rate changes; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any
day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for the day
of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. Any change in
the Alternate Base Rate due to a change in the Prime Rate or the Federal
Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"ANNUALIZED": with respect to the determination of any financial
results for any period (a) if such period is the period ending on September
30, 1997, the applicable financial result for the fiscal quarter ended on
such date multiplied by four (4), (b) if such period is the period ending
on December 31, 1997, the applicable financial result for the two fiscal
quarters ended on such date multiplied by two (2), (c) if such period is
the period ending on March 31, 1998, the applicable financial result for
the three fiscal quarters ended on such date multiplied by four-thirds
(4/3) and (d) for any period ending thereafter, the applicable financial
result for the four fiscal quarters ended on such date.
"APPLICABLE MARGIN": for each Type of Loan and for purposes of Section
5.5, the rate per annum set forth under the relevant column heading below:
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Applicable Margin for Applicable Margin
Eurodollar Loans and for Alternate Base Applicable
Pounds Sterling Loans Rate Loans Commitment Fee
--------------------- ------------------ --------------
1.50% .50% 0.375%
; PROVIDED that in the event that the ratio of Consolidated Indebtedness of
the Company and its Subsidiaries to Consolidated EBITDA of the Company and
its Subsidiaries, as most recently determined in accordance with subsection
8.1(a) or (b), is as set forth in the relevant column heading below for any
quarterly period, any such Applicable Margin with respect to Loans and the
commitment fee shall be as provided in the relevant column heading below,
but in no event shall any such reductions be effective prior to December
31, 1997:
Relevant Ratio Applicable Applicable Applicable
of Consolidated Margin For Margin for Margin for
Indebtedness to Eurodollar Loans Alternate Base Commitment Fee
Consolidated and Pounds Sterling Rate Loans
EBITDA Loans
---------------- ------------------- --------------- --------------
Greater than or equal 1.75% 0.75% 0.375%
to 3.50x
Less than 3.50x but greater 1.50% 0.50% 0.375%
than or equal to 3.00x
Less than 3.00x but greater 1.25% 0.25% 0.250%
than or equal to 2.50x
Less than 2.50x 1.00% -0- 0.250%
if and in the event the financial statements required to be delivered
pursuant to subsection 8.1(a) or 8.1(b), as applicable, and the related
compliance certificate required to be delivered pursuant to subsection
8.2(b), are delivered on or prior to the date when due (or, in the case of
the fourth quarterly period of each fiscal year of the Company, if
financial statements which satisfy the requirements of, and are delivered
within the time period specified in, subsection 8.1(b) and a related
compliance certificate which satisfies the requirements of, and is
delivered within the time period specified in, subsection 8.2(b), with
respect to any such quarterly period are so delivered within such time
periods), then the Applicable Margin during the period from the date that
is five Business Days later than the date upon which such financial
statements were due to be delivered shall be the Applicable Margin as set
forth in the relevant column heading above; PROVIDED, HOWEVER, that in the
event that the financial statements delivered pursuant to subsection 8.1(a)
or 8.1(b), as applicable, and the related compliance certificate required
to be delivered pursuant to subsection 8.2(b), are not delivered when due,
then:
(a) if such financial statements and certificate are delivered
after the date such financial statements and certificate were
required to be delivered (without giving effect to any applicable
cure period) and the Applicable Margin increases from that
previously in effect as a result of the delivery of such financial
statements, then the Applicable Margin during the period from the
date upon which such financial statements were required to be
delivered (without giving effect to any applicable cure period)
until the date upon which they actually are delivered shall, except
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as otherwise provided in clause (c) below, be the Applicable Margin
as so increased;
(b) if such financial statements and certificate are delivered
after the date such financial statements and certificate were
required to be delivered and the Applicable Margin decreases from
that previously in effect as a result of the delivery of such
financial statements, then such decrease in the Applicable Margin
shall not become applicable until the date upon which the financial
statements and certificate actually are delivered; and
(c) if such financial statements and certificate are not
delivered prior to the expiration of the applicable cure period,
then, effective upon such expiration, for the period from the date
upon which such financial statements and certificate were required
to be delivered (after the expiration of the applicable cure period)
until two Business Days following the date upon which they actually
are delivered, the Applicable Margin in respect of Revolving Credit
Loans shall be 2-1/2%, in the case of Eurodollar Loans, and 1-1/2%,
in the case of Alternate Base Rate Loans, and 1/2%, in the case of
subsection 5.5 (it being understood that the foregoing shall not
limit the rights of the Administrative Agent and the Lenders set
forth in Section 11).
"ASSET SALE": any sale, sale-leaseback, or other disposition by the
Company or any Subsidiary thereof of any of its property or assets,
including the stock of any Subsidiary, other than any sale, sale-leaseback
or other disposition permitted under subsections 9.6(a) through (d) or
subsection 9.12.
"ASSIGNEE": as defined in subsection 13.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENT": as at any date of
determination with respect to any Lender, an amount in U.S. Dollars equal
to the excess, if any, of (a) the amount of such Lender's Revolving Credit
Commitment in effect on such date OVER (b) the Aggregate Revolving Credit
Outstanding of such Lender on such date.
"BENEFITTED LENDER": as defined in subsection 13.7.
"BOARD": the Board of Governors of the Federal Reserve System (or any
successor thereto).
"BORROWERS": as defined in the preamble hereto.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2, 2.5(a) 3.2 or 4.2 as a date on which a Borrower requests
the Lenders to make Loans hereunder or issue a Letter of Credit.
"BUSINESS DAY": (a) for all purposes other than as covered by clause
(b) below, a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to
close and (b) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans and Loans
in Pounds Sterling, any day which is a Business Day, described in clause
(a) and which is also a London Banking Day.
"CAPITAL EXPENDITURES": direct or indirect (by way of the acquisition
of securities of a Person or the expenditure of cash or the incurrence of
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Indebtedness) expenditures (other than expenditures in connection with
Acquisitions permitted hereunder) in respect of the purchase or other
acquisition of fixed or capital assets.
"CAPITAL STOCK": any and all shares, interests, participation or other
equivalents (however designated) of capital stock of a corporation, any and
all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants or options to purchase any of the foregoing.
"CASH EQUIVALENTS": (a) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed or insured by the
United States Government or any agency thereof, (b) certificates of deposit
and eurodollar time deposits with maturities of one year or less from the
date of acquisition and overnight bank deposits of any Lender or of any
commercial bank having capital and surplus in excess of $500,000,000, (c)
repurchase obligations of any Lender or of any commercial bank satisfying
the requirements of clause (b) of this definition, having a term of not
more than 30 days with respect to securities issued or fully guaranteed or
insured by the United States Government, (d) commercial paper of a domestic
issuer rated at least A-2 by Standard and Poor's Rating Group ("S&P") or
P-2 by Moody's Investors Service, Inc. ("MOODY'S"), (e) securities with
maturities of one year or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States, by
any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of
which state, commonwealth, territory, political subdivision, taxing
authority or foreign government (as the case may be) are rated at least A
by S&P or A by Moody's (or the equivalent rating by either such rating
agency for such type of securities), (f) securities with maturities of one
year or less from the date of acquisition backed by standby letters of
credit issued by any commercial bank satisfying the requirements of clause
(b) of this definition or (g) shares of money market mutual or similar
funds which invest exclusively in assets satisfying the requirements of
clauses (a) through (f) of this definition.
"CHASE": The Chase Manhattan Bank.
"CLASS": the classification of loans as Revolving Credit Loans, Swing
Line Loans or Pounds Sterling Loans, each of which categories shall be
deemed to be a "Class" of Loans.
"CLOSING DATE": the date on or before October 31, 1997 on which all of
the conditions precedent set forth in subsection 7.1 shall have been met or
waived.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COMMERCIAL LETTERS OF CREDIT": as defined in subsection 4.1(ii).
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments, Swing Line Commitment and the Pounds Sterling Commitments.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which includes the Company and
which is treated as a single employer under Section 414 of the Code.
"CONSOLIDATED DEBT SERVICE": for any period, the sum of (a) the
Annualized Consolidated Interest Expense of the Company for such period,
PLUS (b) the principal amounts of all long-term indebtedness payable by the
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Company and its Subsidiaries during the next succeeding twelve-month period
determined in accordance with GAAP, excluding, however, from such
indebtedness the Loans during the final twelve months of the Revolving
Credit Commitment Period.
"CONSOLIDATED EBITDA": for any period, the sum of (i) Annualized
Consolidated Net Income for such period, (ii) Annualized Consolidated
Interest Expense for such period, (iii) the Annualized amount of taxes,
depreciation and amortization deducted from earnings in determining such
Consolidated Net Income and (iv) to the extent deducted in determining such
Consolidated Net Income, Annualized extraordinary charges of the Company
relating to the Holland & Barrett Acquisition arising during the fourth
fiscal quarter of 1997, not to exceed $6,000,000.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO": for any period, the ratio
of (i) the result of (A) the Consolidated EBITDA of the Company and its
Subsidiaries minus (B) their Annualized Capital Expenditures to (ii) the
Consolidated Debt Service of the Company and its Subsidiaries, in the case
of clause (i) and (ii), for such period.
"CONSOLIDATED INDEBTEDNESS": at a particular date, all Indebtedness of
the Company and its Subsidiaries, determined on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE": for any fiscal period, the amount
which would, in conformity with GAAP, be set forth opposite the caption
"interest expense" (or any like caption) on a consolidated income statement
of the Company and its Subsidiaries for such period.
"CONSOLIDATED NET INCOME": for any fiscal period, the consolidated net
income (or deficit) of the Company and its Subsidiaries for such period
(taken as a cumulative whole), determined on a consolidated basis in
accordance with GAAP; PROVIDED, that any non-cash extraordinary gains and
losses shall be excluded in determining Consolidated Net Income.
"CONSOLIDATED NET WORTH": at a particular date, all amounts which
would, in conformity with GAAP, be included on a consolidated balance sheet
of the Company and its Subsidiaries under "stockholders' equity" (or any
like caption) as of such date.
"CONTINUING DIRECTORS": the directors of the Company on the Closing
Date and each other director, if such other director's nomination for
election to the Board of Directors of the Company is recommended by a
majority of the then Continuing Directors.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"DEFAULT": any of the events specified in Section 11, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DOLLARS", "U.S. DOLLARS" and "$": dollars in lawful currency of the
United States of America.
"DOMESTIC SUBSIDIARY": any Subsidiary other than a Foreign Subsidiary.
"ENGLISH SECURITY DOCUMENTS": the collective reference to (i) a
Debenture by the Company in favor of the Administrative Agent for the
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benefit of the Lenders of 65% of the Capital Stock of Holland & Barrett and
65% of the Capital Stock of Vitamin World Limited in form and substance
reasonably satisfactory to the Administrative Agent and (ii) Agreements in
form and substance satisfactory to the Administrative Agent providing for a
lien on the material assets of the Foreign Subsidiary Borrower securing its
Obligations.
"ENVIRONMENTAL COMPLAINT": any complaint, order, citation, notice or
other written communication from any Person with respect to the existence
or alleged existence of a violation of any Environmental Laws or legal
liability resulting from air emissions, water discharges, noise emissions,
Hazardous Material or any other environmental, health or safety matter.
"ENVIRONMENTAL LAWS": any and all applicable Federal, foreign, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental Authority and any and all
common law requirements, rules and bases of liability regulating, relating
to or imposing liability or standards of conduct concerning pollution or
protection of the environment or the Release or threatened Release of
Hazardous Materials, as now or hereafter in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY LIABILITIES": at any time, all reserve requirements in
effect at such time (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve System.
"EUROCURRENCY RATE": with respect to any Pounds Sterling Loan for the
relevant Interest Period, the rate determined by the Administrative Agent
to be the rate at which Chase offers to place deposits in Pounds Sterling
with first-class banks in the London interbank market at approximately 11
A.M. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of Chase's relevant Pounds
Sterling Loan and having a maturity approximately equal to such Interest
Period. The Eurocurrency Rate shall be rounded to the next higher multiple
of 1/16 of 1% if the rate is not such a multiple.
"EURODOLLAR BASE RATE": with respect to a Eurodollar Loan for the
relevant Interest Period, the applicable London interbank offered rate for
deposits in U.S. Dollars appearing on Telerate Page 3750 as of 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period, and having a maturity approximately equal to such Interest Period.
If no London interbank offered rate of such maturity then appears on
Telerate Page 3750, then the Eurodollar Base Rate shall be equal to the
London interbank offered rate for deposits in U.S. Dollars maturing
immediately before or immediately after such maturity, whichever is higher,
as determined by the Administrative Agent from Telerate Page 3750. If
Telerate Page 3750 is not available, the applicable Eurodollar Base Rate
for the relevant Interest Period shall be the rate determined by the
Administrative Agent to be the rate at which Chase offers to place deposits
in U.S. Dollars with first-class banks in the London interbank market at
approximately 11:00 A.M. (London time) two Business Days prior to the first
day of such Interest Period, in the approximate amount of Chase's relevant
portion of the Eurodollar Loan and having a maturity approximately equal to
such Interest Period.
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"EURODOLLAR LOANS": Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to a Eurodollar Loan for the relevant
Interest Period, the quotient of (a) the Eurodollar Base Rate applicable to
such Interest Period, divided by (b) one minus the Eurocurrency Liabilities
(expressed as a decimal) applicable to such Interest Period. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate
is not such a multiple.
"EVENT OF DEFAULT": any of the events specified in Section 11, PROVIDED
that any requirement for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as amended.
"EXTENSION OF CREDIT": as to any Lender, the making of a Loan by such
Lender and, with respect to any Lender, the issuance of any Letter of
Credit.
"FINANCING LEASE": (a) any lease of property, real or personal, the
obligations under which are capitalized on a consolidated balance sheet of
the Company and its Subsidiaries and (b) any other such lease to the extent
that the then present value of the minimum rental commitment thereunder
should, in accordance with GAAP, be capitalized on a balance sheet of the
lessee.
"FOREIGN SUBSIDIARY": as to any Person, any Subsidiary of such Person
which is organized under the laws of any jurisdiction outside of the
country of the jurisdiction of organization of such Person.
"FOREIGN SUBSIDIARY BORROWER": as defined in the preamble hereto.
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GEL CAP FACILITY": the soft gelatin capsule manufacturing facility
located at Cartwright Loop Industrial Park, Church Street, Bayport, New
York.
"GOVERNMENTAL AUTHORITY": any nation or government, any state, province
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"GUARANTEE AND COLLATERAL AGREEMENT": the Guarantee and Collateral
Agreement, substantially in the form of Exhibit B, to be executed and
delivered on the Closing Date by the Company and each of its Domestic
Subsidiaries, as the same may be amended, supplemented or otherwise
modified.
"GUARANTEE OBLIGATION": as to any Person, any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other Person (the
"PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor
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or otherwise to maintain the net worth or solvency of the primary obligor,
(c) to purchase property, securities or services primarily for the purpose
of assuring the owner of any such primary obligation of the ability of the
primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of any such primary obligation against
loss in respect thereof; PROVIDED, HOWEVER, that the term Guarantee
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guarantee
Obligation shall be deemed to be an amount equal to the value as of any
date of determination of the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made (unless
such Guarantee Obligation shall be expressly limited to a lesser amount, in
which case such lesser amount shall apply) or, if not stated or
determinable, the value as of any date of determination of the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith.
"HAZARDOUS MATERIALS": any solid wastes, toxic or hazardous substances,
materials or wastes, defined, listed, classified or regulated as such in or
under any Environmental Laws, including, without limitation, asbestos,
petroleum or petroleum products (including gasoline, crude oil or any
fraction thereof), polychlorinated biphenyls, and urea-formaldehyde
insulation, and any other substance the presence of which may give rise to
liability under any Environmental Law.
"HEDGE AGREEMENT": any interest rate protection agreement, interest
rate swap or other interest rate hedge arrangement, or currency swap or
other currency hedge arrangement (other than any interest rate cap or other
similar agreement or arrangement pursuant to which the Company has no
credit exposure), to or under which the Company or any of its Subsidiaries
is a party or a beneficiary.
"HEDGE AGREEMENT OBLIGATIONS": all obligations of the Company under any
one or more Hedge Agreements to make payments to the counterparties
thereunder upon the occurrence of a termination event or similar event
thereunder.
"HOLLAND & BARRETT": Holland & Barrett Holdings Limited.
"HOLLAND & BARRETT ACQUISITION": as defined in the recitals hereto.
"INDEBTEDNESS": of a Person, at a particular date, the sum (without
duplication) at such date of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services in respect of which such
Person is liable as obligor (other than current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices), (b) indebtedness secured by any Lien on any property or asset
owned or held by such Person regardless of whether the indebtedness secured
thereby shall have been assumed by or is a primary liability of such
Person, (c) obligations of such Person under Financing Leases, (d) the face
amount of all letters of credit issued for the account of such person and,
without duplication, the unreimbursed amount of all drafts drawn thereunder
and (e) obligations (in the nature of principal or interest) of such Person
in respect of acceptances or similar obligations issued or created for the
account of such Person.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is
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outstanding, (b) as to any Eurodollar Loan or Pounds Sterling Loan having
an Interest Period of three months or less, the last day of such Interest
Period and (c) as to any Eurodollar Loan or Pounds Sterling Loan having an
Interest Period longer than three months, (i) each day which is three
months after the first day of such Interest Period and (ii) the last day of
such Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan or Pounds
Sterling Loan:
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such
Eurodollar Loan or Pounds Sterling Loan and ending one, two, three
or six months thereafter, as selected by the relevant Borrower in
its notice of borrowing or notice of conversion, as the case may
be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan
or Pounds Sterling Loan and ending one, two, three or six months
thereafter, as selected by the relevant Borrower by irrevocable
notice to the Administrative Agent not less than three Business
Days prior to the last day of the then current Interest Period with
respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period pertaining to a Eurodollar Loan
or Pounds Sterling Loan would otherwise end on a day that is not
a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension
would be to carry such Interest Period into another calendar
month in which event such Interest Period shall end on the
immediately preceding Business Day;
(ii) any Interest Period applicable to a Eurodollar Loan or
Pounds Sterling Loan that would otherwise extend beyond the
Revolving Credit Termination Date shall end on the Revolving
Credit Termination Date; and
(iii) any Interest Period pertaining to a Eurodollar Loan or
Pounds Sterling Loan that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such
Interest Period) shall end on the last Business Day of a calendar
month.
"ISSUING LENDER": Chase or any of its Affiliates, in its capacity as
issuer of the Letters of Credit and any other Lender which the Company, the
Administrative Agent and the Majority Lenders shall have approved, in its
capacity as issuer of the Letters of Credit.
"JUDGMENT CURRENCY": as defined in subsection 13.16(b).
"LENDERS": as defined in the preamble hereto.
"LETTER OF CREDIT APPLICATIONS": (a) in the case of Standby Letters of
Credit, a letter of credit application for a Standby Letter of Credit on
the standard form of the applicable Issuing Lender for standby letters of
credit, and (b) in the case of Commercial Letters of Credit, a letter of
credit application for a Commercial Letter of Credit on the standard form
of the applicable Issuing Lender for commercial letters of credit.
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"LETTER OF CREDIT OBLIGATIONS": at any particular time, all liabilities
of the Company with respect to Letters of Credit, whether or not any such
liability is contingent, including (without duplication) the sum of (a) the
aggregate undrawn face amount of all Letters of Credit then outstanding
plus (b) the aggregate amount of all unpaid Reimbursement Obligations.
"LETTERS OF CREDIT": as defined in subsection 4.1(ii).
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement (other than a bank or similar deposit account), encumbrance,
lien (statutory or other), or preference, priority or other security
agreement or similar preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable law of
any jurisdiction in respect of any of the foregoing).
"LOAN DOCUMENTS": the collective reference to this Agreement, any
Notes, any documents or instruments evidencing or governing the Security
Documents.
"LOAN PARTIES": the collective reference to the Company, the Foreign
Subsidiary Borrower and each guarantor or grantor party to any Security
Document.
"LOANS": the collective reference to the Revolving Credit Loans, the
Swing Line Loans and the Pounds Sterling Loans.
"LONDON BANKING DAY": any day on which banks in London are open for
general banking business, including dealings in foreign currency and
exchange.
"MAJORITY LENDERS": at any time, Lenders the Revolving Credit
Commitment Percentages of which aggregate more than 50%.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole or (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"MATERIAL ENVIRONMENTAL AMOUNT": $500,000.
"MATERIAL FOREIGN SUBSIDIARY": any Foreign Subsidiary accounting for 5%
or more of the assets or revenues of the Company and its consolidated
Subsidiaries, taken as a whole.
"MOODY'S": Moody's Investors Service, Inc. or any successor thereto.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"NON-EXCLUDED TAXES": as defined in subsection 5.12(a).
"NOTES": the collective reference to the Revolving Credit Notes, Swing
Line Notes and any note delivered pursuant to subsection 7.3(e).
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"OBLIGATIONS": collectively, the unpaid principal of and interest on
the Loans, the Reimbursement Obligations and all other obligations and
liabilities of the Company and the Foreign Subsidiary Borrower to the
Administrative Agent, the Issuing Lender and the Lenders under or in
connection with this Agreement, the other Loan Documents and any Hedge
Agreement with any Lender (including in each case, without limitation,
interest accruing at the then applicable rate provided in this Agreement or
any other applicable Loan Document or Hedge Agreement after the maturity of
the Loans and interest accruing at the then applicable rate provided in
this Agreement or any other applicable Loan Document or Hedge Agreement
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Company,
whether or not a claim for post-filing or post-petition interest is allowed
in such proceeding), whether direct or indirect, absolute or contingent,
due or to become due, or now existing or hereafter incurred, which may
arise under, out of, or in connection with, this Agreement, the Notes, the
Letters of Credit, the Letter of Credit Applications, the other Loan
Documents or any Hedge Agreement with a Lender or any other document made,
delivered or given in connection therewith, in each case whether on account
of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agents or to the Lenders).
"PARTICIPANTS": as defined in subsection 13.6(b).
"PARTICIPATING INTEREST": with respect to any Letter of Credit (a) in
the case of the Issuing Lender, its interest in such Letter of Credit and
any Letter of Credit Application relating thereto after giving effect to
the granting of any participating interests therein pursuant hereto and (b)
in the case of each Participating Lender, its undivided participating
interest in such Letter of Credit and any Letter of Credit Application
relating thereto.
"PARTICIPATING LENDER": any Lender (other than the Issuing Lender) with
respect to its Participating Interest in a Letter of Credit.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PLEDGED STOCK": as defined in the Guarantee and Collateral Agreement
or any other Security Document.
"POUNDS STERLING": pounds sterling in lawful currency of the United
Kingdom.
"POUNDS STERLING COMMITMENT": any Lender's obligation to make Pounds
Sterling Loans pursuant to subsection 3.1.
"POUNDS STERLING LOANS": as defined in subsection 3.1.
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"PROPERTY": each parcel of real property owned or operated by the
Company and its Subsidiaries.
"REGISTER": as defined in subsection 13.6(d).
"REIMBURSEMENT OBLIGATION": the obligation of the Company to reimburse
the Issuing Lender in accordance with the terms of this Agreement and the
related Letter of Credit Application for any payment made by the Issuing
Lender under any Letter of Credit.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, escaping, leaking, dumping, disposing, spreading,
depositing or dispersing of any Hazardous Materials in, unto or onto the
environment.
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of
ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the thirty day notice period is
waived under any of subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
ss. 4043 or any successor regulation thereto.
"REQUIREMENT OF LAW": as to (a) any Person, the certificate of
incorporation and by-laws or the partnership or limited partnership
agreement or other organizational or governing documents of such Person,
and any law, treaty, rule or regulation or determination of an arbitrator
or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or
any of its property is subject, and (b) any property, any law, treaty,
rule, regulation, requirement, judgment, decree or determination of any
Governmental Authority applicable to or binding upon such property or to
which such property is subject, including, without limitation, any
Environmental Laws.
"RESPONSIBLE OFFICER": with respect to any Loan Party, the chief
executive officer, the president, the chief financial officer, any vice
president, the treasurer or the assistant treasurer of such Loan Party.
"RESTRICTED PAYMENTS": as defined in subsection 9.7.
"REVOLVING CREDIT COMMITMENT": as to any Lender at any time, its
obligation to make Revolving Credit Loans to, and/or participate in Letters
of Credit issued for the account of or Swing Line Loans to, the Company in
an aggregate amount not to exceed at any time outstanding the U.S. Dollar
amount set forth opposite such Lender's name in Schedule I under the
heading "Revolving Credit Commitment", as such amount may be reduced from
time to time pursuant to subsection 2.4 and the other applicable provisions
hereof.
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at any time,
the percentage which such Lender's Revolving Credit Commitment then
constitutes of the Aggregate Revolving Credit Commitments (or, if the
Revolving Credit Commitments have terminated or expired, the percentage
which (a) the Aggregate Revolving Credit Outstanding of such Lender at such
time then constitutes of (b) the Aggregate Revolving Credit Outstanding of
all Lenders at such time).
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"REVOLVING CREDIT COMMITMENT PERIOD": the period from and including the
Closing Date to but not including the Revolving Credit Termination Date, or
such earlier date on which the Revolving Credit Commitments shall terminate
as provided herein.
"REVOLVING CREDIT LOAN": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.3(e).
"REVOLVING CREDIT TERMINATION DATE": September 30, 2003.
"SECURITIES ACT": the Securities Act of 1933, as amended.
"SECURITY DOCUMENTS": the collective reference to the Guarantee and
Collateral Agreement and the English Security Documents and each other
pledge agreement, security document or similar agreement that may be
delivered to the Administrative Agent as collateral security for any or all
of the Obligations, in each case as amended, supplemented or otherwise
modified from time to time.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SOLVENT": with respect to any Person on a particular date, the
condition that on such date, (a) the fair value of the property of such
Person is greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (b) the present fair
salable 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 mature, (c) 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, and (d) such
Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's property would
constitute an unreasonably small amount of capital.
"STANDBY LETTERS OF CREDIT": as defined in subsection 4.1(i).
"SUBORDINATED DEBT": up to $150,000,000 in aggregate principal amount
of 8.625% Senior Subordinated Notes of the Company due 2007 having terms
and conditions satisfactory to the Lenders.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly,
through one or more intermediaries, or both, by such Person (exclusive of
any Affiliate in which such Person has a minority ownership interest).
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"SWING LINE COMMITMENT": the Swing Line Lender's obligation to make
Swing Line Loans pursuant to subsection 2.5.
"SWING LINE LENDER": Chase, in its capacity as lender of the Swing Line
Loans.
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"SWING LINE LOAN PARTICIPATION CERTIFICATE": a certificate in
substantially the form of Exhibit C, as the same may be amended,
supplemented or otherwise modified from time to time.
"SWING LINE LOANS": as defined in subsection 2.5(a).
"SWING LINE NOTE": as defined in subsection 2.3(e).
"TRANCHE": the collective reference to Eurodollar Loans or Pounds
Sterling Loans the then current Interest Periods with respect to all of
which begin on the same date and end on the same later date (whether or not
such Loans shall originally have been made on the same day).
"TRANSFEREE": as defined in subsection 13.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan, a Eurodollar Loan or
a Pounds Sterling Loan.
"UK GAAP": generally accepted accounting principles in the United
Kingdom in effect from time to time.
"U.S. DOLLAR EQUIVALENT": with respect to an amount denominated in any
currency other than U.S. Dollars, the equivalent in U.S. Dollars of such
amount, calculated on the basis of the arithmetical mean of the buy and
sell spot rates of exchange of the Administrative Agent for such currency
in the London market at 11:00 a.m. London time, two Business Days prior to
the date on which such amount is to be determined.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, the other Loan Documents or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes and any other Loan Document, and
any certificate or other document made or delivered pursuant hereto or thereto,
accounting terms relating to the Company and its Subsidiaries not defined in
subsection 1.1 and accounting terms partly defined in subsection 1.1, to the
extent not defined, shall have the respective meanings given to them under GAAP
PROVIDED that, if the Company notifies the Administrative Agent that the Company
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Company that the Majority Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
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SECTION 2. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS
2.1 REVOLING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
(each, a "REVOLVING CREDIT LOAN") in U.S. Dollars to the Company from time to
time during the Revolving Credit Commitment Period so long as after giving
effect thereto (i) the Available Revolving Credit Commitment of each Lender is
greater than or equal to zero and (ii) the Aggregate Revolving Credit
Outstanding of all Lenders do not exceed the Aggregate Revolving Credit
Commitments. During the Revolving Credit Commitment Period the Company may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the
Company and notified to the Administrative Agent in accordance with subsections
2.2 and 5.2, PROVIDED that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Revolving Credit
Termination Date.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Company may borrow
under the Revolving Credit Commitments during the Revolving Credit Commitment
Period on any Business Day, PROVIDED that the Company shall give the
Administrative Agent irrevocable notice (which notice must be received by the
Administrative Agent prior to 11:00 A.M. (New York time) at least (a) three
Business Days prior to the requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially Eurodollar Loans, or (b)
one Business Day prior to the requested Borrowing Date, otherwise), specifying
in each case (i) the amount to be borrowed, (ii) the requested Borrowing Date,
(iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a
combination thereof and (iv) if the borrowing is to be entirely or partly of
Eurodollar Loans, the amount of such Type of Loan and the length of the initial
Interest Periods therefor. Each borrowing under the Revolving Credit Commitments
shall be in an amount equal to (A) in the case of ABR Loans, $1,000,000 or a
whole multiple of $1,000,000 in excess thereof (or, if the then Aggregate
Available Revolving Credit Commitments are less than $1,000,000, such lesser
amount) and (B) in the case of Eurodollar Loans, $5,000,000 or a whole multiple
of $5,000,000 in excess thereof. Upon receipt of any such notice from the
Company, the Administrative Agent shall promptly notify each Lender thereof. Not
later than 12:00 Noon, New York City time, on each requested Borrowing Date each
Lender shall make an amount equal to its Revolving Credit Commitment Percentage
of the principal amount of the Revolving Credit Loans requested to be made on
such Borrowing Date available to the Administrative Agent at its office
specified in subsection 13.2 in U.S. Dollars and in immediately available funds.
The Administrative Agent shall on such date credit the account of the Company on
the books of such office with the aggregate of the amounts made available to the
Administrative Agent by the Lenders and in like funds as received by the
Administrative Agent.
2.3 REPAYMENT OF REVOLVING CREDIT LOANS; EVIDENCE OF DEBT. (a) The
Company hereby unconditionally promises to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of each Revolving
Credit Loan of such Lender (whether made before or after the termination or
expiration of the Revolving Credit Commitments) on the Revolving Credit
Termination Date and on such other dates and in such other amounts as may be
required from time to time pursuant to this Agreement. The Company hereby
further agrees to pay interest on the unpaid principal amount of the Revolving
Credit Loans from time to time outstanding until payment thereof in full at the
rates per annum, and on the dates, set forth in subsection 5.1.
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(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Company to such Lender
resulting from each Revolving Credit Loan of such Lender from time to time,
including the amounts of principal and interest payable thereon and paid to such
Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 13.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Company to each Lender hereunder in respect of the Revolving Credit Loans and
(iii) both the amount of any sum received by the Administrative Agent hereunder
from the Company in respect of the Revolving Credit Loans and each Lender's
share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.3(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Company therein recorded; PROVIDED, HOWEVER, that the failure
of any Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Company to repay (with applicable interest) the Revolving Credit Loans made
to the Company by such Lender in accordance with the terms of this Agreement.
(e) The Company agrees that it will execute and deliver to such Lender
(i) a promissory note of the Company evidencing the Revolving Credit Loans of
such Lender, substantially in the form of Exhibit A-1 with appropriate
insertions as to date and principal amount (each, a "REVOLVING CREDIT NOTE")
and/or (ii) a promissory note of the Company evidencing the Swing Line Loans of
such Lender, substantially in the form of Exhibit A-2 with appropriate
insertions as to date and principal amount; PROVIDED, that the delivery of such
Revolving Credit Notes and such Swing Line Notes shall not be a condition
precedent to the Closing Date.
2.4 TERMINATION OR REDUCTION OF REVOLVING CREDIT COMMITMENTS. The
Company shall have the right, upon not less than five Business Days' notice to
the Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments; PROVIDED
that no such termination or reduction shall be permitted if, after giving effect
thereto and to any prepayments of the Loans made on the effective date thereof,
the Available Revolving Credit Commitment of any Lender would not be greater
than or equal to zero. Any such reduction shall be in an amount equal to
$1,000,000 or a whole multiple of $1,000,000 in excess thereof and shall reduce
permanently the Revolving Credit Commitments then in effect.
2.5 SWING LINE COMMITMENT. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"SWING LINE LOAN"; collectively, the "SWING LINE LOANS") to the Company from
time to time during the Revolving Credit Commitment Period in an aggregate
principal amount at any one time outstanding not to exceed $5,000,000; PROVIDED
that the Swing Line Lender shall not make any Swing Line Loan if, after giving
effect thereto, the sum of the Swing Line Loans, the Revolving Credit Loans and
Letter of Credit Obligations (in each case after giving effect to the Loans
requested to be made and the Letters of Credit requested to be issued on such
date) exceed the Revolving Credit Commitments. During the Revolving Credit
Commitment Period, the Company may use the Swing Line Commitment by borrowing,
prepaying the Swing Line loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof. All Swing Line Loans shall be
made as ABR Loans and shall not be entitled to be converted into Eurodollar
Loans. The Company shall give the Swing Line Lender irrevocable notice (which
notice must be received by the Swing Line Lender prior to 12:00 Noon, New York
City time) on the requested Borrowing Date specifying the amount of the
requested Swing Line Loan which shall be in a minimum amount of $100,000 or a
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whole multiple of $100,000 in excess thereof. The proceeds of the Swing Line
Loan will be made available by the Swing Line Lender to the Company at the
office of the Swing Line Lender by 3:00 p.m. on the Borrowing Date by crediting
the account of the Company at such office with such proceeds. The Company may at
any time and from time to time prepay the Swing Line Loans, in whole or in part,
without premium or penalty, by notifying the Swing Line Lender prior to 12:00
Noon on any Business Day of the date and amount of prepayment. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein. Partial prepayments shall be in an aggregate
principal amount of $100,000 or a whole multiple of $100,000 in excess thereof.
(b) The Swing Line Lender, at any time in its sole and absolute
discretion may, on behalf of the Company (which hereby irrevocably directs the
Swing Line Lender to act on its behalf) request each Lender, including the Swing
Line Lender, to make a Revolving Credit Loan in an amount equal to such Lender's
Commitment Percentage of the amount of the Swing Line Loans outstanding on the
date such notice is given (the "REFUNDED SWING LINE LOANS"). Unless any of the
events described in paragraph (h) of Section 11 shall have occurred with respect
to the Company (in which event the procedures of paragraph (d) of this
subsection 2.5 shall apply) each Lender shall make the proceeds of its Revolving
Credit Loan available to the Administrative Agent for the account of the Swing
Line Lender at the office of the Administrative Agent specified in subsection
13.2 prior to 12:00 Noon (New York City time) in funds immediately available on
the Business Day next succeeding the date such notice is given. The proceeds of
such Revolving Credit Loans shall be immediately applied to repay the Refunded
Swing Line Loans. Effective on the day such Revolving Credit Loans are made, the
portion of the Swing Line Loans so paid shall no longer be outstanding as Swing
Line Loans, shall no longer be due under any Swing Line Note and shall be due
under the respective Revolving Credit Loans made by the Lenders in accordance
with their respective Revolving Credit Commitment Percentages.
(c) Notwithstanding anything herein to the contrary, the Swing Line
Lender shall not be obligated to make any Swing Line Loans if the conditions set
forth in subsection 7.2 have not been satisfied.
(d) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of this subsection 2.5 one of the events described in paragraph
(h) of Section 11 shall have occurred and be continuing with respect to the
Company, each Lender will, on the date such Revolving Credit Loan was to have
been made pursuant to the notice in subsection 2.5, purchase an undivided
participating interest in the Refunded Swing Line Loans in an amount equal to
(i) its Revolving Credit Commitment Percentage TIMES (ii) the Refunded Swing
Line Loans. Each Lender will immediately transfer to the Swing Line Lender, in
immediately available funds, the amount of its participation, and upon receipt
thereof the Swing Line Lender will deliver to such Lender a Swing Line Loan
Participation Certificate dated the date of receipt of such funds and in such
amount.
(e) Whenever, at any time after any Lender has purchased a
participating interest in a Swing Line Loan, the Swing Line Lender receives any
payment on account thereof, the Swing Line Lender will distribute to such Lender
its participating interest in such amount (appropriately adjusted, in the case
of interest payments, to reflect the period of time during which such Lender's
participating interest was outstanding and funded); PROVIDED, HOWEVER, that in
the event that such payment received by the Swing Line Lender is required to be
returned, such Lender will return to the Swing Line Lender any portion thereof
previously distributed by the Swing Line Lender to it.
(f) Each Lender's obligation to make the Loans referred to in
subsection 2.5(b) and to purchase participating interests pursuant to subsection
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2.5(d) shall be absolute, irrevocable and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which such Lender or the
Company may have against the Swing Line Lender, the Company or any other Person
for any reason whatsoever, (ii) the occurrence or continuance of a Default or an
Event of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Company or any other Loan Party; (iv) any breach of this
Agreement or any other Loan Document by the Company or any of its Subsidiaries
or any other Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
SECTION 3. AMOUNT AND TERMS OF POUNDS STERLING
COMMITMENT
3.1 POUNDS STERLING COMMITMENTS. Subject to the terms and conditions
hereof, each Lender severally agrees to make revolving credit loans (each, a
"POUNDS STERLING LOAN") in Pounds Sterling to the Company or the Foreign
Subsidiary Borrower from time to time during the Revolving Credit Commitment
Period so long as after giving effect thereto (a) the Available Revolving Credit
Commitment of each Lender is greater than or equal to zero, (b) the Aggregate
Revolving Credit Outstanding of all Lenders do not exceed the Aggregate
Revolving Credit Commitments and (c) the aggregate principal amount of all
Pounds Sterling Loans shall not exceed Pound Sterling equivalent of $10,000,000.
During the Revolving Credit Commitment Period, the Company or the Foreign
Subsidiary Borrower may use the Revolving Credit Commitments by borrowing,
repaying the Pounds Sterling Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof. For the purpose of determining
the Aggregate Revolving Credit Outstanding on the date of a requested Pounds
Sterling Loan, the U.S. Dollar Equivalent of the Pounds Sterling Loan then being
requested shall be aggregated with the U.S. Dollar Equivalents of all Pounds
Sterling Loans then outstanding (the U.S. Dollar Equivalent of each such
outstanding Pounds Sterling Loan to be calculated as of the date of the most
recent continuation of such Pounds Sterling Loan pursuant to subsection 3.2(d)
or, if not previously continued, the date of the initial Pounds Sterling Loan).
3.2 MAKING THE POUNDS STERLING LOANS. (a) Each Pounds Sterling Loan
shall be made on notice, given by the Company to the Administrative Agent not
later than 11:00 A.M. (London time) on the third Business Day prior to the date
of the proposed Pounds Sterling Loan. Each such notice shall specify therein (i)
the name of the Borrower, (ii) the date of such proposed Pounds Sterling Loan,
(iii) the aggregate amount of such proposed Pounds Sterling Loan and (iv) the
initial Interest Period for such Pounds Sterling Loan.
(b) The Administrative Agent shall give to each Lender prompt notice of
the Administrative Agent's receipt of the notice referred to in subsection
3.2(a). Each Lender shall, before 11:00 A.M. (London time) on the date of the
proposed Pounds Sterling Loan, make available to the account of the
Administrative Agent's office located at Trinity Tower, 9 Thomas Moore Street,
London, England E1 9YT, in immediately available funds, such Lender's Revolving
Credit Commitment Percentage of such proposed Pounds Sterling Loan in Pounds
Sterling of such Pounds Sterling Loan. After the Administrative Agent's receipt
of such funds and upon fulfillment of the applicable conditions set forth in
Section 7, the Administrative Agent will make such funds available to the
applicable Borrower at the Administrative Agent's aforesaid addresses.
(c) Each Pounds Sterling Loan shall be in an amount in Pounds Sterling
of which the U.S. Dollar Equivalent is equal to at least $1,000,000 (or, if the
then Aggregate Available Revolving Credit Commitments are less than $1,000,000,
such lesser amount).
(d) At least three Business Days' prior to the end of each Interest
Period, the Company shall give the Administrative Agent notice (a "Notice of
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Continuation"), not later than 11:00 A.M. (New York time) specifying the
duration of the next succeeding Interest Period. The Administrative Agent shall
promptly notify each Lender of its receipt of a Notice of Continuation and the
contents thereof. If, within the time period required under the terms of this
subsection 3.2(d), the Administrative Agent does not receive a Notice of
Continuation from the Company, then, upon the expiration of the Interest Period
therefor, the applicable Interest Period in respect of such Pounds Sterling
Loans shall be automatically deemed to be a period of one month commencing on
the last day of the immediately preceding Interest Period and ending one month
thereafter. Notwithstanding the first sentence of this subsection 3.2(d), no
Pounds Sterling Loans shall be continued in accordance with a Notice of
Continuation given if, on the date of the Notice of Continuation, the Borrowers
are not in compliance with subsection 3.1, unless, one or more of the Borrowers
shall repay the Pounds Sterling Loans, together with all accrued interest on the
amount prepaid, such that the Borrowers are in compliance with subsection 3.1.
Notwithstanding the foregoing, upon the expiration of any Interest Period with
respect to any Pounds Sterling Loan at any time at which a Default or Event of
Default shall have occurred and be continuing, the applicable Interest Period in
respect of such Pounds Sterling Loans shall be automatically deemed to be a
period of one month commencing on the last day of the immediately preceding
Interest Period and ending one month thereafter. Each Notice of Continuation
shall be irrevocable.
3.3 REPAYMENT OF POUNDS STERLINING LOANS; EVIDENCE OF DEBT. (a) The
Company and the Foreign Subsidiary Borrower hereby unconditionally promises to
pay to the Administrative Agent for the account of each Lender the then unpaid
principal amount of each Pounds Sterling Loan of such Lender to the Company or
the Foreign Subsidiary Borrower on the Revolving Credit Termination Date and on
such other date(s) and in such other amounts as may be required from time to
time pursuant to this Agreement. Each of the Company and the Foreign Subsidiary
Borrower hereby further agrees to pay interest on the unpaid principal amount of
the Pounds Sterling Loans advanced to it and from time to time outstanding until
payment thereof in full at the rates per annum, and on the dates, set forth in
subsection 5.1.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of the Company and the Foreign
Subsidiary Borrower to such Lender resulting from each Pounds Sterling Loan of
such Lender from time to time, including the amounts of principal and interest
payable thereon and paid to such Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 13.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Pounds Sterling Loan made hereunder, (ii) the
amount of any principal or interest due and payable or to become due and payable
from the Company and the Foreign Subsidiary Borrower to each Lender hereunder in
respect of the Pounds Sterling Loans and (iii) both the amount of any sum
received by the Administrative Agent hereunder from the Company and the Foreign
Subsidiary Borrower in respect of the Pounds Sterling Loans and each Lender's
share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 3.3(b) shall, to the extent permitted by
applicable law, be PRIMA FACIE evidence of the existence and amounts of the
obligations of the Company and the Foreign Subsidiary Borrower therein recorded;
PROVIDED, however, that the failure of any Lender or the Administrative Agent to
maintain the Register or any such account, or any error therein, shall not in
any manner affect the obligation of the Company or the Foreign Subsidiary
Borrower to repay (with applicable interest) the Pounds Sterling Loans made to
the Company or the Foreign Subsidiary Borrower by such Lender in accordance with
the terms of this Agreement.
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SECTION 4. LETTERS OF CREDIT
4.1 LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, the Issuing Lender, agrees, on behalf of the Lenders, and in reliance
on the agreement of the Lenders set forth in subsection 4.3, to issue for the
account of the Company letters of credit in an aggregate face amount, together
with any unpaid Reimbursement Obligations, not to exceed $5,000,000 at any time
outstanding, as follows:
(i) standby letters of credit (collectively, the "STANDBY LETTERS
OF CREDIT") in a form reasonably satisfactory to the Issuing Lender and
in favor of such beneficiaries as the Company shall specify from time
to time (which shall be reasonably satisfactory to the Issuing Lender);
and
(ii) commercial letters of credit in the form of the Issuing
Lender's standard commercial letters of credit ("COMMERCIAL LETTERS OF
CREDIT") in favor of sellers of goods or services to the Company or its
Subsidiaries (the Standby Letters of Credit and Commercial Letters of
Credit being referred to collectively as the "LETTERS OF CREDIT");
PROVIDED that on the date of the issuance of any Letter of Credit, and after
giving effect to such issuance, the Aggregate Revolving Credit Outstanding of
all Lenders do not exceed the Aggregate Revolving Credit Commitments at such
time. Each Standby Letter of Credit shall (i) have an expiry date no later than
one year from the date of issuance thereof or, if earlier, five Business Days
prior to the Revolving Credit Termination Date, (ii) be denominated in U.S.
Dollars and (iii) be in a minimum face amount of $100,000. Each Commercial
Letter of Credit shall (i) provide for the payment of sight drafts when
presented for honor thereunder, or of time drafts, in each case in accordance
with the terms thereof and when accompanied by the documents described or when
such documents are presented, as the case may be, (ii) be denominated in U.S.
Dollars and (iii) have an expiry date no later than six months from the date of
issuance thereof or, if earlier, five Business Days prior to the Revolving
Credit Termination Date.
4.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Company may from
time to time request, upon at least three Business Days' notice, the Issuing
Lender to issue a Letter of Credit by delivering to the Issuing Lender at its
address specified in subsection 13.2 a Letter of Credit Application, completed
to the satisfaction of such Issuing Lender, together with such other
certificates, documents and other papers and information as such Issuing Lender
may reasonably request. Upon receipt of any Letter of Credit Application, the
Issuing Lender will process such Letter of Credit Application, and the other
certificates, documents and other papers delivered in connection therewith, in
accordance with its customary procedures and shall promptly issue such Letter of
Credit (but in no event earlier than three Business Days after receipt by the
Issuing Lender of the Letter of Credit Application relating thereto) by issuing
the original of such Letter of Credit to the beneficiary thereof and by
furnishing a copy thereof to the Company. Prior to the issuance of any Letter of
Credit, the Issuing Lender will confirm with the Administrative Agent that the
issuance of such Letter of Credit is permitted pursuant to Section 4 and
subsection 7.2. Additionally, the Issuing Lender and the Company shall inform
the Administrative Agent of any modifications made to outstanding Letters of
Credit, of any payments made with respect to such Letters of Credit, and of any
other information regarding such Letters of Credit as may be reasonably
requested by the Administrative Agent, in each case pursuant to procedures
established by the Administrative Agent.
4.3 PARTICIPATING INTERESTS. Effective as of the date of the issuance
of each Letter of Credit, the Issuing Lender agrees to allot, and does allot, to
each other Lender, and each such Lender severally and irrevocably agrees to take
and does take, a Participating Interest in such Letter of Credit and the related
Letter of Credit Application in a percentage equal to such Lender's Revolving
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Credit Commitment Percentage. On the date that any Participating Lender becomes
a party to this Agreement in accordance with subsection 13.6, Participating
Interests in any outstanding Letter of Credit held by the Lender from which such
Participating Lender acquired its interest hereunder shall be proportionately
reallotted between such Participating Lender and such transferor Lender. Each
Participating Lender hereby agrees that its obligation to participate in each
Letter of Credit issued in accordance with the terms hereof and to pay or to
reimburse the Issuing Lender in respect of such Letter of Credit for its
participating share of the drafts drawn thereunder shall be irrevocable and
unconditional; PROVIDED that no Participating Lender shall be liable for the
payment of any amount under subsection 4.4(b) resulting solely from the Issuing
Lender's gross negligence or willful misconduct.
4.4 PAYMENTS. (a) The Company agrees (i) to reimburse the
Administrative Agent for the account of the Issuing Lender, forthwith upon its
demand and otherwise in accordance with the terms of the Letter of Credit
Application, if any, relating thereto, for any payment made by the Issuing
Lender under any Letter of Credit and (ii) to pay to the Administrative Agent
for the account of such Issuing Lender, interest on any unreimbursed portion of
any such payment from the date of such payment until reimbursement in full
thereof at a fluctuating rate per annum equal to the rate then borne by
Revolving Credit Loans that are ABR Loans pursuant to subsection 5.1(b) plus 2%.
(b) In the event that the Issuing Lender makes a payment under any
Letter of Credit and is not reimbursed in full therefor, forthwith upon demand
of the Issuing Lender, and otherwise in accordance with the terms hereof or of
the Letter of Credit Application, if any, relating to such Letter of Credit, the
Issuing Lender will promptly through the Administrative Agent notify each
Participating Lender that acquired its Participating Interest in such Letter of
Credit from the Issuing Lender. No later than the close of business on the date
such notice is given, each such Participating Lender will transfer to the
Administrative Agent, for the account of the Issuing Lender, in immediately
available funds, an amount equal to such Participating Lender's pro rata share
of the unreimbursed portion of such payment.
(c) Whenever, at any time, after the Issuing Lender has made payment
under a Letter of Credit and has received from any Participating Lender the
Participating Lender's pro rata share of the unreimbursed portion of such
payment, the Issuing Lender receives any reimbursement on account of such
unreimbursed portion or any payment of interest on account thereof, the Issuing
Lender will distribute to the Administrative Agent, for the account of such
Participating Lender, its pro rata share thereof; PROVIDED, HOWEVER, that in the
event that the receipt by the Issuing Lender of such reimbursement or such
payment of interest (as the case may be) is required to be returned, such
Participating Lender will promptly return to the Administrative Agent, for the
account of the Issuing Lender, any portion thereof previously distributed by the
Issuing Lender to it.
4.5 FURTHER ASSURANCES. The Company hereby agrees, from time to time,
to do and perform any and all acts and to execute any and all further
instruments reasonably requested by the Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of the Letters of Credit issued
hereunder.
4.6 OBLIGATIONS ABSOLUTE. The payment obligations of the Company and
each Participating Lender under subsection 4.4 shall be unconditional and
irrevocable and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including, without limitation, the following
circumstances:
(a) the existence of any claim, set-off, defense or other right
which the Company may have at any time against any beneficiary, or any
transferee, of any Letter of Credit (or any Persons for whom any such
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beneficiary or any such transferee may be acting), the Issuing Lender or
any Participating Lender, or any other Person, whether in connection with
this Agreement, the transactions contemplated herein, or any unrelated
transaction;
(b) any statement or any other document presented under any Letter
of Credit opened for its account proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect;
(c) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate which does not comply with
the terms of such Letter of Credit, except payment resulting solely from
the gross negligence or willful misconduct of the Issuing Lender; or
(d) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing, except circumstances or happenings
resulting from the gross negligence or willful misconduct of the Issuing
Lender.
4.7 LETTER OF CREDIT APPLICATION. To the extent not inconsistent with
the terms of this Agreement (in which case the provisions of this Agreement
shall prevail), provisions of any Letter of Credit Application related to any
Letter of Credit are supplemental to, and not in derogation of, any rights and
remedies of the Issuing Lender and the Participating Lenders under this Section
4 and applicable law. The Company acknowledges and agrees that all rights of the
Issuing Lender under any Letter of Credit Application shall inure to the benefit
of each Participating Lender to the extent of its Revolving Credit Commitment
Percentage as fully as if such Participating Lender was a party to such Letter
of Credit Application.
4.8 PURPOSE OF LETTERS OF CREDIT. Each Standby Letter of Credit shall
be used by the Company solely (a) to provide credit support for borrowings by
the Company or its Subsidiaries, or (b) for other working capital purposes of
the Company and Subsidiaries in the ordinary course of business. Each Commercial
Letter of Credit will be used by the Company and Subsidiaries solely to provide
the primary means of payment in connection with the purchase of goods or
services by the Company and Subsidiaries in the ordinary course of business.
SECTION 5. GENERAL PROVISIONS
5.1 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such Interest Period
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest for each day on which it is
outstanding at a rate per annum equal to the Alternate Base Rate for such day
plus the Applicable Margin.
(c) Each Pounds Sterling Loan shall bear interest for each day during
each Interest Period with respect thereto at a rate per annum equal to the
Eurocurrency Rate determined for such Interest Period plus the Applicable
Margin.
(d) If all or a portion of (i) the principal amount of any Loan, (ii)
any interest payable thereon or (iii) any fee or other amount payable hereunder
shall not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such amount shall bear interest for each day after the due date
until such amount is paid in full at a rate per annum equal to (x) in the case
of principal, the rate that would otherwise be applicable thereto pursuant to
the foregoing provisions of this subsection plus 2% or (y) in the case of any
such overdue interest, fee or other amount, the rate described in paragraph (b)
of this subsection plus 2%. If any Event of Default other than as described in
the preceding sentence shall occur and be continuing, and the Majority Lenders
shall give notice to the Company that this sentence shall apply, then, until
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such Event of Default shall be cured or waived or such notice shall be
withdrawn, the outstanding principal amount of all Loans shall bear interest at
2% above the rate that would otherwise be applicable thereto pursuant to the
foregoing provisions of this subsection (other than the first sentence of this
paragraph (d)).
(e) Interest shall be payable in arrears on each Interest Payment Date,
PROVIDED that interest accruing pursuant to paragraph (d) of this subsection
shall be payable from time to time on demand.
5.2 CONVERSION AND CONTINUATION OPTIONS. (a) The Company may elect from
time to time to convert outstanding Eurodollar Loans (in whole or in part) to
ABR Loans by giving the Administrative Agent at least two Business Days' prior
irrevocable notice of such election, PROVIDED that any such conversion of
Eurodollar Loans may only be made on the last day of an Interest Period with
respect thereto. The Company may elect from time to time to convert outstanding
ABR Loans (in whole or in part) to Eurodollar Loans by giving the Administrative
Agent at least three Business Days' prior irrevocable notice of such election.
Any such notice of conversion to Eurodollar Loans shall specify the length of
the initial Interest Period or Interest Periods therefor. Upon receipt of any
such notice the Administrative Agent shall promptly notify each relevant Lender
thereof. All or any part of outstanding Eurodollar Loans and ABR Loans may be
converted as provided herein, PROVIDED that (i) no ABR Loan may be converted
into a Eurodollar Loan when any Default or Event of Default has occurred and is
continuing and the Administrative Agent or Lenders holding the majority of the
outstanding principal amount of Loans have determined that such conversion is
not appropriate, (ii) any such conversion may only be made if, after giving
effect thereto, subsection 5.3 shall not have been violated, (iii) no ABR Loan
may be converted into a Eurodollar Loan after the date that is one month prior
to the Revolving Credit Termination Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Company giving
notice to the Administrative Agent of the length of the next Interest Period to
be applicable to such Loans determined in accordance with the applicable
provisions of the term "Interest Period" set forth in subsection 1.1, PROVIDED
that no Eurodollar Loan may be continued as such (i) when any Default or Event
of Default has occurred and is continuing and the Administrative Agent or
Lenders holding the majority of the outstanding principal amount of Loans of
such Class have determined that such continuation is not appropriate, (ii) if,
after giving effect thereto, subsection 5.3 would be contravened or (iii) after
the date that is one month prior to the Revolving Credit Termination Date, and
PROVIDED, FURTHER, that if the Company shall fail to give such notice or if such
continuation is not permitted pursuant to the preceding proviso such Eurodollar
Loans shall be automatically converted to ABR Loans on the last day of such then
expiring Interest Period.
(c) Any Pounds Sterling Loans may be continued as set forth in
subsection 3.2(d).
5.3 MINIMUM AMOUNTS OF TRANCHES. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, (i) the aggregate principal amount of the
Eurodollar Loans comprising each Tranche shall be equal to $1,000,000 or a whole
multiple of $1,000,000 in excess thereof, (ii) the aggregate principal amount of
the Pounds Sterling Loans comprising each Tranche shall be in an amount of which
the U.S. Dollar Equivalent is at least $1,000,000 and (iii) there shall not be
more than (ten) 10 Tranches at any one time outstanding.
5.4 OPTIONAL AND MANDATORY PREPAYMENTS. (a) The Company may at any time
and from time to time prepay Revolving Credit Loans, in whole or in part, upon
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at least three Business Days' irrevocable notice to the Administrative Agent (in
the case of Eurodollar Loans) and at least one Business Day's irrevocable notice
to the Administrative Agent (in the case of ABR Loans), specifying the date and
amount of prepayment and whether the prepayment is (i) of Revolving Credit Loans
and (ii) of Eurodollar Loans, ABR Loans or a combination thereof, and, in each
case if a combination thereof, the amount allocable to each. Upon the receipt of
any such notice the Administrative Agent shall promptly notify each Lender
thereof. If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein. Partial prepayments of the
Loans shall be in an aggregate principal amount of $1,000,000 or a whole
multiple of $1,000,000 in excess thereof.
(b) The Company or the Foreign Subsidiary Borrower, as the case may be,
may at any time and from time to time prepay, without premium or penalty, the
Pounds Sterling Loans, in whole or in part, upon at least three Business Days'
irrevocable notice to the Administrative Agent specifying the date and amount of
prepayment. Upon the receipt of any such notice, the Administrative Agent shall
promptly notify each Lender thereof. If any such notice is given, the amount
specified in such notice shall be due and payable on the date specified therein.
Partial prepayments of Pounds Sterling Loans shall be in an aggregate principal
amount of which the U.S. Dollar Equivalent is at least $1,000,000.
(c) If, at any time during the Revolving Credit Commitment Period, for
any reason the Aggregate Revolving Credit Outstanding of all Lenders exceed the
Aggregate Revolving Credit Commitments then in effect, or the Aggregate
Revolving Credit Outstanding of any Lender exceeds the Revolving Credit
Commitment of such Lender then in effect, (i) the Company shall, without notice
or demand, immediately prepay the Revolving Credit Loans and/or (ii) the Company
or the Foreign Subsidiary Borrower shall, without notice or demand, immediately
prepay the Pounds Sterling Loans, in an aggregate principal amount at least
sufficient to eliminate any such excess. Notwithstanding the foregoing,
mandatory prepayments of Revolving Credit Loans or Pounds Sterling Loans that
would otherwise be required pursuant to this subsection 5.4(c) solely as a
result of currency fluctuations from time to time shall only be required to be
made pursuant to this subsection 5.4 on the last Business Day of each month on
the basis of the U.S. Dollar Equivalent in effect on such Business Day.
(d) Each prepayment of Loans pursuant to this subsection 5.4 shall be
accompanied by accrued and unpaid interest on the amount prepaid to the date of
prepayment and any amounts payable under subsection 5.11 in connection with such
prepayment.
(e) The Revolving Credit Loans shall be prepaid and the Letters of
Credit shall be cash collateralized or replaced to the extent such extensions of
credit exceed the amount of the Revolving Credit Facility.
5.5 COMMITMENT FEES; OTHER FEES. (a) The Company agrees to pay to the
Administrative Agent for the account of each Lender (other than any Lender which
has defaulted in its obligation to fund a Loan under this Agreement), a
commitment fee for the period from and including the Closing Date to but
excluding the Revolving Credit Termination Date (or such earlier date on which
the Revolving Credit Commitments shall terminate as provided herein) computed at
the rate per annum set forth in the definition of "Applicable Margin" on the
average daily Available Revolving Credit Commitment of such Lender during the
period for which payment is made, payable quarterly in arrears on the last day
of each March, June, September and December and on the Revolving Credit
Termination Date or such earlier date on which the Revolving Credit Commitments
shall terminate as provided herein, commencing on the first such date to occur
after the date hereof. For purposes of the commitment fee calculations only,
Swing Line loans shall be deemed to be not outstanding.
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(b) The Company shall pay (without duplication of any other fee payable
under this subsection 5.5) to the Administrative Agent all fees separately
agreed to by the Company and the Administrative Agent.
(c) In lieu of any letter of credit commissions and fees provided for
in any Letter of Credit Application relating to a Standby Letter of Credit
(other than any standard issuance, amendment and negotiation fees), the Company
will pay the Administrative Agent, (i) for the account of the Issuing Lender, a
non-refundable fronting fee equal to _ of 1% per annum and (ii) for the account
of the Participating Lenders, a non-refundable Standby Letter of Credit fee
equal to the Applicable Margin in respect of Eurodollar Loans, in each case on
the amount available to be drawn under such Standby Letter of Credit. Such fee
shall be payable quarterly in arrears on the last Business Day of each calendar
quarter, and shall be calculated on the average daily amount available to be
drawn under the Standby Letters of Credit.
(d) In lieu of any letter of credit commissions and fees provided for
in any Letter of Credit Application relating to a Commercial Letter of Credit
(other than any standard issuance, amendment and negotiation fees), the Company
will pay the Administrative Agent, (i) for the account of the Issuing Lender, a
non-refundable fronting fee equal to 1/16 of 1% of the amount of such Commercial
Letter of Credit, (ii) for the account of the Participating Lenders, a
non-refundable Commercial Letter of Credit fee equal to 1/4 of 1% of the amount
of such Letter of Credit. Such fee shall be payable to the Administrative Agent
on the date of issuance and shall be distributed by the Administrative Agent to
the Participating Lenders promptly thereafter and (iii) for the account of the
Administrative Agent, the normal and customary Letter of Credit application and
processing fees.
(e) The Company agrees to pay the Issuing Lender for its own account
its customary administration, amendment, transfer and negotiation fees charged
by the Issuing Lender in connection with its issuance and administration of
Letters of Credit.
5.6 COMPUTATION OF INTEREST AND FEES. (a) Interest and fees shall be
calculated on the basis of a 360-day year for the actual days elapsed; provided
that interest calculated at Alternate Base Rate (based on the Prime Rate
included therein) shall be calculated on the basis of a 365- (or 366-, as the
case may be) day year for the actual days elapsed. The Administrative Agent
shall as soon as practicable notify the Company and the relevant Lenders of each
determination of a Eurodollar Rate or a Eurocurrency Rate. Any change in the
interest rate on a Loan resulting from a change in the Alternate Base Rate shall
become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
the Company and the relevant Lenders of the effective date and the amount of
each such change in the Alternate Base Rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of a Borrower, deliver to such
Borrower a statement showing in reasonable detail the calculations used by such
Administrative Agent in determining any interest rate pursuant to subsection
5.1(a).
5.7 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which determination
shall be conclusive and binding upon the Borrowers) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means
do not exist for ascertaining the Eurodollar Rate or the Eurocurrency Rate,
as the case may be, for such Interest Period, or
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(b) the Administrative Agent has received notice from the Majority
Lenders, as the case may be, that the Eurodollar Rate or Eurocurrency Rate,
as the case may be, determined or to be determined for such Interest Period
will not adequately and fairly reflect the cost to such Lenders of making
or maintaining their Eurodollar Loans or Pounds Sterling Loans, as the case
may be, during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Company and the Lenders as soon as practicable thereafter. If such notice is
given (i) any Eurodollar Loans or Pounds Sterling Loans, as the case may be,
requested to be made on the first day of such Interest Period shall be made as
ABR Loans in U.S. Dollars, (ii) any Revolving Credit 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 ABR Loans, (iii) any outstanding
Eurodollar Loans shall be converted on the last day of such Interest Period to
ABR Loans and (iv) any Pounds Sterling Loans to which such Interest Period
relates shall be repaid on the last day of such Interest Period. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans or Pounds Sterling Loans shall be made or continued as such, nor shall the
Company have the right to convert ABR Loans to Eurodollar Loans.
5.8 PRO RATA TREATMENT AND PAYMENTS. (a) (i) Each borrowing of
Revolving Credit Loans by the Company from the Lenders hereunder shall be made
pro rata according to the Revolving Credit Commitment Percentages of the Lenders
in effect on the date of such borrowing. Each payment by the Company on account
of any commitment fee hereunder shall be allocated by the Administrative Agent
among the Lenders in accordance with the respective amounts which such Lenders
are entitled to receive pursuant to subsection 5.5(a). Any reduction of the
Revolving Credit Commitments, as the case may be, of the Lenders shall be
allocated by the Administrative Agent among the Lenders pro rata according to
the Revolving Credit Commitment Percentages of such Lenders. Each payment by the
Company on account of principal of or interest in respect of Revolving Credit
Loans shall be allocated by the Administrative Agent pro rata according to the
respective principal amounts thereof then due and owing to each Lender. All
payments (including prepayments) to be made by the Company in respect of
Revolving Credit Loans hereunder, whether on account of principal, interest,
fees or otherwise, shall be made without set-off or counterclaim and shall be
made prior to 12:00 Noon, New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders entitled thereto, at the
Administrative Agent's office specified in subsection 13.2, in U.S. Dollars and
in immediately available funds. The Administrative Agent shall distribute such
payments to the Lenders entitled to receive the same promptly upon receipt in
like funds as received.
(ii) Each borrowing of Pounds Sterling Loans by the Company or the
Foreign Subsidiary Borrower shall be made pro rata according to the Revolving
Credit Commitment Percentages of the Lenders. Each payment (including each
prepayment) by the Company or the Foreign Subsidiary Borrower on account of
principal of and interest on Pounds Sterling Loans shall be allocated by the
Administrative Agent pro rata according to the respective principal amounts of
the Pounds Sterling Loans then due and owing by the Company or the Foreign
Subsidiary Borrower to each Lender. All payments (including prepayments) to be
made by the Company or the Foreign Subsidiary Borrower hereunder, whether on
account of principal, interest, fees or otherwise, shall be made without set-off
or counterclaim and shall be made at or before 11:00 A.M. London Time, on the
due date thereof to the Administrative Agent, for the account of the Lenders, at
the Administrative Agent's office located at Trinity Tower, 9 Thomas Moore
Street, London, England E1 9YT, in Pounds Sterling Loan and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders entitled to receive the same promptly upon receipt in like funds as
received.
(iii) If any payment hereunder (other than payments on the Eurodollar
Loans and the Pounds Sterling Loans) becomes due and payable on a day other than
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a Business Day, the maturity of such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan or a Pounds Sterling Loan becomes due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day (and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension) unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a Borrowing Date that such Lender will not make the
amount that would constitute its share of such borrowing available to such
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the applicable
Borrower a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate per annum equal to (i) the daily average Federal
Funds Effective Rate (in the case of a borrowing of Revolving Credit Loans) and
(ii) the Administrative Agent's reasonable estimate of its average daily cost of
funds (in the case of a borrowing of Pounds Sterling Loans), in each case for
the period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the applicable Borrower shall
repay such Lender's share of such borrowing (together with interest thereon from
the date such amount was made available to such Borrower (i) at the rate per
annum applicable to ABR Loans hereunder (in the case of amounts made available
in U.S. Dollars) and (ii) the Administrative Agent's reasonable estimate of its
average daily cost of funds PLUS the Applicable Margin applicable to Pounds
Sterling Loans (in the case of a borrowing of Pounds Sterling Loans)) to the
Administrative Agent not later than three Business Days after receipt of written
notice from the Administrative Agent specifying such Lender's share of such
borrowing that was not made available to such Administrative Agent, and the
Borrower shall have the right to pursue any remedies against such Lender for its
failure to make its portion of such borrowing available.
(c) Unless the Administrative Agent shall have been notified in writing
by any Borrower prior to a date on which a payment is due from such Borrower
hereunder that such Borrower will not make such payment available to such
Administrative Agent, the Administrative Agent may assume that such Borrower is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the applicable
Lenders a corresponding amount. If such amount is not made available to the
Administrative Agent by the required time on the due date therefor, the
applicable Lender shall pay to the Administrative Agent, on demand, such amount
with interest thereon at a rate per annum equal to (i) the daily average Federal
Funds Effective Rate (in the case of a borrowing of Revolving Credit Loans) and
(ii) the Administrative Agent's reasonable estimate of its average daily cost of
funds (in the case of a borrowing of Pounds Sterling Loans), in each case for
the period until such Lender makes such amount immediately available to the
Administrative Agent. A certificate of the Administrative Agent submitted to any
Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error.
5.9 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 shall make it unlawful for any Lender to make or maintain
Eurodollar Loans or Pounds Sterling Loans as contemplated by this Agreement, (a)
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the commitment of such Lender hereunder to make Eurodollar Loans or Pounds
Sterling Loans, continue Eurodollar Loans or Pounds Sterling Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith be cancelled until such
time as it shall no longer be unlawful for such Lender to make or maintain the
affected Loans, (b) such Lender's Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to ABR Loans on the respective last days
of the then current Interest Periods with respect to such Eurodollar Loans or
within such earlier period as may be required by law and (c) such Lender's
Pounds Sterling Loans shall be prepaid on the last day of the then current
Interest Period with respect thereto or within such earlier period or may be
required by law. If any such conversion of a Eurodollar Loan or repayment of a
Pounds Sterling Loan occurs on a day which is not the last day of the then
current Interest Period Interest Period with respect thereto, the Company shall
pay to such Lender such amounts, if any, as may be required pursuant to
subsection 5.11.
5.10 REQUIREMENTS OF LAW. (a) In the event that the adoption of or any
change in any Requirement of Law (or in the interpretation or application
thereof) or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental
Authority:
(i) does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement, any Note, any Loans made by
it or any Letter of Credit, or change the basis of taxation of payments
to such Lender of principal, fees, interest or any other amount payable
hereunder (except for changes in the rate of tax on the overall net
income of such Lender);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender which are not
otherwise included in the determination of the Eurodollar Rate or
Eurocurrency Rate; or
(iii) does or shall impose on such Lender any other condition; and
the result of any of the foregoing is to increase the cost to such
Lender, by any amount which such Lender deems to be material, of
making, renewing or maintaining advances or extensions of credit or to
reduce any amount receivable hereunder, in each case in respect of its
Loans or Letters of Credit which it issues or in which it holds
Participating Interests, then, in any such case, the applicable
Borrower shall promptly pay such Lender, upon receipt of its demand
setting forth in reasonable detail, any additional amounts necessary to
compensate such Lender for such additional cost or reduced amount
receivable, such additional amounts together with interest on each such
amount from the date two Business Days after the date demanded until
payment in full thereof at the ABR. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by such
Lender, through the Administrative Agent, to the applicable Borrower
shall be conclusive in the absence of manifest error. This covenant
shall survive the termination of this Agreement and payment of all
amounts outstanding hereunder for a period of one year.
(b) In the event that any Lender shall have determined that the
adoption of any law, rule, regulation or guideline regarding capital adequacy
(or any change therein or in the interpretation or application thereof) or
compliance by any Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any central bank or Governmental Authority, including, without
limitation, the issuance of any final rule, regulation or guideline, does or
shall have the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder to a level
below that which such Lender or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration such Lender's or
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such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, after submission
by such Lender to the Company (with a copy to the Administrative Agent) of a
written request therefor, the Company shall promptly pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.
(c) Any request by any Lender for compensation under this subsection
5.10 shall be accompanied by a certificate of a duly authorized officer of such
Lender setting for such information and calculations supporting such request as
such Lender shall customarily provide in similar situations.
5.11 INDEMNITY. Each Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by such Borrower in payment when due of
the principal amount of or interest on any Loans of such Lender, (b) default by
such Borrower in making a borrowing or conversion after such Borrower has given
a notice of borrowing or a notice of conversion in accordance with this
Agreement, (c) default by such Borrower in making any prepayment after such
Borrower has given a notice in accordance with this Agreement or (d) the making
of a prepayment of a Eurodollar Loan or Pounds Sterling Loan on a day which is
not the last day of an Interest Period with respect thereto, including, without
limitation, in each case, any such loss or expense arising from the reemployment
of funds obtained by it to maintain its Eurodollar Loans or Pounds Sterling
Loans hereunder or from fees payable to terminate the deposits from which such
funds were obtained, but excluding, in each case, lost profit. This covenant
shall survive termination of this Agreement and payment of all amounts
outstanding hereunder.
5.12 TAXES. (a) All payments made by any Borrower under this Agreement
shall be made free and clear of, and without reduction 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 Governmental Authority excluding,
in the case of the Administrative Agent and each Lender, income or franchise
taxes imposed on the Administrative Agent or such Lender by the jurisdiction
under the laws of which the Administrative Agent or such Lender is organized or
any political subdivision or taxing authority thereof or therein or by any
jurisdiction in which such Lender's lending office is located or any political
subdivision or taxing authority thereof or therein or as a result of a
connection between such Lender and any jurisdiction other than a connection
resulting solely from entering into this Agreement (all such non-excluded taxes,
levies, imposts, deductions, charges or withholdings being thereinafter called
"NON-EXCLUDED TAXES"). Subject to the provisions of subsection 5.12(c), if any
Non-Excluded Taxes are required to be withheld from any amounts payable by such
Borrower to the Administrative Agent or any Lender hereunder or under the Notes,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
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
Agreement and the Notes. Whenever any Non-Excluded Taxes are paid by any
Borrower with respect to payments made in connection with this Agreement, as
promptly as possible thereafter, such Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may be,
a certified copy of an original official receipt received by such Borrower
showing payment thereof. Subject to the provisions of subsection 5.12(c), if any
Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Administrative Agent the required receipts or
other required documentary evidence, such Borrower shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lenders as
a result of any such failure.
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(b) Each Lender that is not incorporated or organized under the laws of
the United States of America or a state thereof agrees that, prior to the first
date any payment is due to be made to it hereunder or under any Note, it will
deliver to the Company and the Administrative Agent (A) if such Lender is a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) two valid,
duly completed copies of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be, certifying in each case
that such Lender is entitled to receive payments by the Borrower under this
Agreement and the Notes payable to it, without deduction or withholding of any
United States federal income taxes, and (ii) a valid, duly completed Internal
Revenue Service Form W-8 or W-9 or successor applicable form, as the case may
be, to establish an exemption from United States backup withholding tax or (B)
if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224, (i) a
certificate substantially in the form of Exhibit H (a "TAX STATUS CERTIFICATE")
and (ii) two completed and signed copies of Internal Revenue Service Form W-8 or
successor applicable form, to establish in each case that such Lender is
entitled to receive payments by the Borrowers under this Agreement and the other
Loan Documents without deduction or withholding of any United States federal
income taxes. Each Lender which delivers to the Company and the Administrative
Agent a Form 1001 or 4224 and Form W-8 or W-9 pursuant to the next preceding
sentence further undertakes to deliver to the Company and the Administrative
Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or
successor applicable forms, or other manner or certification, as the case may
be, on or before the date that any such form expires or becomes obsolete or
otherwise is required to be resubmitted as a condition to obtaining an exemption
from withholding tax, or after the occurrence of any event requiring a change in
the most recent form previously delivered by it to the Company, and such
extensions or renewals thereof as may reasonably be requested by the Company,
certifying in the case of a Form 1001 or 4224 that such Lender is entitled to
receive payments by the Company under this Agreement without deduction or
withholding of any United States federal income taxes, unless any change in
treaty, law or regulation or official interpretation thereof has occurred prior
to the date on which any such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such letter or form with respect to it and such
Lender advises the Company that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax, and in the
case of a Form W-8 or W-9, establishing an exemption from United States backup
withholding tax.
(c) The Company shall not be required to pay any additional amounts to
the Administrative Agent or any Lender (or Transferee except to the extent such
Transferee's transferor was entitled, at the time of transfer, to receive
additional amounts from the Company) in respect of United States withholding tax
pursuant to subsection 5.12(a) if the obligation to pay such additional amounts
would not have arisen but for a failure by the Administrative Agent or such
Lender (or Transferee) to comply with the requirements of subsection 5.12(b) (or
in the case of a Transferee, the requirements of subsection 13.6(h)).
(d) Each Lender that is not incorporated or organized under the laws of
the jurisdiction under which the Foreign Subsidiary Borrower is incorporated or
organized shall, upon request by the Foreign Subsidiary Borrower, within a
reasonable period of time after such request, deliver to the Foreign Subsidiary
Borrower or the applicable governmental or taxing authority, as the case may be,
any form or certificate required in order that any payment by the Foreign
Subsidiary Borrower under this Agreement to such Lender may be made free and
clear of, and without deduction or withholding for or on account of any
Non-Excluded Taxes (or to allow any such deduction or withholding to be at a
reduced rate) imposed on such payment under the laws of the jurisdiction under
which the Foreign Subsidiary Borrower is incorporated or organized, PROVIDED
that such Lender is legally entitled to complete, execute and deliver such form
or certificate and such completion, execution or submission would not materially
prejudice the legal position of such Lender.
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(e) Except as otherwise provided in subsection 5.14(a), each Lender
agrees to use reasonable efforts (including reasonable efforts to change its
lending office) to avoid or to minimize any amounts which might otherwise be
payable pursuant to this subsection 5.12; PROVIDED, HOWEVER, that such efforts
shall not impose on such Lender any additional costs or legal or regulatory
burdens deemed by such Lender in its sole judgment to be material.
(f) The agreements in subsection 5.12(a) shall survive the termination
of this Agreement and the payment of the Notes and all other amounts payable
hereunder until the expiration of the applicable statute of limitations for such
taxes.
5.13 USE OF PROCEEDS. The proceeds of the Revolving Credit Loans and
the Pounds Sterling Loans shall be used for the general working capital and
general corporate purposes of the Company and its Subsidiaries. The Letters of
Credit shall be used for the general working capital purposes of the Company and
its Subsidiaries.
5.14 CHANGE IN LENDING OFFICE; REPLACEMENT OF LENDER. (a) Each Lender
agrees that if it makes any demand for payment under subsection 5.10 or 5.12(a),
or if any adoption or change of the type described in subsection 5.9 shall occur
with respect to it, it will use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions and so long as such efforts would
not be disadvantageous to it, as determined in its sole discretion) to designate
a different lending office if the making of such a designation would reduce or
obviate the need for any Borrower to make payments under subsection 5.10 or
5.12(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 5.9.
(b) If any Lender requests any payment under subsection 5.10 or
5.12(a), the Borrower shall have the right (i) to replace such Lender with one
or more replacement lenders, each of which shall be reasonably acceptable to the
Administrative Agent, or (ii) to replace only the Revolving Credit Commitments
(and outstanding Extensions of Credit thereunder) with identical Commitments
and/or Loans of one or more replacement lenders, each of which shall be
reasonably acceptable to the Administrative Agent.
SECTION 6. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the
Loans, and to induce the Issuing Lender to issue Letters of Credit, each
Borrower hereby represents and warrants to the Administrative Agent and to each
Lender that:
6.1 FINANCIAL CONDITION. (a) The consolidated balance sheet of the
Company and its consolidated Subsidiaries as at September 30, 1996 and the
related consolidated statements of income and of cash flows for the fiscal year
ended on such date, reported on by Coopers & Lybrand L.L.P., copies of which
have heretofore been furnished to each Lender, are complete and correct in all
material respects and present fairly the consolidated financial condition of the
Company and its consolidated Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash flows for the fiscal
year then ended. The unaudited consolidated balance sheets of the Company and
its consolidated Subsidiaries as at June 30, 1997 and the related unaudited
consolidated statements of income and of cash flows for the nine-month period
ended on such date, certified by the chief financial officer of the Company,
copies of which have heretofore been furnished to each Lender, are complete and
correct in all material respects and present fairly the consolidated financial
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condition of the Company and its consolidated Subsidiaries as at such date, and
the consolidated results of their operations and their consolidated cash flows
for the respective nine-month period then ended (subject to normal year-end
audit adjustments). All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or chief financial officer, as the case may be, and as disclosed
therein). Except as set forth on Schedule 6.1, neither the Company nor any of
its consolidated Subsidiaries had, at the date of the most recent balance sheet
referred to above, any material Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or foreign currency
swap or exchange transaction, which is not reflected in the foregoing statements
or in the notes thereto. Except for the Holland & Barrett Acquisition, during
the period from September 30, 1996 to and including the date hereof there has
been no sale, transfer or other disposition by the Company or any of its
consolidated Subsidiaries of any material part of its business or property and
no purchase or other acquisition of any business or property (including any
capital stock of any other Person) material in relation to the consolidated
financial condition of the Company and its consolidated Subsidiaries at
September 30, 1996, other than the sale of inventory in the ordinary course of
business.
(b) The unaudited PRO FORMA balance sheets of the Company and its
consolidated Subsidiaries as at June 30, 1997, certified by a Responsible
Officer of the Company (collectively, the "PRO FORMA BALANCE Sheet"), copies of
which have been furnished to each Lender, are the unaudited consolidated and
consolidating balance sheets of the Company and its consolidated Subsidiaries,
adjusted to give effect (as if such events had occurred on such date) to the
Holland and Barrett Acquisition, the incurrence of the Loans and the
Subordinated Debt and the use of the proceeds thereof. The Pro Forma Balance
Sheet, together with the notes thereto, was prepared in accordance with GAAP and
reflects on a pro forma basis the financial position of the Company and its
consolidated Subsidiaries as of June 30, 1997, as adjusted as described above,
assuming that the events specified in the preceding sentence had actually
occurred at such date.
6.2 NO CHANGE. Since September 30, 1996 there has been no development
or event which has had or could reasonably be expected to have a Material
Adverse Effect.
6.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Loan Party and its
Subsidiaries (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has the power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
except to the extent that the failure to be so qualified in any such
jurisdiction could not, in the aggregate, reasonably be expected to have a
Material Adverse Effect, and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Loan
Party has the power and authority, and the legal right, to make, deliver and
perform the Loan Documents to which it is a party and to borrow hereunder and
has taken all necessary action to authorize the borrowings on the terms and
conditions of this Agreement and any Notes and to authorize the execution,
delivery and performance of the Loan Documents to which it is a party. No
consent or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan Documents. This Agreement
has been, and each other Loan Document to which it is a party will be, duly
executed and delivered on behalf of each Loan Party that is a party hereto or
thereto. This Agreement constitutes, and each other Loan Document to which it is
a party when executed and delivered will constitute, a legal, valid and binding
obligation of each Loan Party that is a party hereto or thereto enforceable
against such Loan Party in accordance with its terms, subject to the effects of
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bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing.
6.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the proceeds thereof will not
violate any Requirement of Law or Contractual Obligation of any Loan Party or of
any of its Subsidiaries and will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
6.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 6.6, no
litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Loan Parties,
threatened by or against any Loan Party or any of its Subsidiaries or against
any of its or their respective properties or revenues (a) with respect to any of
the Loan Documents or any of the transactions contemplated hereby or thereby, or
(b) which could reasonably be expected to have a Material Adverse Effect.
6.7 NO DEFAULT. No Loan Party nor any of its Subsidiaries is in default
under or with respect to any of its Contractual Obligations in any respect which
could reasonably be expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing.
6.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Loan Parties and its
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to, or a valid
leasehold interest in, all its other property, except to the extent that the
failure to have such title would not have a Material Adverse Effect, and none of
such property is subject to any Lien except as permitted by subsection 9.3. With
respect to real property or interests in real property, as of the Closing Date,
the Company has (i) fee title to all of the real property listed on Schedule 6.8
under the heading "Fee Properties" (each, a "FEE PROPERTY"), and (ii) good and
valid title to the leasehold estates in all of the real property leased by it
and listed on Schedule 6.8 under the heading "Leased Properties" (each, a
"LEASED PROPERTY"), in each case free and clear of all mortgages, liens,
security interests, easements, covenants, rights-of-way and other similar
restrictions of any nature whatsoever, except (A) Liens permitted pursuant to
subsection 9.3, (B) as to Leased Property, the terms and provisions of the
respective lease therefor and any matters affecting the fee title and any estate
superior to the leasehold estate related thereto, and (C) title defects, or
leases or subleases granted to others, which are not material to the Fee
Properties or the Leased Properties, as the case may be, taken as a whole. The
Fee Properties and the Leased Properties constitute, as of the Closing Date, all
of the real property owned in fee or leased by the Company.
6.9 INTELLECTUAL PROPERTY. Each Loan Party and each of its Subsidiaries
owns, or is licensed to use or otherwise has the right to use, all trademarks,
tradenames, copyrights, patents, trade secrets and other proprietary information
that it uses in the conduct of its business as currently conducted except for
those the failure to own or license which could not reasonably be expected to
have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). To the knowledge
of each Loan Party, 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 enforceability of any such Intellectual Property, nor does any Loan
Party know of any valid basis for any such claim. The use of such Intellectual
Property by each Loan Party and its Subsidiaries does not infringe on the rights
of any Person, except for such claims and infringements that, in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
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6.10 NO BURDENSOME RESTRICTIONS. No Contractual Obligation of any Loan
Party or any of its Subsidiaries could reasonably be expected to have a Material
Adverse Effect.
6.11 TAXES. Each Loan Party and each of its Subsidiaries has filed or
caused to be filed all material tax returns which, to the knowledge of the Loan
Parties, are required to be filed and has paid all taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other taxes, fees or other charges imposed on it or any of its
property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of such Loan Party or its Subsidiaries, as the case may be); no tax Lien
has been filed, and, to the knowledge of the Loan Parties, no claim is being
asserted, with respect to any such tax, fee or other charge.
6.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation G or Regulation U of the
Board of Governors of the Federal Reserve System as now and from time to time
hereafter in effect. If requested by any Lender or the Administrative Agent, the
Borrower will furnish to the Administrative Agent and each Lender a statement to
the foregoing effect in conformity with the requirements of FR Form G-1 or FR
Form U-1 referred to in said Regulation G or Regulation U, as the case may be.
6.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan. No termination
of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a
Plan has arisen, during such five-year period. The present value of all accrued
benefits under each Single Employer Plan (based on those assumptions used to
fund such Plan) did not, as of the last annual valuation date prior to the date
on which this representation is made or deemed made, exceed the value of the
assets of such Plan allocable to such accrued benefits by an amount which has
resulted or could result in any material liability to any Loan Party or Commonly
Controlled Entity. No Loan Party nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan which has resulted or
which could result in any material liability of any Loan Party or Commonly
Controlled Entity, and no Loan Party nor any Commonly Controlled Entity would
become subject to any material liability under ERISA if the Borrower or any such
Commonly Controlled Entity were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding the date on which this
representation is made or deemed made. No such Multiemployer Plan is in
Reorganization or Insolvent. The Company has adopted FASB 106.
6.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Company is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Company is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
6.15 SUBSIDIARIES. Schedule II sets forth all Subsidiaries of the
Company as of the Closing Date.
6.16 ENVIRONMENTAL MATTERS. Except to the extent that all of the
following, taken together, could not reasonably be expected to result in a
Material Adverse Effect or to result in the payment of Material Environmental
Amount:
(a) The facilities and properties owned, leased or operated by each
Loan Party or any of its Subsidiaries (the "PROPERTIES") do not contain,
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and have not previously contained, any Materials of Environmental Concern
in amounts or concentrations which (i) constitute or constituted a
violation of, or (ii) could reasonably be expected to give rise to
liability under, any Environmental Law.
(b) The Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, in all
material respects with all applicable Environmental Laws, and there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated
by any Loan Party or any of its Subsidiaries (the "BUSINESS") which could
materially interfere with the continued operation of the Properties or
materially impair the fair saleable value thereof.
(c) Neither any Loan Party nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor does any Loan Party have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location which could reasonably be expected to give rise to liability
under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any
of the Properties or elsewhere in violation of, or in a manner that could
reasonably be expected to give rise to liability under, any applicable
Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Loan Parties, threatened, under any
Environmental Law to which any Loan Party or any Subsidiary thereof is or
will be named as a party with respect to the Properties or the Business,
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
Properties or the Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of any Loan Party or any Subsidiary thereof in connection
with the Properties or otherwise in connection with the Business, in
violation of or in amounts or in a manner that could reasonably give rise
to liability under Environmental Laws.
6.17 SOLVENCY. Each Loan Party is, and after giving effect to the
consummation of any Acquisition and to the incurrence of all Indebtedness and
obligations being incurred in connection herewith and therewith will be and will
continue to be, Solvent.
6.18 SECURITY DOCUMENTS. (a) The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described, and as defined, therein and proceeds thereof, and, after taking the
actions described in Schedule 3 thereto, the Guarantee and Collateral Document
shall at all times constitute a fully perfected Lien on, and security interest
in, all right, title and interest of the Loan Parties in such Collateral located
in the State of New York and the proceeds thereof, as security for the Secured
Obligations (as defined in the Guarantee and Collateral Document), in each case
prior and superior in right to any other Person, other than with respect to
Liens expressly permitted by subsection 9.3.
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(b) The English Security Documents are or will be effective to create
in favor of the Administrative Agent, for the benefit of the Lenders, a legal,
valid and enforceable security interest in the Collateral described, and as
defined, therein and proceeds thereof, and, after taking the actions described
therein, the English Security Documents shall at all times constitute a fully
perfected Lien on, and security interest in, all right, title and interest of
the Loan Parties in such Collateral and the proceeds thereof, as security for
the Secured Obligations (as defined in the English Security Documents), in each
case prior and superior in right to any other Person, other than with respect to
Liens expressly permitted by subsection 9.3.
6.19 ACCURACY OF INFORMATION . No statement or information contained in
this Agreement, any other Loan Document or any other document, certificate or
statement furnished in writing to the Administrative Agent or the Lenders or any
of them, by or on behalf of any Loan Party for use in connection with the
transactions contemplated by this Agreement or the other Loan Documents, taken
as a whole together with all other information provided in this Agreement, the
other Loan Documents or any other such document, certificate or statement,
contained as of the date such statement, information, document or certificate
was so furnished any untrue statement of any fact material to the interests of
the Administrative Agent or any Lender, or omitted to state a fact necessary in
order to make the statements contained herein or therein not misleading in any
respect material to the interests of the Administrative Agent or any Lender.
There is no fact known to any Loan Party that could reasonably be expected to
have a Material Adverse Effect that has not been expressly disclosed herein, in
the other Loan Documents or in such other documents, certificates and statements
furnished to the Administrative Agent and the Lenders for use in connection with
the transactions contemplated hereby and by the other Loan Documents.
SECTION 7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO CLOSING DATE. The Closing Date shall occur on the
date of satisfaction of the following conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrowers, with a counterpart for each Lender, (ii) the Guarantee and
Collateral Agreement, executed and delivered by a duly authorized officer
of the parties thereto, with a counterpart or a conformed copy for each
Lender and (iii) the English Security Document described in clause (i) of
the definition thereof, executed and delivered by a duly authorized officer
of the Loan Party party thereto, with a counterpart or a conformed copy for
each Lender.
(b) CLOSING CERTIFICATE. The Administrative Agent shall have received,
with a copy for each Lender, a certificate of the Company and the other
domestic Loan Parties, dated the Closing Date, substantially in the form of
Exhibit G with appropriate insertions and attachments, satisfactory in form
and substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the Company
and the domestic Loan Parties.
(c) CORPORATE PROCEEDINGS OF THE COMPANY. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Company authorizing (i) the
execution, delivery and performance of this Agreement and the other Loan
Documents to which it is a party, (ii) the borrowings contemplated
hereunder and (iii) the granting by it of the Liens created pursuant to the
Security Documents to which the Company is a party, certified by the
Secretary or an Assistant Secretary of the Company as of the Closing Date,
which certificate shall be in form and substance satisfactory to the
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Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded.
(d) COMPANY INCUMBENCY CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a Certificate of the Company,
dated the Closing Date, as to the incumbency and signature of the officers
of the Company executing any Loan Document satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of the Company.
(e) CORPORATE PROCEEDINGS OF SUBSIDIARIES. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each Subsidiary of the Company which is
a party to a Loan Document authorizing (i) the execution, delivery and
performance of the Loan Documents to which it is a party and (ii) the
granting by it of the Liens created pursuant to the Security Documents to
which it is a party, certified by the Secretary or an Assistant Secretary
of each such Subsidiary as of the Closing Date, which certificate shall be
in form and substance satisfactory to the Administrative Agent and shall
state that the resolutions thereby certified have not been amended,
modified, revoked or rescinded.
(f) SUBSIDIARY INCUMBENCY CERTIFICATES. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of each
Domestic Subsidiary of the Borrower which is a Loan Party, dated the
Closing Date, as to the incumbency and signature of the officers of such
Subsidiaries executing any Loan Document, satisfactory in form and
substance to the Administrative Agent, executed by the President or any
Vice President and the Secretary or any Assistant Secretary of each such
Subsidiary.
(g) CORPORATE DOCUMENTS. The Administrative Agent shall have received,
with a counterpart for each Lender, true and complete copies of the
certificate of incorporation and by-laws of each Loan Party, certified as
of the Closing Date as complete and correct copies thereof by the Secretary
or an Assistant Secretary of such Loan Party.
(h) FEES. The Administrative Agent and the Lenders shall have received
all invoiced fees and expenses required to be paid on the Closing Date.
(i) LEGAL OPINIONS. The Administrative Agent shall have received, with
a counterpart for each Lender, the following executed legal opinions:
(i) the executed legal opinion of Michael C. Duban, counsel to
the Company and the other Loan Parties, substantially in the form of
Exhibit F-1;
(ii) the executed legal opinion of Allen & Overy, special English
counsel to the Company and the other Loan Parties, substantially in the
form of Exhibit F-2; and
each such legal opinion to cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require.
(j) FINANCIAL STATEMENTS. The Administrative Agent shall have received,
with a copy for each Lender, (i) audited consolidated financial statements
of the Company and its consolidated Subsidiaries for the two most recent
fiscal years ended prior to the Closing Date and unaudited consolidated
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financial statements of the Company and its consolidated Subsidiaries,
reasonably satisfactory to the Lenders and certified by the chief financial
officer of the Company, for the nine months ended June 30, 1997, (ii)
unaudited interim consolidated financial statements of the Company and its
consolidated Subsidiaries for each quarterly period ended subsequent to the
date of the latest financial statements delivered pursuant to clause (i) of
this paragraph as to which such financial statements are available,
reasonably satisfactory to the Lenders and certified by the chief financial
officer of the Company, all such financial statements, including the
related schedules and notes thereto, having been prepared in accordance
with GAAP applied consistently throughout the periods involved (except as
approved by such accountants or chief financial officer, as the case may
be, and as disclosed therein), (iii) audited consolidated financial
statements of Holland & Barrett for the two most recent fiscal years ended
prior to the Closing Date, (iv) unaudited interim consolidated financial
statements of Holland & Barrett for each quarterly period ended subsequent
to the date of the latest financial statements delivered pursuant to clause
(iii) of this paragraph as to which such financial statements are
available, reasonably satisfactory to the Lenders and certified by the
chief financial officer of the Company, all such financial statements,
including the related schedules and notes thereto, having been prepared in
accordance with UK GAAP applied consistently throughout the periods
involved (except as approved by such accountants or chief financial
officer, as the case may be, and as disclosed therein).
(k) PRO FORMA BALANCE SHEET. The Administrative Agent shall have
received, with a copy for each Lender, the Pro Forma Balance Sheet
described in subsection 6.1(b).
(l) BUSINESS PLAN. The Administrative Agent shall have received, with a
copy for each Lender, a business plan for fiscal years 1997 - 2003
reasonably satisfactory to the Lenders.
(m) PLEDGED STOCK; STOCK POWERS. The Administrative Agent shall have
received the certificates representing the shares pledged pursuant to the
Guarantee and Collateral Agreement and the English Security Documents,
together with an undated stock power for each such certificate executed in
blank by a duly authorized officer of the pledgor thereof. All actions
required to perfect the security interest in the pledged stock of the
Foreign Subsidiary Borrower created pursuant to the English Security
Documents shall have been taken.
(n) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions, including, without
limitation, the filing of duly executed financing statements on form UCC-1,
necessary or, in the opinion of the Administrative Agent, desirable to
perfect the Liens created by the Security Documents shall have been
completed.
(o) LIEN SEARCHES. The Administrative Agent shall have received the
results of a recent search by a Person satisfactory to the Administrative
Agent, of the Uniform Commercial Code, judgment and tax lien filings which
may have been filed with respect to personal property of the Company and
its Subsidiaries in each of the jurisdictions and offices where assets of
the Company and its Subsidiaries are located or recorded, and such search
shall reveal no material liens on any of the assets of the Borrower or its
Subsidiaries except for liens permitted by the Loan Documents.
(p) SOLVENCY. The Administrative Agent shall have received, with a copy
for each Lender a certificate substantially in the form of Exhibit I which
shall document the solvency of the Company on a consolidated basis after
giving effect to the Holland & Barrett Acquisition and the other
transactions contemplated hereby.
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(q) CONSENTS, LICENSES AND APPROVALS. (i) All governmental and material
third party approvals (including material landlords' and other consents)
necessary or advisable in connection with the execution, delivery and
performance of the Loan Documents and the Acquisition Documents and the
continuing operation of the business of the Company and its Subsidiaries
shall have been obtained and be in full force and effect, and (ii) all
applicable waiting periods shall have expired without any action being
taken or threatened by any competent Governmental Authority which would
restrain, prevent or otherwise impose adverse conditions on the Company,
any of its Subsidiaries or the Holland & Barrett Acquisition.
(r) SUBORDINATED DEBT. The Company shall have received at least
$148,750,000 gross proceeds from the issuance of the Subordinated Debt and
deposited such gross proceeds in an escrow account maintained by Chase,
such proceeds to be used to refinance short term indebtedness incurred to
finance the Holland & Barrett Acquisition.
7.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any Extension of Credit requested to be made by it on any date
(including, without limitation, the Closing Date), is subject to the
satisfaction of the following conditions precedent as of the date such Extension
of Credit is requested to be made:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by each of the Loan Parties in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred and
be continuing on such date or after giving effect to the Extension of
Credit requested to be made on such date.
(c) INTERIM FINANCING. Prior to the date upon which the Company shall
have repaid (or arrangements satisfactory to the Administrative Agent have
been made to repay) all obligations owing and outstanding under, and
terminated (or arrangements satisfactory to the Administrative Agent have
been made to terminate), the Reimbursement and Guarantee Agreement, dated
as of August 7, 1997, between the Company and The Chase Manhattan Bank, the
aggregate outstanding Loans and Letter of Credit Obligations shall not
exceed $20,000,000.
Each Extension of Credit made to a Borrower hereunder shall constitute a
representation and warranty by such Borrower as of the date of such Extension of
Credit that the conditions contained in this subsection 7.2 have been satisfied.
7.3 CONDITIONS TO INITIAL EXTENSION OF CREDIT TO THE FOREIGN
SUBSIDIARY. The agreement of each Lender to make its initial Extension of Credit
requested to be made by it to the Foreign Subsidiary Borrower, in addition to
the satisfaction with the condition in Section 7.1 and 7.2, is subject to the
satisfaction of the following conditions precedent as of the date such initial
Extension of Credit is requested to be made:
(a) ENGLISH SECURITY DOCUMENTS. The Administrative Agent shall have
received each English Security Document referred to in clause (ii) of the
definition thereof, executed and delivered by a duly authorized officer of
the Loan Party party thereto, with a counterpart or a conformed copy for
each Lender.
(b) CORPORATE PROCEEDINGS OF THE FOREIGN SUBSIDIARY BORROWER. The
Administrative Agent shall have received, with a counterpart for each
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Lender, a copy of the resolutions, in form and substance satisfactory to
the Administrative Agent, of the Board of Directors of the Foreign
Subsidiary Borrower authorizing (i) the execution, delivery and performance
of this Agreement and the other Loan Documents to which it is a party, (ii)
the borrowings contemplated hereunder and (iii) the granting by it of the
Liens created pursuant to the Security Documents to which the Foreign
Subsidiary Borrower is a party, certified by the Secretary or an Assistant
Secretary (or like official) of the Foreign Subsidiary Borrower as of such
initial date, which certificate shall be in form and substance satisfactory
to the Administrative Agent and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(c) LEGAL OPINIONS. The Administrative Agent shall have received, with
a counterpart for each Lender, the executed legal opinion of Allen & Overy,
special English counsel to the Company and the other Loan Parties covering
customary matters as the Administrative Agent may reasonably require.
(d) ACTIONS TO PERFECT LIENS. The Administrative Agent shall have
received evidence in form and substance satisfactory to it that all
filings, recordings, registrations and other actions necessary or, in the
opinion of the Administrative Agent, desirable to perfect the Liens created
by the English Security Documents shall have been completed.
(e) HOLLAND & BARRETT NOTES. The Administrative Agent shall have
received, for the account of each Lender that shall so request, a
promissory note of the Foreign Subsidiary Borrower reasonably satisfactory
to the Administrative Agent and substantially similar to the form of
Revolving Credit Note in Exhibit A--1 with appropriate changes, executed by
a duly authorized officer of the Foreign Subsidiary Borrower.
SECTION 8. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments (or any of
them) remain in effect, any Loan or Reimbursement Obligation remains outstanding
and unpaid or any other amount is owing to any Lender or either Administrative
Agent hereunder or under any other Loan Document, the Company shall and shall
cause each of its Subsidiaries to:
8.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the end
of each fiscal year of the Company, copies of the consolidated and
consolidating balance sheets of the Company and its consolidated
Subsidiaries as at the end of such year and the related consolidated and
consolidating statements of income and retained earnings and of cash flows
for such year, setting forth in each case in comparative form the figures
for the previous year, reported on without a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit, by Coopers & Lybrand L.L.P. or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days after
the end of each of the first three quarterly periods of each fiscal year of
the Company, the unaudited consolidated and consolidating balance sheets of
the Company and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated and consolidating statements of
income and retained earnings and of cash flows of the Company and its
consolidated Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in
comparative form the figures for the previous year, certified by a
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Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments);
all such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by such accountants or officer, as the case may be,
and disclosed therein and except that interim statements may exclude detailed
footnote disclosure in accordance with standard practice).
8.2 CERTIFICATES; OTHER INFORMATION. Furnish to each Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 8.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except as specified in
such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and 8.1(b), a certificate of a
Responsible Officer (i) stating that, to the best of such officer's
knowledge, each Loan Party during such period has observed or performed
all of its covenants and other agreements, and satisfied every
condition, contained in this Agreement and the other Loan Documents to
be observed, performed or satisfied by it, and that such officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate; and (ii) in the case of financial
statements referred to in subsections 8.1(a) and 8.1(b), including
calculations and information demonstrating in reasonable detail
compliance with the requirements of subsection 9.1;
(c) not later than 90 days following the end of each fiscal
year of the Company, a copy of the projections by the Company of the
operating budget of the Company and its Subsidiaries for the succeeding
fiscal year, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been
prepared on the basis of sound financial planning practice and that
such officer has no reason to believe they are incorrect or misleading
in any material respect;
(d) within five Business Days after the same are filed, copies
of all financial statements and reports which the Company may make to,
or file with, the Securities and Exchange Commission or any successor
or analogous Governmental Authority;
(e) concurrently with the delivery of the financial statements
referred to in subsections 8.1(a) and 8.1(b), to the extent not
included in the financial statements and reports referred to in
subsection 8.2(d), a management narrative report explaining all
significant variances from forecasts, projections and previous results
and all significant current developments in staffing, marketing, sales
and operations; and
(f) promptly, such additional financial and other information
as any Lender may from time to time reasonably request.
8.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all its
obligations of whatever nature, except where the amount or validity thereof is
currently being contested in good faith by appropriate proceedings and reserves
in conformity with GAAP with respect thereto have been provided on the books of
the Company or its Subsidiaries, as the case may be.
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8.4 MAINTENANCE OF EXISTENCE. Preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business except as otherwise permitted pursuant to subsection
9.5; and comply with all Contractual Obligations and Requirements of Law except
to the extent that failure to comply therewith could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect.
8.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all property useful and
necessary in its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to each Lender, upon written request,
full information as to the insurance carried.
8.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and, upon prior
written notice, permit representatives of any Lender to visit and inspect any of
its properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired and to discuss
the business, operations, properties and financial and other condition of the
Company and its Subsidiaries with officers and employees of the Company and its
Subsidiaries and, in the presence of an officer of the Company, with its
independent certified public accountants.
8.7 NOTICES. Promptly give notice to the Administrative Agent (who
shall promptly notify each Lender) of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the Company
or any of its Subsidiaries and any Governmental Authority, which in either
case, if not cured or if adversely determined, as the case may be, could
reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding (including without limitation any
notice of violation, alleged violation, liability or potential liability
under any Environmental Law) affecting the Company or any of its
Subsidiaries in which the amount involved is $500,000 or more and not
covered by insurance or in which injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after any Loan Party knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(e) any development or event which has had or could reasonably be
expected to have a Material Adverse Effect.
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Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
8.8 ENVIRONMENTAL LAWS. (a) Comply with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental Laws and
obtain and comply in all respects with and maintain, and ensure that all tenants
and subtenants obtain and comply in all respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except to the extent that any failures could not,
in the aggregate, reasonably be expected to have a Material Adverse Effect or to
result in the payment of Material Environmental Amount.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws except to the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings could not be
reasonably expected to have a Material Adverse Effect.
8.9 ADDITIONAL SUBSIDIARIES. (a) With respect to any Domestic
Subsidiary of the Company created or acquired after the Closing Date by the
Company, promptly (i) cause such Subsidiary to become a party to the Guarantee
and Collateral Agreement, (ii) deliver to the Administrative Agent the
certificates representing such Capital Stock, together with undated stock
powers, executed in blank, securing such Subsidiary's obligations under such
guarantee and covering the types of assets covered by the Guarantee and
Collateral Agreement, (iii) take all required actions to perfect the security
interests created by the Guarantee and Collateral Agreement in the assets of
such Subsidiary and (iv) if requested by the Administrative Agent, deliver to
the Administrative Agent legal opinions relating to the matters described in the
preceding clauses (i) through (iii) which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
(b) With respect to each direct Material Foreign Subsidiary of the
Company or any Domestic Subsidiary acquired or formed after the Closing Date,
promptly after the acquisition or formation thereof, execute and deliver and
cause each such Foreign Subsidiary to execute and deliver to the Administrative
Agent, in form and substance reasonably satisfactory to the Administrative
Agent, such documents and instruments (including, without limitation, pledge
agreements) and take such action (including, without limitation, the delivery of
stock certificates and instruments) as the Administrative Agent may reasonably
request in order to grant to the Administrative Agent, for the ratable benefit
of the Lenders, as collateral security for the Obligations, a first priority
perfected security interest in 65% of the voting Capital Stock and 100% of the
non-voting Capital Stock of, or equivalent ownership interests in, such Foreign
Subsidiary, along with any warrants, options, or other rights to acquire the
same, in all cases to the extent legally permissible and practicable and deliver
to the Administrative Agent such legal opinions as it shall reasonably request
with respect thereto.
(c) If requested by the Administrative Agent, grant in favor of the
Administrative Agent, for the benefit of the Lenders, Liens on any other assets
other than real property hereafter acquired by the Company or any Domestic
Subsidiary and on previously encumbered assets which become unencumbered, to the
extent such Liens are then permissible under applicable law and pursuant to any
agreements to which the Company or its Subsidiaries are a party, pursuant to
documentation in form and substance satisfactory to the Administrative Agent.
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SECTION 9. NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments (or any of
them) remain in effect, any Loan or Reimbursement Obligation remains outstanding
and unpaid or any other amount is owing to any Lender or either Administrative
Agent hereunder or under any other Loan Document, the Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly:
9.1 FINANCIAL CONDITION COVENANTS
(a) Maintain at the end of each fiscal quarter of the Company a
Consolidated Fixed Charge Coverage Ratio of less than the ratio set forth
below opposite the period in which such date occurs:
PERIOD RATIO
------ -----
Closing Date through September 29, 1998 1.50
September 30, 1998 through September 29, 1999 1.65
September 30, 1999 through September 29, 2000 2.25
September 30, 2000 - Thereafter 3.00
(b) MAINTENANCE OF CONSOLIDATED INDEBTEDNESS TO CONSOLIDATED EBITDA
RATIO. Permit the ratio of (i) Consolidated Indebtedness on any date during
any test period set forth below to (ii) Consolidated EBITDA for the four
fiscal quarters most recently ended prior to such date, to be greater than
the amount set forth opposite such test period below:
TEST PERIOD RATIO
----------- -----
Closing Date through September 29, 1998 3.75
September 30, 1998 through September 29, 1999 3.50
September 30, 1999 - Thereafter 3.00
(c) CONSOLIDATED NET WORTH. Permit Consolidated Net Worth on any date
during any test period set forth below to be less than the amount set forth
opposite such test period below for such fiscal year:
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TEST PERIOD AMOUNT
- ----------- ------
Closing Date through
September 29, 1998 $110,000,000
September 30, 1998 through
September 29, 1999 $120,000,000
September 30, 1999 through
September 29, 2000 $135,000,000
September 30, 2000 through
September 29, 2001 $160,000,000
September 30, 2001 through
September 29, 2002 $190,000,000
September 30, 2002 through
September 29, 2003 $230,000,000
September 30, 2003 -
Thereafter $275,000,000
9.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrowers under this Agreement;
(b) Subordinated Debt in an aggregate principal amount not to exceed
$150,000,000 less all repayments of principal thereof;
(c) existing Indebtedness of the Company listed on Schedule 9.2;
(d) Indebtedness of the Company to any Subsidiary of the Company and of
any Domestic Subsidiary to the Company or to any other Subsidiary of the
Company;
(e) Indebtedness under sale and leaseback transactions permitted by
subsection 9.12;
(f) Indebtedness of the Company under Hedge Agreements entered into
solely to hedge interest rate exposure and not for speculative purposes;
(g) Indebtedness of the Company or any Subsidiary incurred to finance
the acquisition, construction or improvement of any fixed or capital
assets, including obligations under Financing Leases and any Indebtedness
assumed in connection with the acquisition of any such assets or secured by
a Lien on any such extensions, renewals and replacements of any such
Indebtedness that do not increase the outstanding principal amount thereof;
PROVIDED that (A) such Indebtedness is incurred prior to or within 90 days
after such acquisition or the completion of such construction or
improvement and (B) the aggregate principal amount of Indebtedness
permitted by this paragraph (g), and the aggregate amount of sale-leaseback
transactions permitted under subsection 9.12 theretofore consummated, shall
not exceed $10,000,000 at any time outstanding;
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(h) Indebtedness of any Person that becomes a Subsidiary after the date
hereof; PROVIDED that (A) such Indebtedness exists at the time such Person
becomes a Subsidiary and is not created in contemplation of or in
connection with such Person becoming a Subsidiary and (B) the aggregate
principal amount of Indebtedness permitted by this paragraph (h) not exceed
$1,000,000 at any time outstanding;
(i) Indebtedness of any Foreign Subsidiaries, in addition to
Indebtedness permitted by paragraph (j), in an aggregate amount not in
excess of $1,000,000 at any time outstanding; and
(j) Indebtedness of any Foreign Subsidiary to any other Foreign
Subsidiary.
9.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with
respect thereto are maintained on the books of such Person in conformity
with GAAP (or, in the case of Foreign Subsidiaries, generally accepted
accounting principles in effect from time to time in their respective
jurisdictions of incorporation);
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of such
Person;
(f) Existing Liens listed on Schedule 9.3;
(g) Liens securing Indebtedness of the Borrower permitted by subsection
9.2(g) incurred to finance the acquisition of fixed or capital assets
(whether pursuant to a loan, a Financing Lease or otherwise), PROVIDED that
(i) such Liens shall be created substantially simultaneously with the
acquisition of such fixed or capital assets, (ii) such Liens do not at any
time encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not
increased and (iv) the principal amount of Indebtedness secured by any such
Lien shall at no time exceed the original purchase price of such property
at the time it was acquired;
(h) Liens on current assets of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary permitted under subsection 9.2(i);
(i) Liens (not otherwise permitted hereunder) which secure obligations
in aggregate amount at any time outstanding not exceeding (as to the
Borrower and all Subsidiaries), and on property with an aggregate value not
exceeding, $1,000,000; and
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(j) Liens created pursuant to the Security Documents.
9.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
(a) Guarantee Obligations in existence on the date hereof and listed on
Schedule 9.4;
(b) Guarantee Obligations incurred after the date hereof in an
aggregate amount not to exceed $1,000,000 at any one time outstanding;
(c) guarantees made in the ordinary course of its business by the
Company of obligations (other than Indebtedness) of any of its Domestic
Subsidiaries, which obligations are otherwise permitted under this
Agreement;
(d) the guarantee by the Company under this Agreement and guarantee by
the Domestic Subsidiaries under the Guarantee and Collateral Agreement;
(e) guarantees of any Foreign Subsidiary of the obligations of any
other Foreign Subsidiary; and
(f) guarantees by the Company of obligations of Foreign Subsidiaries in
an aggregate amount not in excess of $1,000,000 at any one time
outstanding.
9.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Company may be merged or consolidated with or
into the Company (PROVIDED that the Company shall be the continuing or
surviving corporation) or with or into any one or more wholly owned
Subsidiaries of the Company (PROVIDED that if a Domestic Subsidiary is a
party to such transaction, such Domestic Subsidiary shall be the continuing
or surviving corporation); and
(b) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Company or any other wholly owned Domestic Subsidiary of
the Company.
9.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign, transfer
or otherwise dispose of any of its property, business or assets (including,
without limitation, receivables and leasehold interests), whether now owned or
hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares
of such Subsidiary's Capital Stock to any Person other than the Company or any
wholly owned Domestic Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out property in
the ordinary course of business;
(b) the sale of inventory in the ordinary course of business;
(c) as permitted by subsection 9.5(b); and
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(d) the sale or other disposition of any other property at fair market
value for consideration not in excess of $1,000,000 in the aggregate in any
fiscal year.
9.7 LIMITATION ON DIVIDENDS AND OTHER RESTRICTED PAYMENTS. Declare or
pay any dividend (other than dividends payable solely in common stock of the
Company) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Company or any Subsidiary or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Company or any Subsidiary thereof (such
declarations, payments, setting apart, purchases, redemptions, defeasances,
retirements, acquisitions and distributions being herein called "RESTRICTED
PAYMENTS") except (a) as permitted by subsections 9.5 and 9.9, and (b) any
Subsidiary may pay dividends to the Company or any other Subsidiary.
9.8 LIMITATION ON CAPITAL EXPENDITURES. Make any Capital Expenditure
except for Capital Expenditures by the Company and its Subsidiaries in the
ordinary course of business not exceeding, in the aggregate during any fiscal
year of the Company $40,000,000.
9.9 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the Company or its Subsidiaries
for travel, entertainment and relocation expenses in the ordinary course of
business in an aggregate amount for the Company and its Subsidiaries not to
exceed $100,000 at any one time outstanding;
(d) investments by the Company or its Subsidiaries in any wholly-owned
Subsidiary of the Company which has complied with the conditions set forth
in subsection 8.9(a) or any wholly-owned Foreign Subsidiary which has
complied with the conditions set forth in subsection 8.9(b); PROVIDED that
the aggregate amount of all such advances, loans, investments, transfers or
guarantees outstanding at any time made to or on behalf of the Foreign
Subsidiaries shall not exceed $10,000,000;
(e) Acquisitions; PROVIDED, the aggregate amount of investments
(whether cash, securities or other consideration) permitted each year
pursuant to this paragraph (f) shall not exceed, in the aggregate in any
fiscal year, the sum of $3,000,000; and
(f) additional investments not to exceed $1,000,000 in the aggregate
while this Agreement is outstanding.
9.10 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. (a) Make any optional payment or prepayment on or redemption or
purchase of any Indebtedness (other than the Loans), (b) amend, modify or
change, or consent or agree to any amendment, modification or change to any of
the terms of any Indebtedness (excluding the Loans) (other than any such
amendment, modification or change which would extend the maturity or reduce the
amount of any payment of principal thereof or which would reduce the rate or
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extend the date for payment of interest thereon), or (c) amend, modify or change
the subordination provisions of any Subordinated Debt.
9.11 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise permitted under this Agreement and (b) upon
fair and reasonable terms no less favorable to the Company or such Subsidiary,
as the case may be, than it would obtain in a comparable arm's length
transaction with a Person which is not an Affiliate.
9.12 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Company or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Company or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Company or such Subsidiary; provided, that such
sale leaseback transactions in an amount of, together with the aggregate
principal amount of Indebtedness permitted under subsection 9.2(g) and (h) then
outstanding, up to $10,000,000 in the aggregate while this Agreement is in
effect may be consummated by the Company, provided that the Company will not
mortgage any existing Real Property (including the Gel-Cap Facility).
9.13 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Company to end on a day other than September 30.
9.14 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any Person
any agreement, other than (a) this Agreement, (b) the Subordinated Debt and (c)
any industrial revenue bonds, purchase money mortgages or Financing Leases
permitted by this Agreement (in which cases, any prohibition or limitation shall
only be effective against the assets financed thereby), which prohibits or
limits the ability of the Company or any of its Subsidiaries to create, incur,
assume or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired.
9.15 LIMITATION ON LINES OF BUSINESS. Enter into any business, either
directly or through any Subsidiary, except for the vitamins and healthfood
businesses.
SECTION 10. GUARANTEE
10.1 GUARANTEE. (a) The Company hereby unconditionally and irrevocably
guarantees to the Administrative Agent, for the ratable benefit of the Lenders
and their respective successors, indorsees, transferees and assigns, the prompt
and complete payment and performance by the Foreign Subsidiary Borrower when due
(whether at the stated maturity, by acceleration or otherwise) of the
Obligations owed by it (the "FOREIGN SUBSIDIARY OBLIGATIONS").
(b) The Company further agrees to pay any and all expenses (including,
without limitation, all reasonable fees and disbursements of counsel), which may
be paid or incurred by the Administrative Agent or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Foreign Subsidiary Obligations and/or enforcing
any rights with respect to, or collecting against, the Company under this
Section. This Section shall remain in full force and effect until the Foreign
Subsidiary Obligations are paid in full and the Commitments are terminated,
notwithstanding that from time to time prior thereto the Borrowers may be free
from any Foreign Subsidiary Obligations.
(c) No payment or payments made by any Borrower or any other Person or
received or collected by the Administrative Agent or any Lender from any
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Borrower or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application, at any time or from time to time, in
reduction of or in payment of the Foreign Subsidiary Obligations shall be deemed
to modify, reduce, release or otherwise affect the liability of the Company
hereunder which shall, notwithstanding any such payment or payments, remain
liable hereunder for the Foreign Subsidiary Obligations until the Foreign
Subsidiary Obligations are paid in full and the Commitments are terminated.
(d) The Company agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent and
such Lender in writing that such payment is made under this Section for such
purpose.
10.2 NO SUBROGATION. Notwithstanding any payment or payments made by
the Company hereunder, or any set-off or application of funds of the Company by
the Administrative Agent or any Lender, the Company shall not be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against the Borrowers or against any collateral security or guarantee or right
of offset held by the Administrative Agent or any Lender for the payment of the
Foreign Subsidiary Obligations, nor shall the Company seek or be entitled to
seek any contribution or reimbursement from the Borrowers in respect of payments
made by the Company hereunder, until all amounts owing to the Administrative
Agent and the Lenders by the Borrowers on account of the Foreign Subsidiary
Obligations are paid in full and the Commitments are terminated. If any amount
shall be paid to the Company on account of such subrogation rights at any time
when all of the Foreign Subsidiary Obligations shall not have been paid in full,
such amount shall be held by the Company in trust for the Administrative Agent
and the Lenders, segregated from other funds of the Company, and shall,
forthwith upon receipt by the Company, be turned over to the Administrative
Agent in the exact form received by the Company (duly indorsed by the Company to
the Administrative Agent, if required), to be applied against the Foreign
Subsidiary Obligations, whether matured or unmatured, in such order as the
Administrative Agent may determine. The provisions of this paragraph shall be
effective notwithstanding the termination of this Agreement and the payment in
full of the Foreign Subsidiary Obligations and the termination of the
Commitments.
10.3 AMENDMENTS, ETC. WITH RESPECT TO THE FOREIGN SUBSIDIARY
OBLIGATIONS; WAIVER OF RIGHTS. The Company shall remain obligated hereunder
notwithstanding that, without any reservation of rights against the Company, and
without notice to or further assent by the Company, any demand for payment of
any of the Foreign Subsidiary Obligations made by the Administrative Agent or
any Lender may be rescinded by the Administrative Agent or such Lender, and any
of the Foreign Subsidiary Obligations continued, and the Obligations, or the
liability of any other party upon or for any part thereof, or any collateral
security or guarantee therefor or right of offset with respect thereto, may,
from time to time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and any Loan Documents and any other documents executed and
delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, in accordance with the provisions thereof as
the Administrative Agent (or the requisite Lenders, as the case may be) may deem
advisable from time to time, and any collateral security, guarantee or right of
offset at any time held by the Administrative Agent or any Lender for the
payment of the Foreign Subsidiary Obligations may be sold, exchanged, waived,
surrendered or released. None of the Administrative Agent or any Lender shall
have any obligation to protect, secure, perfect or insure any Lien at any time
held by it as security for the Foreign Subsidiary Obligations or for this
Agreement or any property subject thereto. When making any demand hereunder
against the Company, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on the Borrowers or any other
guarantor, and any failure by the Administrative Agent or any Lender to make any
such demand or to collect any payments from the Borrower or any such other
guarantor or any release of the Borrowers or such other guarantor shall not
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relieve the Company of its obligations or liabilities hereunder, and shall not
impair or affect the rights and remedies, express or implied, or as a matter of
law, of the Administrative Agent or any Lender against the Company. For the
purposes hereof "demand" shall include the commencement and continuance of any
legal proceedings.
10.4 GUARANTEE ABSOLUTE AND UNCONDITIONAL. The Company waives any and
all notice of the creation, renewal, extension or accrual of any of the Foreign
Subsidiary Obligations and notice of or proof of reliance by the Administrative
Agent or any Lender upon this Agreement or acceptance of this Agreement; the
Foreign Subsidiary 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 Agreement; and all dealings between the Borrowers
and the Company, on the one hand, and the Administrative Agent and the Lenders,
on the other, shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Agreement. The Company waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Foreign Subsidiary Borrower and the Company with respect to the
Foreign Subsidiary Obligations. This Section 10 shall be construed as a
continuing, absolute and unconditional guarantee of payment without regard to
(a) the validity, regularity or enforceability of this Agreement, any other Loan
Document, any of the Foreign Subsidiary Obligations or any other collateral
security therefor or guarantee or right of offset with respect thereto at any
time or from time to time held by the Administrative Agent or any Lender, (b)
any defense, set-off or counterclaim (other than a defense of payment or
performance) which may at any time be available to or be asserted by the Company
against the Administrative Agent or any Lender, or (c) any other circumstance
whatsoever (with or without notice to or knowledge of the Borrowers or the
Company) which constitutes, or might be construed to constitute, an equitable or
legal discharge of the Foreign Subsidiary Borrower for the Foreign Subsidiary
Obligations, or of the Company under this Section 10, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against the
Company, the Administrative Agent and any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Borrowers or any other Person or against any collateral security or guarantee
for the Foreign Subsidiary Obligations or any right of offset with respect
thereto, and any failure by the Administrative Agent or any Lender to pursue
such other rights or remedies or to collect any payments from the Borrowers or
any such other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the
Borrowers or any such other Person or of any such collateral security, guarantee
or right of offset, shall not relieve the Company of any liability hereunder,
and shall not impair or affect the rights and remedies, whether express, implied
or available as a matter of law, of the Administrative Agent or any Lender
against the Company. This Section 10 shall remain in full force and effect and
be binding in accordance with and to the extent of its terms upon the Company
and its successors and assigns, and shall inure to the benefit of the
Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Foreign Subsidiary Obligations
and the obligations of the Company under this Agreement shall have been
satisfied by payment in full and the Commitments shall be terminated,
notwithstanding that from time to time during the term of this Agreement the
Borrowers may be free from any Foreign Subsidiary Obligations.
10.5 REINSTATEMENT. This Section 10 shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of any of the Foreign Subsidiary Obligations is rescinded or must otherwise be
restored or returned by the Administrative Agent or any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Borrower or upon or as a result of the appointment of a receiver, intervenor or
conservator of, or trustee or similar officer for, any Borrower or any
substantial part of its property, or otherwise, all as though such payments had
not been made.
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10.6 PAYMENTS. The Company hereby agrees that all payments required to
be made by it hereunder will be made to the Administrative Agent without set-off
or counterclaim in accordance with the terms of the Foreign Subsidiary
Obligations, including, without limitation, in the currency in which payment is
due.
SECTION 11. EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) Any Borrower shall fail to pay (i) any principal of any Loans or
any Reimbursement Obligations when due (whether at the stated maturity, by
acceleration or otherwise) in accordance with the terms thereof or hereof
or (ii) any interest on any Loans, or any fee or other amount payable
hereunder, within five days after any such interest, fee or other amount
becomes due in accordance with the terms hereof; or
(b) Any representation or warranty made or deemed made by the Company
or any other Loan Party herein or in any other Loan Document or which is
contained in any certificate, document or financial or other statement
furnished at any time under or in connection with this Agreement or any
other Loan Document shall prove to have been incorrect in any material
respect on or as of the date made or deemed made; or
(c) The Company or any other Loan Party shall default in the observance
or performance of any negative covenant contained in Section 9 or in any
Security Document to which it is a party; or
(d) The Company or any other Loan Party shall default in the observance
or performance of any other agreement contained in this Agreement or any
other Loan Document other than as provided in (a) through (c) above, and
such default shall continue unremedied for a period of 30 days; or
(e) Any Loan Document shall cease, for any reason, to be in full force
and effect, or the Company or any other Loan Party shall so assert; or any
security interest created by any of the Security Documents shall cease to
be enforceable and of the same effect and priority purported to be created
thereby; or
(f) The subordination provisions contained in any instrument pursuant
to which the Subordinated Debt was created or in any instrument evidencing
such Subordinated Debt shall cease, for any reason, to be in full force and
effect or enforceable in accordance with their terms; or
(g) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on any Indebtedness (other than
Indebtedness under this Agreement), in the payment of any Guarantee
Obligation or in the payment of any Hedge Agreement Obligation, where, in
any case or in the aggregate, the principal amount thereof then outstanding
exceeds $1,000,000, beyond the period of grace (not to exceed 30 days), if
any, provided in the instrument or agreement under which such Indebtedness,
Guarantee Obligation or Hedge Agreement Obligation was created; or (ii)
default in the observance or performance of any other agreement or
condition relating to any such Indebtedness, Guarantee Obligation or Hedge
Agreement Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is
to cause, or to permit the holder or holders of such Indebtedness or Hedge
Agreement Obligation or, beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
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beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
(h) (i) The Company, any Domestic Subsidiary or any Material Foreign
Subsidiary shall commence any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or relief of debtors,
seeking to have an order for relief entered with respect to it, or seeking
to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian or other similar official for it or for
all or any substantial part of its assets, or the Company, any Domestic
Subsidiary or any Material Foreign Subsidiary shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Company, any Domestic Subsidiary or any Material
Foreign Subsidiary any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an order
for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Company, any Domestic Subsidiary or
any Material Foreign Subsidiary any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) the Company, any Domestic Subsidiary or any
Material Foreign Subsidiary shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the acts
set forth in clause (i), (ii), or (iii) above; or (v) the Company, any
Domestic Subsidiary or any Material Foreign Subsidiary shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(i) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Single
Employer Plan, (iii) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall
be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Majority Lenders, likely to
result in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate for purposes of Title IV of
ERISA, (v) the Company or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Majority Lenders is likely to, incur any
liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, a Multiemployer Plan or (vi) any other event or
condition shall occur or exist, with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all
other such events or conditions, if any, could subject the Company or any
of its Subsidiaries to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or
financial or other condition of the Company and its Subsidiaries taken as a
whole; or
(j) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $1,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged, stayed or
bonded pending appeal within 30 days from the entry thereof; or
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(k) (i) Any Person or "group" (within the meaning of Section 13(d) or
15(d) of the Exchange Act), other than any Person or group owning 20% or
more of the Capital Stock of the Company on the date hereof (A) shall have
acquired, combined with previous holdings, beneficial ownership of 25% or
more of any outstanding class of capital stock of the Company having
ordinary voting power in the election of directors or (B) shall obtain the
power (whether or not exercised) to elect a majority of the Company's
directors or (ii) the Board of Directors of the Company shall not consist
of a majority of Continuing Directors;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (h) or (ii) of paragraph (i) above with respect to the Company or if
such event is an Event of Default specified in clause (g) above resulting from
the acceleration of the Subordinated Debt automatically the Commitments shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement (including, without limitation,
all Reimbursement Obligations, regardless of whether or not such Reimbursement
Obligations are then due and payable) shall immediately become due and payable,
and (B) if such event is any other Event of Default, any of the following
actions may be taken: (i) with the consent of the Majority Lenders, the
Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Company declare the Commitments to
be terminated forthwith, whereupon the Commitments shall immediately terminate;
(ii) with the consent of the Majority Lenders, the Administrative Agent may, or
upon the direction of the Majority Lenders, the Administrative Agent shall, by
notice of default to the Company, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement (including
all amounts payable in respect of Letters of Credit whether or not the
beneficiaries thereof shall have presented the drafts and other documents
required thereunder) and the Notes to be due and payable forthwith, whereupon
the same shall immediately become due and payable and (iii) the Administrative
Agent may, and upon the direction of the Majority Lenders shall, exercise any
and all remedies and other rights provided pursuant to this Agreement and/or the
other Loan Documents.
With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Company shall at such time deposit in a cash collateral
account opened by the Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. The Company hereby
grants to the Administrative Agent, for the benefit of the Issuing Lender and
the Participating Lenders, a security interest in such cash collateral to secure
all obligations of the Company under this Agreement and the other Loan
Documents. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Company hereunder and under the Notes. After all such Letters
of Credit shall have expired or been fully drawn upon, all Reimbursement
Obligations shall have been satisfied and all other obligations of the Company
hereunder and under the Notes shall have been paid in full, the balance, if any,
in such cash collateral account shall be returned to the Company. The Company
shall execute and deliver to the Administrative Agent, for the account of the
Issuing Lender and the Participating Lenders, such further documents and
instruments as the Administrative Agent may request to evidence the creation and
perfection of the within security interest in such cash collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
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SECTION 12. THE ADMINISTRATIVE AGENT AND THE ARRANGER
12.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints Chase as the Administrative Agent of such Lender under this Agreement
and the other Loan Documents, and each such Lender irrevocably authorizes the
Administrative Agent, in such capacity, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent.
12.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan 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 Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
12.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Borrower or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower.
12.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall
be entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, 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 the Company), independent accountants
and other experts selected by the Administrative Agent. The Administrative Agent
may deem and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Loan Document unless it shall first receive such advice or
concurrence of the Majority 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 Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other Loan
Documents in accordance with a request of the Majority Lenders, and such request
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and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders and all future holders of the Loans.
12.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrowers referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event that
the Administrative Agent receives such a notice, the Administrative Agent shall
give notice thereof to the Lenders. The Administrative Agent shall take such
action with respect to such Default or Event of Default as shall be reasonably
directed by the Majority Lenders; PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
12.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that none of the Administrative Agent or any of
its respective officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of the Borrowers, shall be deemed to constitute any representation or warranty
by the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent, the Arranger or any other 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 Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrower. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Borrowers which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
12.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Borrowers and
without limiting the obligation of the Company to do so), ratably according to
their respective Aggregate Revolving Credit Outstanding in effect on the date on
which indemnification is sought (or, if indemnification is sought after the date
upon which the Commitments shall have terminated and the Loans shall have been
paid in full, ratably in accordance with their Aggregate Revolving Credit
Outstanding immediately prior to such date), 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 the payment of the Loans)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan 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 Administrative Agent under or in connection with any of the
foregoing; PROVIDED that no 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 solely from the
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Administrative Agent's gross negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Loans and all other amounts
payable hereunder.
12.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrowers as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it, the Administrative
Agent shall have the same rights and powers under this Agreement and the other
Loan Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
12.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Majority Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Company, such approval not to be unreasonably withheld whereupon
such successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon such appointment and approval, and the former
Administrative Agent's rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any
holders of the Loans. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Section 12 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement and the other Loan Documents.
12.10 ISSUING LENDER AND COLLATERAL AGENT. Each Lender hereby
acknowledges that the provisions of this Section 12 shall apply to the Issuing
Lender, in its capacity as issuer of any Letter of Credit, and the Collateral
Agent, in its capacity under the other Loan Documents, in the same manner as
such provisions are expressly stated to apply to the Administrative Agent.
SECTION 13. MISCELLANEOUS
13.1 AMENDMENTS AND WAIVERS. (a) Neither this Agreement or any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this subsection
13.1. The Majority Lenders may, or, with the written consent of the Majority
Lenders, the Administrative Agent may, from time to time, (i) enter into with
the Borrowers written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights or obligations
of the Lenders or of the Borrowers hereunder or thereunder or (ii) waive at the
Company's request, on such terms and conditions as the Majority Lenders or the
Administrative Agent, as the case may be, may specify in such instrument, any of
the requirements of this Agreement or the other Loan Documents or any Default or
Event of Default and its consequences; PROVIDED, HOWEVER, that no such waiver
and no such amendment, supplement or modification shall:
(A) reduce the amount or extend the scheduled date of maturity of any
Loan, or reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitments, in each case
without the consent of each Lender affected thereby;
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(B) amend, supplement, modify or waive any provision of this subsection
13.1 or reduce the percentages specified in the definition of "Majority
Lenders" or consent to the assignment or transfer by the Company of any of
its rights and obligations under this Agreement and the other Loan
Documents, in each case without the consent of all the Lenders;
(C) amend, supplement, modify or waive any provision of Section 12 or
any other provision of this Agreement governing the rights or obligations
of the Administrative Agent without the consent of the then Administrative
Agent;
(D) extend the expiring date on any Letter of Credit beyond the
Revolving Credit Termination Date without the consent of each Lender; or
(E) release the guarantee contained in Section 10 or, except as
permitted under subsection 9.6, the Guarantee and Collateral Agreement or
all or a substantial portion of the Collateral under, and as defined in,
the Security Documents without the consent of each Lender.
Any waiver and any amendment, supplement or modification pursuant to this
subsection 13.1 shall apply to each of the Lenders and shall be binding upon the
Borrowers, the Lenders, the Administrative Agent and all future holders of the
Loans and the Reimbursement Obligations. In the case of any waiver, the
Borrowers, the Lenders and the Administrative Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
13.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrowers, the Issuing Lender and the Administrative
Agent, and as set forth in Schedule I in the case of the other parties hereto,
or to such other address as may be hereafter notified by the respective parties
hereto:
The Borrowers: c/o NBTY, Inc.
90 Orville Drive
Bohemia, New York 11716-2510
Attention: Harvey Kamil
Fax: (516) 567-7148
The Administrative
Agent, the Issuing
Lender or SwingLine
Lender: The Chase Manhattan Bank
Loan & Agency Services Group
One Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Janet Belden
Fax: (212) 552-5658
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PROVIDED that any notice, request or demand to or upon the Administrative Agent,
the Issuing Lender or the Lenders pursuant to subsection 2.2, 2.4, 2.5, 3.2, 4.2
or 5.2 shall not be effective until received.
13.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
13.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder until all obligations hereunder and under the other Loan
Documents have been paid in full and the Commitments hereunder have been
terminated.
13.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation,
syndication and execution of, and any amendment, supplement or modification to,
this Agreement and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b) to
pay or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred during the continuance of any Default or Event of Default in
connection with the enforcement or preservation of any rights under this
Agreement, the other Loan Documents and any such other documents, including,
without limitation, the fees and disbursements of counsel to each Lender and of
counsel to the Administrative Agent, (c) to pay, indemnify, and hold each Lender
and the Administrative Agent harmless from, any and all recording and filing
fees and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the other Loan Documents and any such other
documents, and (d) to pay, indemnify, and hold each Lender and the
Administrative Agent harmless from and against any and all other liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement, the other Loan Documents and related documents or the use of the
proceeds of the Loans, including, without limitation, any of the foregoing
relating to the violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Company, any of its
Subsidiaries or any of the Properties (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), PROVIDED, that the Company shall
have no obligation hereunder to the Administrative Agent or any Lender with
respect to indemnified liabilities solely arising from the gross negligence or
willful misconduct of the Administrative Agent or any such Lender. The
agreements in this subsection shall survive repayment of the Loans and all other
amounts payable hereunder for a period of one year.
13.6 SUCCESSORS AND ASSIGNS; PARTICIPATION AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrowers, the
Lenders, the Administrative Agent and their respective successors and assigns,
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except that the Borrowers may not assign or transfer any of their rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
lending business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("PARTICIPANTS") participating interests in any
Loan owing to such Lender, any Commitment of such Lender or any other interest
of such Lender hereunder and under the other Loan Documents. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this Agreement
shall remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Loan for
all purposes under this Agreement and the other Loan Documents, and the
Borrowers and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. The Company
agrees that if amounts outstanding under this Agreement are due or unpaid, or
shall have been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, PROVIDED that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in subsection 13.7(a) as fully
as if it were a Lender hereunder. The Company also agrees that each Participant
shall be entitled to the benefits of subsections 5.9, 5.10, 5.11 and 5.12 with
respect to its participation in the Commitments and the Loans outstanding from
time to time as if it was a Lender; PROVIDED that, in the case of subsection
5.12, such Participant shall have complied with the requirements of said
subsection and PROVIDED, FURTHER, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking or
lending business and in accordance with applicable law, at any time and from
time to time assign to any Lender or any affiliate thereof or to an additional
bank or financial institution (an "ASSIGNEE"), in the case of any assignment
relating to Loans to such an additional bank or financial institution with the
consent of the Company and the Administrative Agent (which consents in each case
shall not be unreasonably withheld), all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to an
Assignment and Acceptance, substantially in the form of Exhibit E, executed by
such Assignee, such assigning Lender (and, to the extent required, by the
Company and the Administrative Agent) and delivered to the Administrative Agent
for its acceptance and recording in the Register, PROVIDED that, in the case of
any such assignment to an additional bank or financial institution, the sum of
the aggregate principal amount of the Loans and the aggregate amount of the
Available Revolving Credit Commitment being assigned and, if such assignment is
of less than all of the rights and obligations of the assigning Lender, the sum
of the aggregate principal amount of the Loans and the aggregate amount of the
Available Revolving Credit Commitment remaining with the assigning Lender are
each not less than $5,000,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date determined pursuant to such
Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto
and, to the extent provided in such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder with Commitments as set forth therein, and
(y) the assigning Lender thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this Agreement
(and, in the case of an Assignment and Acceptance covering all or the remaining
portion of an assigning Lender's rights and obligations under this Agreement,
such assigning Lender shall cease to be a party hereto). Notwithstanding any
provision of this subsection and subsection 13.6(e), the consent of the Company
shall not be required, and, unless requested by the Assignee and/or the
61
<PAGE>
assigning Lender, new Notes shall not be required to be executed and delivered
by the Company, for any assignment which occurs at any time when any of the
events described in clause (h) of Section 11 shall have occurred and be
continuing.
(d) The Administrative Agent shall, on behalf of the Company, maintain
at the address of the Administrative Agent referred to in subsection 13.2 a copy
of each Assignment and Acceptance delivered to it and a register (the
"REGISTER") for the recordation of the names and addresses of the Lenders and
the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders shall treat each Person whose name is recorded in the Register as the
owner of a Loan or other obligation hereunder or under any Note as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder or under any Note shall be effective only upon appropriate
entries with respect thereto being made in the Register. The Register shall be
available for inspection by the Company or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of any assignment relating to
Revolving Credit Loans to an Assignee that is not then a Lender or an affiliate
thereof, by the Company and the Administrative Agent, to the extent required by
subsection 13.6(c)) together with payment to the Administrative Agent by the
assigning Lender or Assignee of a registration and processing fee of $3,500
(except that no such registration and processing fee shall be payable in the
case of an Assignee which is already a Lender or is an Affiliate of a Lender),
the Administrative Agent shall (i) promptly accept such Assignment and
Acceptance and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give notice of such acceptance
and recordation to the Lenders and the Company.
(f) The Company authorizes each Lender to disclose to any Participant
or Assignee (each, a "TRANSFEREE") and any prospective Transferee, subject to
the provisions of subsection 13.18, any and all financial information in such
Lender's possession concerning the Company and its Affiliates which has been
delivered to such Lender by or on behalf of the Company pursuant to this
Agreement or which has been delivered to such Lender by or on behalf of the
Company in connection with such Lender's credit evaluation of the Company and
its Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
(h) If, pursuant to this subsection 13.6, any interest in this
Agreement or any Note or Letter of Credit is transferred to any Transferee which
is not incorporated or organized under the laws of the United States of America
or a state thereof, the assigning Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, (i) to represent to the
assigning Lender (for the benefit of the assigning Lender, the Administrative
Agent and the Borrowers) that under applicable law and treaties no Non-Excluded
Taxes will be required to be withheld by the Administrative Agent, any Borrower
or the assigning Lender with respect to any payments to be made to such
Transferee in respect of the Loans or Participating Interests, (ii) to furnish
to the assigning Lender, the Administrative Agent and the Company, such forms
and certificates required to be furnished pursuant to subsection 5.12(b) and
(iii) to agree (for the benefit of the assigning Lender, the Administrative
Agent and the Borrowers) to be bound by the provisions of subsections 5.12(b)
and (c).
62
<PAGE>
13.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans owing to it by
any Borrower, or interest thereon, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (h) of Section 11 or otherwise),
in a greater proportion than any such payment to or collateral received by any
other Lender, if any, in respect of such other Lender's Loans owing to it by
such Borrower, or interest thereon, such Benefitted Lender shall purchase for
cash from the other Lenders a participating interest in such portion of each
such other Lender's Loan owing to it by such Borrower, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefitted Lender to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Lenders; PROVIDED, HOWEVER, that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefitted Lender, such purchase
shall be rescinded, and the purchase price and benefits returned, to the extent
of such recovery, but without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the extent permitted by
applicable law, upon any amount becoming due and payable by the Company
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Company. Each Lender agrees promptly to notify the
Company and the Administrative Agent after any such set-off and application made
by such Lender, PROVIDED that the failure to give such notice shall not affect
the validity of such set-off and application.
13.8 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be delivered to the Company and the
Administrative Agent.
13.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
13.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrowers, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Borrowers, the Administrative
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
13.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
63
<PAGE>
13.12 SUBMISSION TO JURISDICTION; WAIVERS. (a) Each Borrower hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any other Loan Document to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to such
Borrower at its address set forth in subsection 13.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) The Foreign Subsidiary Borrower hereby irrevocably appoints the
Company as its agent for service of process in any proceeding referred to in
subsection 13.12(a) and agrees that service of process in any such proceeding
may be made by mailing or delivering a copy thereof to it care of Company at its
address for notice set forth in subsection 13.2.
13.13 ACKNOWLEDGEMENTS. Each Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) none of the Administrative Agent or any Lender has any fiduciary
relationship with or duty to such Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Administrative Agents and the Lenders, on the one
hand, and the Company's, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrowers and the Lenders.
13.14 WAIVERS OF JURY TRIAL. EACH OF THE BORROWERS, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
13.15 POWER OF ATTORNEY. The Foreign Subsidiary Borrower hereby grants
to Company an irrevocable power of attorney to act as its attorney-in-fact with
regard to matters relating to this Agreement and each other Loan Document,
including, without limitation, execution and delivery of any amendments,
supplements, waivers or other modifications hereto or thereto, receipt of any
notices hereunder or thereunder and receipt of service of process in connection
herewith or therewith. The Foreign Subsidiary Borrower hereby explicitly
acknowledges that the Administrative Agent and each Lender have executed and
delivered this Agreement and each other Loan Document to which it is a party,
64
<PAGE>
and has performed its obligations under this Agreement and each other Loan
Document to which it is a party, in reliance upon the irrevocable grant of such
power of attorney pursuant to this subsection. The power of attorney granted by
the Foreign Subsidiary Borrower hereunder is coupled with an interest.
13.16 JUDGMENT. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency in the city in which it
normally conducts its foreign exchange operation for the first currency on the
Business Day preceding the day on which final judgment is given.
(b) The obligation of each Borrower in respect of any sum due from it
to any Lender hereunder shall, notwithstanding any judgment in a currency (the
"JUDGMENT CURRENCY") other than that in which such sum is denominated in
accordance with the applicable provisions of this Agreement (the "AGREEMENT
CURRENCY"), be discharged only to the extent that on the Business Day following
receipt by such Lender of any sum adjudged to be so due in the Judgment Currency
such Lender may in accordance with normal banking procedures purchase the
Agreement Currency with the Judgment Currency; if the amount of Agreement
Currency so purchased is less than the sum originally due to such Lender in the
Agreement Currency, such Borrower agrees notwithstanding any such judgment to
indemnify such Lender against such loss, and if the amount of the Agreement
Currency so purchased exceeds the sum originally due to any Lender, such Lender
agrees to remit to such Borrower such excess.
13.17 CONFIDENTIALITY. Each Lender agrees to take normal and reasonable
precautions to maintain the confidentiality of information designated in writing
as confidential and provided to it by the Company or any Subsidiary in
connection with this Agreement; PROVIDED, HOWEVER, that any Lender may disclose
such information (a) at the request of any regulatory authority having
supervisory jurisdiction over it or in connection with an examination of such
Lender by any such authority, (b) pursuant to subpoena or other court process,
(c) when required to do so in accordance with the provisions of any applicable
law, (d) at the direction of any other Governmental Authority, (e) to such
Lender's Affiliates, independent auditors and other professional advisors or (f)
to any Transferee or potential Transferee; PROVIDED that such Transferee agrees
in writing to comply with the provisions of this subsection 13.17.
65
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
NBTY, INC.
By: /s/ Harvey Kamil
------------------------------------------
Title: Executive Vice President
HOLLAND & BARRETT HOLDINGS LIMITED
By: /s/ Harvey Kamil
------------------------------------------
Title: Director
THE CHASE MANHATTAN BANK,
as Administrative Agent and
as a Lender, and as Swing
Line Lender and as Issuing
Lender
By: /s/ Barbara G. Bertschi
------------------------------------------
Title: Vice President
KEYBANK NATIONAL ASSOCIATION
By: /s/ Joseph F. Burns
------------------------------------------
Title: Vice President
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ J. Alan Edwards
------------------------------------------
Title: Authorized Signatory
EUROPEAN AMERICAN BANK
By: /s/ Stewart N. Berman
------------------------------------------
Title: Vice President
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Mary McLaughlin
------------------------------------------
Title: Vice President
<PAGE>
SCHEDULE I
----------
COMMITMENTS; ADDRESSES
================================================================================
Lender Revolving Credit
Commitment
- --------------------------------------------------------------------------------
The Chase Manhattan Bank $13,000,000
760 Jericho Turnpike, Suite 306
Woodbury, New York 11797
Telecopy: (516) 364-3307
Attention: Barbara G. Bertschi
- --------------------------------------------------------------------------------
KeyBank National Association $10,000,000
1377 Motor Parkway
Islandia, New York 11788
Telecopy: (516) 233-4048
Attention: Joseph F. Burns
- --------------------------------------------------------------------------------
Bank of Nova Scotia $9,000,000
One Liberty Plaza
New York, New York 10006
Telecopy: (212) 225-5145
Attention: Tilsa Cora
- --------------------------------------------------------------------------------
European American Bank $9,000,000
730 Veterans Memorial Highway
Hauppauge, New York 11788-2780
Telecopy: (516) 360-7112
Attention: Stuart N. Berman
- --------------------------------------------------------------------------------
I.B.J. Schroder Bank & Trust Company $9,000,000
1 State Street, 9th Floor
New York, New York 10004
Telecopy: (212) 858-2768
Attention: Mark Weitekamp
TOTAL $50,000,000
================================================================================
<PAGE>
EXHIBIT A-1
FORM OF REVOLVING CREDIT NOTE
$ New York, New York
--------- September __ , 1997
FOR VALUE RECEIVED, the undersigned, NBTY, INC., a Delaware corporation
(the "Company"), hereby unconditionally promises to pay to the order of ________
(the "LENDER") at the office of THE CHASE MANHATTAN BANK, located at 270 Park
Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, on the Revolving Credit Termination
Date the principal amount of (a) __________ DOLLARS ($__), or, if less, (b) the
aggregate unpaid principal amount of all Revolving Credit Loans made by the
Lender to the Company pursuant to subsection 2.1 of the Credit Agreement, as
hereinafter defined. The Company further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time outstanding
at the rates and on the dates specified in subsection 6.1 of such Credit
Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date, Type and amount of each
Revolving Credit Loan made pursuant to the Credit Agreement and the date and
amount of each payment or prepayment of principal thereof, each continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of Eurodollar Loans, the length of each Interest Period with respect
thereto. Each such endorsement shall constitute PRIMA FACIE evidence of the
accuracy of the information endorsed. The failure to make any such endorsement
shall not affect the obligations of the Company in respect of such Revolving
Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Credit and Guarantee Agreement dated as of September , 1997 (as amended,
supplemented or otherwise modified from time to time, the "CREDIT AGREEMENT"),
among the Company, the Foreign Subsidiary Borrower, the Lender, the other banks
and financial institutions from time to time parties thereto and The Chase
Manhattan Bank, as Administrative Agent, (b) is subject to the provisions of the
Credit Agreement and (c) is subject to optional and mandatory prepayment in
whole or in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
<PAGE>
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
NBTY, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
<PAGE>
<TABLE>
<CAPTION>
Schedule A
to Revolving Credit Note
------------------------
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
Amount Amount of ABR Loans
Converted to Amount of Principal of Converted to Unpaid Principal
Date Amount of ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans Balance of ABR Loans Notation Made By
<S> <C> <C> <C> <C> <C> <C>
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
- -------- --------------------- --------------- ------------------------ --------------------- --------------------- ----------------
======== ===================== =============== ======================== ===================== ===================== ================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule B
to Revolving Credit Note
------------------------
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
Amount Interest Period and Amount of Principal Amount of Eurodollar Unpaid Principal
Amount of Converted to Eurodollar Rate with of Eurodollar Loans Loans Converted to Balance of Notation
Date Eurodollar Loans Eurodollar Loans Respect Thereto Repaid ABR Loans Eurodollar Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
- ----- ---------------- ---------------- ---------------------- -------------------- --------------------- ---------------- --------
===== ================ ================ ====================== ==================== ===================== ================ ========
</TABLE>
<PAGE>
EXHIBIT A-2
-----------
FORM OF SWING LINE NOTE
$
-------- New York, New York
September , 1997
---
FOR VALUE RECEIVED, the undersigned, NBTY, INC., a Delaware corporation
(the "COMPANY"), hereby unconditionally promises to pay to the order of
_________ (the "LENDER") at the office of THE CHASE MANHATTAN BANK, located at
270 Park Avenue, New York, New York 10017, in lawful money of the United States
of America and in immediately available funds, on the Revolving Credit
Termination Date the principal amount of (a) ___________ DOLLARS ($___ ), or, if
less, (b) the aggregate unpaid principal amount of all Swing Line Loans made by
the Lender to the Company pursuant to subsection ____ of the Credit Agreement,
as hereinafter defined. The Company further agrees to pay interest in like money
at such office on the unpaid principal amount hereof from time to time
outstanding at the rates and on the dates specified in subsection 6.1 of such
Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof the date and amount of each Swing Line
Loan made pursuant to the Credit Agreement and the date and amount of each
payment or prepayment of principal thereof. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed. The
failure to make any such endorsement shall not affect the obligations of the
Company in respect of such Swing Line Loan.
This Note (a) is the Swing Line Notes referred to in the Credit and
Guarantee Agreement dated as of September , 1997 (as amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Company, the Foreign Subsidiary Borrower, the Lender, the other banks and
financial institutions from time to time parties thereto and The Chase Manhattan
Bank, as Administrative Agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or in
part as provided in the Credit Agreement. This Note is secured and guaranteed as
provided in the Loan Documents. Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security interest has
been granted, the nature and extent of the security and the guarantees, the
terms and conditions upon which the security interests and each guarantee were
granted and the rights of the holder of this Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.
<PAGE>
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
NBTY, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT B
TO CREDIT AND
GUARANTEE AGREEMENT
--------------------
================================================================================
GUARANTEE AND COLLATERAL AGREEMENT
made by
NBTY, INC.
and the other Grantors parties hereto
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of September [ ], 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINED TERMS.................................................... 1
1.1 Definitions....................................................... 1
1.2 Other Definitional Provisions..................................... 5
SECTION 2. GUARANTEE........................................................ 6
2.1 Guarantee........................................................ 6
2.2 Right of Contribution............................................ 6
2.3 No Subrogation................................................... 7
2.4 Amendments, etc. with respect to the Borrower Obligations........ 7
2.5 Guarantee Absolute and Unconditional............................. 7
2.6 Reinstatement.................................................... 8
2.7 Payments......................................................... 8
SECTION 3. GRANT OF SECURITY INTEREST....................................... 8
SECTION 4. REPRESENTATIONS AND WARRANTIES................................... 9
4.1 Representations in Credit Agreement.............................. 9
4.2 Title; No Other Liens............................................ 9
4.3 Perfected First Priority Liens................................... 10
4.4 Chief Executive Office........................................... 10
4.5 Inventory and Equipment.......................................... 10
4.6 Farm Products.................................................... 10
4.7 Pledged Securities............................................... 10
4.8 Receivables...................................................... 11
4.9 Intellectual Property............................................ 11
SECTION 5. COVENANTS........................................................ 11
5.1 Covenants in Credit Agreement.................................... 11
5.2 Delivery of Instruments and Chattel Paper........................ 11
5.3 Maintenance of Insurance......................................... 12
5.4 Payment of Obligations........................................... 12
5.5 Maintenance of Perfected Security Interest; Further Documentation.12
5.6 Changes in Locations, Name, etc.................................. 13
5.7 Notices.......................................................... 13
5.8 Pledged Securities............................................... 13
5.9 Receivables...................................................... 14
5.10 Intellectual Property........................................... 14
SECTION 6. REMEDIAL PROVISIONS.............................................. 16
6.1 Certain Matters Relating to Receivables.......................... 16
6.2 Communications with Obligors; Grantors Remain Liable............. 16
6.3 Pledged Stock.................................................... 17
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6.4 Proceeds to be Turned Over To Administrative Agent............... 18
6.5 Application of Proceeds.......................................... 18
6.6 Code and Other Remedies.......................................... 18
6.7 Private Sales.................................................... 19
6.8 Waiver; Deficiency............................................... 19
SECTION 7. THE ADMINISTRATIVE AGENT......................................... 20
7.1 Administrative Agent's Appointment as Attorney-in-Fact, etc...... 20
7.2 Duty of Administrative Agent..................................... 21
7.3 Execution of Financing Statements................................ 22
7.4 Authority of Administrative Agent................................ 22
SECTION 8. MISCELLANEOUS.................................................... 22
8.1 Amendments in Writing............................................ 22
8.2 Notices.......................................................... 22
8.3 No Waiver by Course of Conduct; Cumulative Remedies.............. 22
8.4 Enforcement Expenses; Indemnification............................ 23
8.5 Successors and Assigns........................................... 23
8.6 Set-Off.......................................................... 23
8.7 Counterparts..................................................... 24
8.8 Severability..................................................... 24
8.9 Section Headings................................................. 24
8.10 Integration..................................................... 24
8.11 GOVERNING LAW................................................... 24
8.12 Submission To Jurisdiction; Waivers............................. 24
8.13 Acknowledgements................................................ 25
8.14 WAIVER OF JURY TRIAL............................................ 25
8.15 Additional Grantors............................................. 25
8.16 Judgment........................................................ 25
8.17 Releases........................................................ 26
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<PAGE>
SCHEDULES
Schedule 1 Notice Addresses of Guarantors
Schedule 2 Description of Pledged Securities
Schedule 3 Filings and Other Actions Required to Perfect Security Interests
Schedule 4 Location of Jurisdiction of Organization and Chief Executive Office
Schedule 5 Location of Inventory and Equipment
Schedule 6 Copyrights and Copyright Licenses; Patents and Patent Licenses;
Trademark and Trademark Licenses
Schedule 7 Existing Prior Liens
iii
<PAGE>
GUARANTEE AND COLLATERAL AGREEMENT, dated as of September __, 1997,
made by each of the signatories hereto (together with any other entity that may
become a party hereto as provided herein, the "GRANTORS"), in favor of THE CHASE
MANHATTAN BANK, as Administrative Agent (in such capacity, the "ADMINISTRATIVE
AGENT") for the banks and other financial institutions (the "LENDERS") from time
to time parties to the Credit and Guarantee Agreement, dated as of September ,
1997 (as amended, supplemented or otherwise modified from time to time, the
"CREDIT AGREEMENT"), among NBTY, INC., a Delaware corporation (the "COMPANY"),
the Foreign Subsidiary Borrower parties thereto (together with the Company, the
"BORROWERS"), the Lenders and the Administrative Agent.
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lenders have severally
agreed to make extensions of credit to the Borrowers upon the terms and subject
to the conditions set forth therein;
WHEREAS, each Borrower is a member of an affiliated group of companies
that includes each other Grantor;
WHEREAS, the proceeds of the extensions of credit under the Credit
Agreement will be used in part to enable the Borrowers to make valuable
transfers to one or more of the other Grantors in connection with the operation
of their respective businesses;
WHEREAS, the Borrowers and the other Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective extensions of credit to the Borrowers under the Credit
Agreement that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder, each Grantor hereby agrees with the Administrative Agent, for the
ratable benefit of the Lenders, as follows:
SECTION 1. DEFINED TERMS
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms defined in
the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement, and the following terms which are defined in the Uniform
Commercial Code in effect in the State of New York on the date hereof are used
herein as so defined: Accounts, Chattel Paper, Documents, Equipment, Farm
Products, Instruments and Inventory.
(b) The following terms shall have the following meanings:
"AGREEMENT": this Guarantee and Collateral Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"BORROWER OBLIGATIONS": in respect of any Borrower, the collective
reference to the unpaid principal of and interest on the Loans made to such
<PAGE>
2
Borrower, the Reimbursement Obligations of such Borrower and all other
obligations and liabilities of such Borrower (including, without
limitation, interest accruing at the then applicable rate provided in the
Credit Agreement after the maturity of such Loans and Reimbursement
Obligations and interest accruing at the then applicable rate provided in
the Credit Agreement after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to such Borrower, whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding, and including, with respect to the
Company, its guarantee obligations pursuant to Section 12 of the Credit
Agreement) to the Administrative Agent or any Lender (or, in the case of
any Hedge Agreement referred to below, any Affiliate of any Lender),
whether direct or indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan
Documents, any Letter of Credit or any Hedge Agreement entered into by such
Borrower with any Lender (or any Affiliate of any Lender) or any other
document made, delivered or given in connection therewith, in each case
whether on account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Administrative Agent or to the
Lenders that are required to be paid by such Borrower pursuant to the terms
of any of the foregoing agreements).
"COLLATERAL": as defined in Section 3.
"COLLATERAL ACCOUNT": any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.
"COPYRIGHTS": (i) all copyrights arising under the laws of the United
States, any other country or any political subdivision thereof, whether
registered or unregistered and whether published or unpublished (including,
without limitation, those listed in Schedule 6), all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.
"COPYRIGHT LICENSES": any written agreement naming any Grantor as
licensor or licensee (including, without limitation, those listed in
Schedule 6), granting any right under any Copyright, including, without
limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright, to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such Copyright License is not prohibited by such
Copyright License without the consent of any other party thereto, would not
give any other party to such Copyright License the right to terminate its
obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any money or other amounts due or to become due under any such Copyright
License.
"GENERAL INTANGIBLES": all "general intangibles" as such term is
defined in Section 9-106 of the Uniform Commercial Code in effect in the
State of New York on the date hereof and, in any event, including, without
limitation, with respect to any Grantor, all contracts, agreements,
instruments and indentures in any form, and portions thereof, to which such
<PAGE>
3
Grantor is a party or under which such Grantor has any right, title or
interest or to which such Grantor or any property of such Grantor is
subject, as the same may from time to time be amended, supplemented or
otherwise modified, including, without limitation, (i) all rights of such
Grantor to receive moneys due and to become due to it thereunder or in
connection therewith, (ii) all rights of such Grantor to damages arising
thereunder and (iii) all rights of such Grantor to perform and to exercise
all remedies thereunder, in each case to the extent the grant by such
Grantor of a security interest pursuant to this Agreement in its right,
title and interest in such contract, agreement, instrument or indenture is
not prohibited by such contract, agreement, instrument or indenture without
the consent of any other party thereto, would not give any other party to
such contract, agreement, instrument or indenture the right to terminate
its obligations thereunder, or is permitted with consent if all necessary
consents to such grant of a security interest have been obtained from the
other parties thereto (it being understood that the foregoing shall not be
deemed to obligate such Grantor to obtain such consents); provided, that
the foregoing limitation shall not affect, limit, restrict or impair the
grant by such Grantor of a security interest pursuant to this Agreement in
any Receivable or any money or other amounts due or to become due under any
such contract, agreement, instrument or indenture.
"GUARANTOR OBLIGATIONS": with respect to any Guarantor, the collective
reference to (i) the Borrower Obligations of all Borrowers and (ii) all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement or any other Loan Document to which such
Guarantor is a party, in each case whether on account of guarantee
obligations, reimbursement obligations, fees, indemnities, costs, expenses
or otherwise (including, without limitation, all fees and disbursements of
counsel to the Administrative Agent or to the Lenders that are required to
be paid by such Guarantor pursuant to the terms of this Agreement or any
other Loan Document).
"GUARANTORS": the collective reference to each Grantor other than the
Company.
"HEDGE AGREEMENTS": as to any Person, all interest rate swaps, caps or
collar agreements or similar arrangements entered into by such Person
providing for protection against fluctuations in interest rates or currency
exchange rates or the exchange of nominal interest obligations, either
generally or under specific contingencies.
"INTELLECTUAL PROPERTY": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether
arising under United States, multinational or foreign laws or otherwise,
including, without limitation, the Copyrights, the Copyright Licenses, the
Patents, the Patent Licenses, the Trademarks and the Trademark Licenses,
and all rights to sue at law or in equity for any infringement or other
impairment thereof, including the right to receive all proceeds and damages
therefrom.
"INTERCOMPANY NOTE": any promissory note evidencing loans made by any
Grantor to the Company or any of its Subsidiaries.
"ISSUERS": the collective reference to each issuer of a Pledged
Security.
"NEW YORK UCC": the Uniform Commercial Code as from time to time in
effect in the State of New York.
"OBLIGATIONS": (i) in the case of each Borrower, its Borrower
<PAGE>
4
Obligations, and (ii) in the case of each Guarantor, its Guarantor
Obligations.
"PATENTS": (i) all letters patent of the United States, any other
country or any political subdivision thereof, all reissues and extensions
thereof and all goodwill associated therewith, including, without
limitation, any of the foregoing referred to in Schedule 6, (ii) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule
6, and (iii) all rights to obtain any reissues or extensions of the
foregoing.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered in whole or in part by a Patent, including, without
limitation, any of the foregoing referred to in SCHEDULE 6, to the extent
the grant by such Grantor of a security interest pursuant to this Agreement
in its right, title and interest in such Patent License is not prohibited
by such Patent License without the consent of any other party thereto,
would not give any other party to such Patent License the right to
terminate its obligations thereunder, or is permitted with consent if all
necessary consents to such grant of a security interest have been obtained
from the other parties thereto (it being understood that the foregoing
shall not be deemed to obligate such Grantor to obtain such consents);
provided, that the foregoing limitation shall not affect, limit, restrict
or impair the grant by such Grantor of a security interest pursuant to this
Agreement in any money or other amounts due or to become due under any such
Patent License.
"PLEDGED NOTES": all Intercompany Notes at any time issued to any
Grantor and all other promissory notes issued to or held by any Grantor
(other than promissory notes issued in connection with extensions of trade
credit by any Grantor in the ordinary course of business).
"PLEDGED SECURITIES": the collective reference to the Pledged Notes and
the Pledged Stock.
"PLEDGED STOCK": the shares of Capital Stock listed on Schedule 2,
together with any other shares, stock certificates, options or rights of
any nature whatsoever pledged pursuant to subsection 8.9 of the Credit
Agreement.
"PROCEEDS": all "proceeds" as such term is defined in Section 9-306(1)
of the Uniform Commercial Code in effect in the State of New York on the
date hereof and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"RECEIVABLE": any right to payment for goods sold or leased or for
services rendered, whether or not such right is evidenced by an Instrument
or Chattel Paper and whether or not it has been earned by performance
(including, without limitation, any Account).
"SECURITIES ACT": the Securities Act of 1933, as amended.
"TRADEMARKS": (i) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, trade styles, service
marks, logos and other source or business identifiers, and all goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in
any similar office or agency of the United States, any State thereof or any
other country or any political subdivision thereof, or otherwise, and all
<PAGE>
5
common-law rights related thereto, including, without limitation, any of
the foregoing referred to in Schedule 6, and (ii) the right to obtain all
renewals thereof.
"TRADEMARK LICENSE": any agreement, whether written or oral, providing
for the grant by or to any Grantor of any right to use any Trademark,
including, without limitation, any of the foregoing referred to in Schedule
6, to the extent the grant by such Grantor of a security interest pursuant
to this Agreement in its right, title and interest in such Trademark
License is not prohibited by such Trademark License without the consent of
any other party thereto, would not give any other party to such Trademark
License the right to terminate its obligations thereunder, or is permitted
with consent if all necessary consents to such grant of a security interest
have been obtained from the other parties thereto (it being understood that
the foregoing shall not be deemed to obligate such Grantor to obtain such
consents); provided, that the foregoing limitation shall not affect, limit,
restrict or impair the grant by such Grantor of a security interest
pursuant to this Agreement in any money or other amounts due or to become
due under any such Trademark License.
"VEHICLES": all cars, trucks, trailers, construction and earth moving
equipment and other vehicles covered by a certificate of title law of any
state.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.
SECTION 2. GUARANTEE
2.1 GUARANTEE. (a) Each of the Guarantors hereby, jointly and
severally, unconditionally and irrevocably, guarantees to the Administrative
Agent, for the ratable benefit of the Lenders and their respective successors,
indorsees, transferees and assigns, the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Borrower Obligations of all Borrowers.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).
<PAGE>
6
(c) Each Guarantor agrees that the Borrower Obligations of one or more
Borrowers may at any time and from time to time exceed the amount of the
liability of such Guarantor hereunder without impairing the guarantee contained
in this Section 2 or affecting the rights and remedies of the Administrative
Agent or any Lender hereunder.
(d) The guarantee contained in this Section 2 shall remain in full
force and effect until all the Borrower Obligations and the obligations of each
Guarantor under the guarantee contained in this Section 2 shall have been
satisfied by payment in full, no Letter of Credit shall be outstanding and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Borrowers may be free from any Borrower
Obligations.
(e) No payment made by any Borrower, any of the Guarantors, any other
guarantor or any other Person or received or collected by the Administrative
Agent or any Lender from any Borrower, any of the Guarantors, any other
guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of any of the Borrower Obligations shall be deemed to
modify, reduce, release or otherwise affect the liability of any Guarantor
hereunder which shall, notwithstanding any such payment (other than any payment
made by such Guarantor in respect of such Borrower Obligations or any payment
received or collected from such Guarantor in respect of such Borrower
Obligations), remain liable for the Borrower Obligations of all Borrowers up to
the maximum liability of such Guarantor hereunder until all Borrower Obligations
are paid in full, no Letter of Credit shall be outstanding and the Commitments
are terminated.
2.2 RIGHT OF CONTRIBUTION. Each Guarantor hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made hereunder, such Guarantor shall be entitled to seek and receive
contribution from and against any other Guarantor hereunder which has not paid
its proportionate share of such payment. Each Guarantor's right of contribution
shall be subject to the terms and conditions of Section 2.3. The provisions of
this Section 2.2 shall in no respect limit the obligations and liabilities of
any Guarantor to the Administrative Agent and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.
2.3 NO SUBROGATION. Notwithstanding any payment made by any Guarantor
hereunder or any set-off or application of funds of any Guarantor by the
Administrative Agent or any Lender, no Guarantor shall be entitled to be
subrogated to any of the rights of the Administrative Agent or any Lender
against any Borrower or any other Guarantor or any collateral security or
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek or be
entitled to seek any contribution or reimbursement from any Borrower or any
other Guarantor in respect of payments made by such Guarantor hereunder, until
all amounts owing to the Administrative Agent and the Lenders by the Borrowers
on account of the Borrower Obligations are paid in full, no Letter of Credit
shall be outstanding and the Commitments are terminated. If any amount shall be
paid to any Guarantor on account of such subrogation rights at any time when all
of the Borrower Obligations shall not have been paid in full, such amount shall
be held by such Guarantor in trust for the Administrative Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor, be turned over to the Administrative Agent in the exact form
received by such Guarantor (duly indorsed by such Guarantor to the
Administrative Agent, if required), to be applied against the Borrower
Obligations, whether matured or unmatured, in such order as the Administrative
Agent may determine.
<PAGE>
7
2.4 AMENDMENTS, ETC. WITH RESPECT TO THE BORROWER OBLIGATIONS. Each
Guarantor shall remain obligated hereunder notwithstanding that, without any
reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Borrower
Obligations made by the Administrative Agent or any Lender may be rescinded by
the Administrative Agent or such Lender and any of the Borrower Obligations
continued, and the Borrower Obligations, or the liability of any other Person
upon or for any part thereof, or any collateral security or guarantee therefor
or right of offset with respect thereto, may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered or released by the Administrative Agent or any Lender, and the
Credit Agreement and the other Loan Documents and any other documents executed
and delivered in connection therewith may be amended, modified, supplemented or
terminated, in whole or in part, as the Administrative Agent (or the Required
Lenders or all Lenders, as the case may be) may deem advisable from time to
time, and any collateral security, guarantee or right of offset at any time held
by the Administrative Agent or any Lender for the payment of the Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative Agent nor any Lender shall have any obligation to protect,
secure, perfect or insure any Lien at any time held by it as security for the
Borrower Obligations or for the guarantee contained in this Section 2 or any
property subject thereto.
2.5 GUARANTEE ABSOLUTE AND UNCONDITIONAL. Each Guarantor waives any and
all notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of the
guarantee contained in this Section 2; the Borrower 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 the guarantee
contained in this Section 2; and all dealings between the Borrowers and any of
the Guarantors, on the one hand, and the Administrative Agent and the Lenders,
on the other hand, likewise shall be conclusively presumed to have been had or
consummated in reliance upon the guarantee contained in this Section 2. Each
Guarantor waives diligence, presentment, protest, demand for payment and notice
of default or nonpayment to or upon any Borrower or any of the Guarantors with
respect to the Borrower Obligations. Each Guarantor understands and agrees that
the guarantee contained in this Section 2 shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of the Credit Agreement or any other Loan Document,
any of the Borrower Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any defense, set-off or
counterclaim (other than a defense of payment or performance) which may at any
time be available to or be asserted by any Borrower or any other Person against
the Administrative Agent or any Lender, or (c) any other circumstance whatsoever
(with or without notice to or knowledge of any Borrower or such Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any Borrower for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other
instance. When making any demand hereunder or otherwise pursuing its rights and
remedies hereunder against any Guarantor, the Administrative Agent or any Lender
may, but shall be under no obligation to, make a similar demand on or otherwise
pursue such rights and remedies as it may have against any Borrower, any other
Guarantor or any other Person or against any collateral security or guarantee
for the Borrower Obligations or any right of offset with respect thereto, and
any failure by the Administrative Agent or any Lender to make any such demand,
to pursue such other rights or remedies or to collect any payments from any
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or any
release of any Borrower, any other Guarantor or any other Person or any such
collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any Guarantor.
<PAGE>
8
For the purposes hereof "demand" shall include the commencement and continuance
of any legal proceedings.
2.6 REINSTATEMENT. The guarantee contained in this Section 2 shall
continue to be effective, or be reinstated, as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any Guarantor, or upon or as a result of the appointment of a
receiver, intervenor or conservator of, or trustee or similar officer for, any
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.
2.7 PAYMENTS. Each Guarantor hereby guarantees that payments hereunder
will be paid to the Administrative Agent without set-off or counterclaim in the
currency in which such payment is due pursuant to the Credit Agreement at the
relevant payment office specified in the Credit Agreement.
SECTION 3. GRANT OF SECURITY INTEREST
Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the Administrative Agent, for the ratable benefit of the
Lenders, a security interest in, all of the following property now owned or at
any time hereafter acquired by such Grantor or in which such Grantor now has or
at any time in the future may acquire any right, title or interest
(collectively, the "COLLATERAL"), as collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of such Grantor's Obligations,:
(a) all Accounts;
(b) all Chattel Paper;
(c) all Documents;
(d) all Equipment;
(e) all General Intangibles;
(f) all Instruments;
(g) all Intellectual Property;
(h) all Inventory;
(i) all Pledged Securities;
(j) all books and records pertaining to the Collateral; and
(k) to the extent not otherwise included, all Proceeds and products of
any and all of the foregoing and all collateral security and guarantees given by
any Person with respect to any of the foregoing.
<PAGE>
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective extensions
of credit to the Borrower thereunder, each Grantor hereby represents and
warrants to the Administrative Agent and each Lender that:
4.1 REPRESENTATIONS IN CREDIT AGREEMENT. In the case of each Guarantor,
the representations and warranties set forth in Section 8 of the Credit
Agreement as they relate to such Guarantor or to the Loan Documents to which
such Guarantor is a party, each of which is hereby incorporated herein by
reference, are true and correct, and the Administrative Agent and each Lender
shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
the Company knowledge shall, for the purposes of this Section 4.1, be deemed to
be a reference to such Guarantor's knowledge.
4.2 TITLE; NO OTHER LIENS. Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Lenders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral by the Credit
Agreement, such Grantor owns each item of the Collateral free and clear of any
and all Liens or claims of others except Liens permitted to exist pursuant to
the Credit Agreement. No financing statement or other public notice with respect
to all or any part of the Collateral is on file or of record in any public
office, except such as have been filed in favor of the Administrative Agent, for
the ratable benefit of the Lenders, pursuant to this Agreement or as are
permitted by the Credit Agreement.
4.3 PERFECTED FIRST PRIORITY LIENS. The security interests granted
pursuant to this Agreement (a) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and other documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed form) will constitute valid perfected security
interests in all of the Collateral located in New York State in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as collateral
security for such Grantor's Obligations, enforceable in accordance with the
terms hereof against all creditors of such Grantor and any Persons purporting to
purchase any Collateral from such Grantor and (b) are prior to all other Liens
on the Collateral in existence on the date hereof except for (i) unrecorded
Liens permitted by the Credit Agreement which have priority over the Liens on
the Collateral by operation of law and (ii) Liens described on Schedule 7 and
except to the extent that filings outside the United States might be required to
perfect such security interest in non-U.S. intellectual property.
4.4 CHIEF EXECUTIVE OFFICE. On the date hereof, such Grantor's
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.
4.5 INVENTORY AND EQUIPMENT. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on
SCHEDULE 5.
4.6 FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
4.7 PLEDGED SECURITIES. (a) The shares of Pledged Stock pledged by such
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Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor, except that
the shares of Pledged Stock of any Issuer which is a Foreign Subsidiary
constitute no more than 65% of all the issued and outstanding Capital Stock of
such Issuer.
(b) All the shares of the Pledged Stock have been duly and validly
issued and, to the extent the same are shares of Capital Stock of a corporation,
are fully paid and nonassessable.
(c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect thereto, enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(d) Such Grantor is the record and beneficial owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or options in favor of, or claims of, any other Person, except
the security interest created by this Agreement.
4.8 RECEIVABLES. (a) No amount payable to such Grantor under or in
connection with any Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.
(b) Receivables in respect of which a Governmental Authority is the
obligor do not constitute more than 5%, in face amount, of all Receivables.
(c) The amounts represented by such Grantor to the Lenders from time to
time as owing to such Grantor in respect of the Receivables will at such times
be accurate.
4.9 INTELLECTUAL PROPERTY. (a) Schedule 6 lists all Intellectual
Property owned by such Grantor in its own name on the date hereof.
(b) On the date hereof, to the best of such Grantor's knowledge, all
material Intellectual Property is valid, subsisting, unexpired and enforceable,
has not been abandoned and does not infringe the intellectual property rights of
any other Person.
(c) Except as set forth in SCHEDULE 6, on the date hereof, none of the
Intellectual Property is the subject of any licensing or franchise agreement
pursuant to which such Grantor is the licensor or franchisor.
(d) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's rights in, any Intellectual Property in any respect that could
reasonably be expected to have a Material Adverse Effect.
(e) No action or proceeding is pending, or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual Property or such Grantor's ownership interest
therein, or (ii) which, if adversely determined, could reasonably be expected to
have a Material Adverse Effect.
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SECTION 5. COVENANTS
Each Grantor covenants and agrees with the Administrative Agent and the
Lenders that, from and after the date of this Agreement until the Obligations
shall have been paid in full, no Letter of Credit shall be outstanding and the
Commitments shall have terminated:
5.1 COVENANTS IN CREDIT AGREEMENT. In the case of each Guarantor, such
Guarantor shall comply with and perform each covenant set forth in the Credit
Agreement applicable thereto as if such Guarantor were a party to the Credit
Agreement.
5.2 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable
under or in connection with any of the Collateral in excess of $1,000,000 shall
be or become evidenced by any Instrument or Chattel Paper, such Instrument or
Chattel Paper shall be immediately delivered to the Administrative Agent, duly
indorsed in a manner satisfactory to the Administrative Agent, to be held as
Collateral pursuant to this Agreement.
5.3 MAINTENANCE OF INSURANCE. (a) Such Grantor will maintain, with
financially sound and reputable companies, insurance policies (i) insuring the
Inventory, Equipment and Vehicles against loss by fire, explosion, theft and
such other casualties as may be reasonably satisfactory to the Administrative
Agent and (ii) insuring such Grantor, the Administrative Agent and the Lenders
against liability for personal injury and property damage relating to such
Inventory, Equipment and Vehicles, such policies to be in such form and amounts
and having such coverage as may be reasonably satisfactory to the Administrative
Agent and the Lenders.
(b) All such insurance shall (i) provide that no cancellation, material
reduction in amount or material change in coverage thereof shall be effective
until at least 30 days after receipt by the Administrative Agent of written
notice thereof, (ii) name the Administrative Agent as insured party or loss
payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of warranty clause and (iv) be reasonably satisfactory in all other
respects to the Administrative Agent.
(c) The Borrower shall deliver to the Administrative Agent and the
Lenders a report of a reputable insurance broker with respect to such insurance
during the month of February in each calendar year and such supplemental reports
with respect thereto as the Administrative Agent may from time to time
reasonably request.
5.4 PAYMENT OF OBLIGATIONS. Such Grantor will pay and discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.
5.5 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER DOCUMENTATION.
(a) Such Grantor shall maintain the security interest created by this Agreement
as a perfected security interest having at least the priority described in
Section 4.3 and shall defend such security interest against the claims and
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demands of all Persons whomsoever.
(b) Such Grantor will furnish to the Administrative Agent and the
Lenders from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.
(c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly and duly execute and deliver, and have recorded, such further
instruments and documents and take such further actions as the Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code (or other similar laws) in effect
in any jurisdiction with respect to the security interests created hereby.
5.6 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not, except upon
15 days' prior written notice to the Administrative Agent and delivery to the
Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity, perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:
(i) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5;
(ii) change the location of its chief executive office or sole place of
business from that referred to in Section 4.4; or
(iii) change its name, identity or corporate structure to such an
extent that any financing statement filed by the Administrative Agent in
connection with this Agreement would become misleading.
5.7 NOTICES. Such Grantor will advise the Administrative Agent and the
Lenders promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Administrative Agent to exercise any of its
remedies hereunder; and
(b) of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5.8 PLEDGED SECURITIES. (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate (including, without limitation,
any certificate representing a stock dividend or a distribution in connection
with any reclassification, increase or reduction of capital or any certificate
issued in connection with any reorganization), option or rights in respect of
the Capital Stock of any Issuer, whether in addition to, in substitution of, as
a conversion of, or in exchange for, any shares of the Pledged Stock, or
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13
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the Administrative Agent and the Lenders, hold the same in trust for the
Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor and with, if
the Administrative Agent so requests, signature guaranteed, to be held by the
Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations, provided that the foregoing shall not require any
Grantor to so deliver any such Capital Stock of any Issuer which is a Foreign
Subsidiary if, as a result thereof, the Capital Stock of such Foreign Subsidiary
pledged hereunder would exceed 65% of all Capital Stock of such Foreign
Subsidiary. Any sums paid upon or in respect of the Pledged Securities upon the
liquidation or dissolution of any Issuer shall be paid over to the
Administrative Agent to be held by it hereunder as additional collateral
security for the Obligations, and in case any distribution of capital shall be
made on or in respect of the Pledged Securities or any property shall be
distributed upon or with respect to the Pledged Securities pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the Administrative Agent,
be delivered to the Administrative Agent to be held by it hereunder as
additional collateral security for the Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by such Grantor, such Grantor shall, until such money or property is
paid or delivered to the Administrative Agent, hold such money or property in
trust for the Lenders, segregated from other funds of such Grantor, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent, such
Grantor will not (i) vote to enable, or take any other action to permit, any
Issuer to issue any stock or other equity securities of any nature or to issue
any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity securities of any nature of any Issuer,
(ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any
option with respect to, the Pledged Securities or Proceeds thereof (except
pursuant to a transaction expressly permitted by the Credit Agreement), (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged Securities or Proceeds thereof,
or any interest therein, except for the security interests created by this
Agreement or (iv) enter into any agreement or undertaking restricting the right
or ability of such Grantor or the Administrative Agent to sell, assign or
transfer any of the Pledged Securities or Proceeds thereof.
(c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities issued by it and will comply with such terms insofar as such terms
are applicable to it, (ii) it will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) with
respect to the Pledged Securities issued by it and (iii) the terms of Section
6.3(c) shall apply to it, mutatis mutandis, with respect to all actions that may
be required of it pursuant to Section 6.3(c) with respect to the Pledged
Securities issued by it.
5.9 RECEIVABLES. (a) Other than in the ordinary course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the time of payment of any Receivable, (ii) compromise or settle any
Receivable for less than the full amount thereof, (iii) release, wholly or
partially, any Person liable for the payment of any Receivable, (iv) allow any
credit or discount whatsoever on any Receivable or (v) amend, supplement or
modify any Receivable in any manner that could adversely affect the value
thereof.
(b) Such Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions or calls
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into doubt the validity or enforceability of more than 5% of the aggregate
amount of the then outstanding Receivables.
5.10 INTELLECTUAL PROPERTY. (a) Such Grantor (either itself or through
licensees) will (i) continue to use each material Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment for non-use, (ii) maintain as
in the past the quality of products and services offered under such Trademark,
(iii) use such Trademark with any appropriate notice of registration and all
other notices and legends required by applicable Requirements of Law, (iv) not
adopt or use any mark which is confusingly similar or a colorable imitation of
such Trademark unless the Administrative Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.
(b) Such Grantor (either itself or through licensees) will not do any
act, or omit to do any act, whereby any material Patent may become forfeited,
abandoned or dedicated to the public.
(c) Such Grantor (either itself or through licensees) (i) will employ
each material Copyright and (ii) will not (and will not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
material portion of such Copyrights may become invalidated or otherwise
impaired. Such Grantor will not (either itself or through licensees) do any act
whereby any material portion of such Copyrights may fall into the public domain.
(d) Such Grantor (either itself or through licensees) will not do any
act that knowingly uses any material Intellectual Property to infringe the
intellectual property rights of any other Person.
(e) Such Grantor will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any material Intellectual Property may become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country) regarding such Grantor's ownership of, or the validity of, any
material Intellectual Property or such Grantor's right to register the same or
to own and maintain the same.
(f) Whenever such Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States Copyright Office or any similar office or agency in any State
of the United States, such Grantor shall report such filing to the
Administrative Agent within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the Administrative Agent,
such Grantor shall execute and deliver, and have recorded, any and all
agreements, instruments, documents, and papers as the Administrative Agent may
reasonably request to evidence the Administrative Agent's and the Lenders'
security interest in any Copyright, Patent or Trademark and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.
(g) Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in any State of the United States, to maintain and pursue each
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15
application (and to obtain the relevant registration) and to maintain each
registration of the material Intellectual Property, including, without
limitation, filing of applications for renewal, affidavits of use and affidavits
of incontestability.
(h) In the event that any material Intellectual Property is infringed,
misappropriated or diluted by a third party, such Grantor shall (i) take such
actions as such Grantor shall reasonably deem appropriate under the
circumstances to protect such Intellectual Property and (ii) if such
Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.
SECTION 6. REMEDIAL PROVISIONS
6.1 CERTAIN MATTERS RELATING TO RECEIVABLES. (a) The Administrative
Agent shall have the right to make test verifications of the Receivables in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications. At any time and
from time to time (but not more frequently than once per fiscal quarter), upon
the Administrative Agent's request and at the expense of the relevant Grantor,
such Grantor shall cause independent public accountants or others satisfactory
to the Administrative Agent to furnish to the Administrative Agent reports
showing reconciliations, aging and test verifications of, and trial balances
for, the Receivables.
(b) The Administrative Agent hereby authorizes each Grantor to collect
such Grantor's Receivables, subject to the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority at
any time and only at any time after the occurrence and during the continuance of
an Event of Default. If required by the Administrative Agent at any time after
the occurrence and during the continuance of an Event of Default, any payments
of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in
any event, within two Business Days) deposited by such Grantor in the exact form
received, duly indorsed by such Grantor to the Administrative Agent if required,
in a Collateral Account maintained under the sole dominion and control of the
Administrative Agent, subject to withdrawal by the Administrative Agent for the
account of the Lenders only as provided in Section 0, and (ii) until so turned
over, shall be held by such Grantor in trust for the Administrative Agent and
the Lenders, segregated from other funds of such Grantor. Each such deposit of
Proceeds of Receivables shall be accompanied by a report identifying in
reasonable detail the nature and source of the payments included in the deposit.
(c) At the Administrative Agent's request, at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
deliver to the Administrative Agent all original and other documents evidencing,
and relating to, the agreements and transactions which gave rise to the
Receivables, including, without limitation, all original orders, invoices and
shipping receipts.
6.2 COMMUNICATIONS WITH OBLIGORS; GRANTORS REMAIN LIABLE. (a) The
Administrative Agent in its own name or in the name of others may at any time
after the occurrence and during the continuance of an Event of Default
communicate with obligors under the Receivables to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Receivables.
(b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
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notify obligors on the Receivables that the Receivables have been assigned to
the Administrative Agent for the ratable benefit of the Lenders and that
payments in respect thereof shall be made directly to the Administrative Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall
remain liable under each of the Receivables to observe and perform all the
conditions and obligations to be observed and performed by it thereunder, all in
accordance with the terms of any agreement giving rise thereto. Neither the
Administrative Agent nor any Lender shall have any obligation or liability under
any Receivable (or any agreement giving rise thereto) by reason of or arising
out of this Agreement or the receipt by the Administrative Agent or any Lender
of any payment relating thereto, nor shall the Administrative Agent or any
Lender be obligated in any manner to perform any of the obligations of any
Grantor under or pursuant to any Receivable (or any agreement giving rise
thereto), to make any payment, to make any inquiry as to the nature or the
sufficiency of any payment received by it or as to the sufficiency of any
performance by any party thereunder, to present or file any claim, to take any
action to enforce any performance or to collect the payment of any amounts which
may have been assigned to it or to which it may be entitled at any time or
times.
6.3 PLEDGED STOCK. (a) Unless an Event of Default shall have occurred
and be continuing and the Administrative Agent shall have given notice to the
relevant Grantor of the Administrative Agent's intent to exercise its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive all cash dividends paid in respect of the Pledged Stock and all
payments made in respect of the Pledged Notes, in each case paid in the normal
course of business of the relevant Issuer and consistent with past practice, to
the extent permitted in the Credit Agreement, and to exercise all voting and
corporate rights with respect to the Pledged Securities; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which,
in the Administrative Agent's reasonable judgment, would impair the Collateral
or which would be inconsistent with or result in any violation of any provision
of the Credit Agreement, this Agreement or any other Loan Document.
(b) If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have the
right to receive any and all cash dividends, payments or other Proceeds paid in
respect of the Pledged Securities and make application thereof to the
Obligations in such order as the Credit Agreement shall prescribe, and (ii) any
or all of the Pledged Securities shall be registered in the name of the
Administrative Agent or its nominee, and the Administrative Agent or its nominee
may thereafter exercise (x) all voting, corporate and other rights pertaining to
such Pledged Securities at any meeting of shareholders of the relevant Issuer or
Issuers or otherwise and (y) any and all rights of conversion, exchange and
subscription and any other rights, privileges or options pertaining to such
Pledged Securities as if it were the absolute owner thereof (including, without
limitation, the right to exchange at its discretion any and all of the Pledged
Securities upon the merger, consolidation, reorganization, recapitalization or
other fundamental change in the corporate structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Pledged Securities, and in connection therewith, the
right to deposit and deliver any and all of the Pledged Securities with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(c) Each Grantor hereby authorizes and instructs each Issuer of any
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Pledged Securities pledged by such Grantor hereunder to comply with any
instruction received by it from the Administrative Agent in writing that (i)
states that an Event of Default has occurred and is continuing and (ii) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying.
6.4 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In addition to
the rights of the Administrative Agent and the Lenders specified in Section 6.1
with respect to payments of Receivables, if an Event of Default shall occur and
be continuing, all Proceeds received by any Grantor consisting of cash, checks
and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received by the Administrative Agent hereunder shall be held by the
Administrative Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral
Account (or by such Grantor in trust for the Administrative Agent and the
Lenders) shall continue to be held as collateral security for all the
Obligations and shall not constitute payment thereof until applied as provided
in Section 0.
6.5 APPLICATION OF PROCEEDS. At such intervals as may be agreed upon by
the Company and the Administrative Agent, or, if an Event of Default shall have
occurred and be continuing, at any time at the Administrative Agent's election,
the Administrative Agent may apply all or any part of Proceeds held in any
Collateral Account in payment of the Obligations in such order as the Credit
Agreement prescribes, and any part of such funds which the Credit Agreement does
not require to be applied in payment of the Obligations and which Administrative
Agent deems not required as collateral security for the Obligations shall be
paid over from time to time by the Administrative Agent to the Company or to
whomsoever may be lawfully entitled to receive the same. Any balance of such
Proceeds remaining after the Obligations shall have been paid in full, no
Letters of Credit shall be outstanding and the Commitments shall have terminated
shall be paid over to the Company or to whomsoever may be lawfully entitled to
receive the same.
6.6 CODE AND OTHER REMEDIES. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon any Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon any such private sale or sales, to purchase the whole or any part of
the Collateral so sold, free of any right or equity of redemption in any
Grantor, which right or equity is hereby waived and released. Each Grantor
further agrees, at the Administrative Agent's request, to assemble the
Collateral and make it available to the Administrative Agent at places which the
Administrative Agent shall reasonably select, whether at such Grantor's premises
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18
or elsewhere. The Administrative Agent shall apply the net proceeds of any
action taken by it pursuant to this Section 6.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Administrative Agent and the Lenders
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Obligations, in such
order as the Credit Agreement shall prescribe, and only after such application
and after the payment by the Administrative Agent of any other amount required
by any provision of law, including, without limitation, Section 9-504(1)(c) of
the New York UCC, need the Administrative Agent account for the surplus, if any,
to any Grantor. To the extent permitted by applicable law, each Grantor waives
all claims, damages and demands it may acquire against the Administrative Agent
or any Lender arising out of the exercise by them of any rights hereunder. If
any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 Business Days before such sale or other disposition.
6.7 PRIVATE SALES. (a) Each Grantor recognizes that the Administrative
Agent may be unable to effect a public sale of any or all the Pledged Stock, by
reason of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may be compelled to resort to one or
more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. Each Grantor acknowledges and agrees that any such private sale may
result in prices and other terms less favorable than if such sale were a public
sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The
Administrative Agent shall be under no obligation to delay a sale of any of the
Pledged Stock for the period of time necessary to permit the Issuer thereof to
register such securities for public sale under the Securities Act, or under
applicable state securities laws, even if such Issuer would agree to do so.
(b) Each Grantor agrees to use its best efforts to do or cause to be
done all such other acts as may be necessary to make such sale or sales of all
or any portion of the Pledged Stock pursuant to this Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor further agrees that a breach of any of the covenants contained in
this Section 6.7 will cause irreparable injury to the Administrative Agent and
the Lenders, that the Administrative Agent and the Lenders have no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 6.7 shall be specifically enforceable
against such Grantor, and such Grantor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.
6.8 WAIVER; DEFICIENCY. Each Grantor waives and agrees not to assert
any rights or privileges which it may acquire under Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other disposition of the Collateral are insufficient to pay its
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
SECTION 7. THE ADMINISTRATIVE AGENT
7.1 ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT, ETC. (a)
<PAGE>
19
Each Grantor hereby irrevocably constitutes and appoints the Administrative
Agent and any officer or agent thereof, with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority in
the place and stead of such Grantor and in the name of such Grantor or in its
own name, for the purpose of carrying out the terms of this Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Agreement, and, without limiting the generality of the foregoing, each
Grantor hereby gives the Administrative Agent the power and right, on behalf of
such Grantor, without notice to or assent by such Grantor, to do any or all of
the following:
(i) in the name of such Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Receivable or with respect to any other Collateral and file any claim or
take any other action or proceeding in any court of law or equity or
otherwise reasonably deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due under any Receivable or
with respect to any other Collateral whenever payable;
(ii) in the case of any Intellectual Property, execute and deliver, and
have recorded, any and all agreements, instruments, documents and papers as
the Administrative Agent may reasonably request to evidence the
Administrative Agent's and the Lenders' security interest in such
Intellectual Property and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby;
(iii) pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, effect any repairs or any insurance
called for by the terms of this Agreement and pay all or any part of the
premiums therefor and the costs thereof;
(iv) execute, in connection with any sale provided for in Section 6.6
or 6.7, any indorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(v) (i) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) ask or demand for, collect, and receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) sign and indorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of the
Collateral; (iv) commence and prosecute any suits, actions or proceedings
at law or in equity in any court of competent jurisdiction to collect the
Collateral or any portion thereof and to enforce any other right in respect
of any Collateral; (v) defend any suit, action or proceeding brought
against such Grantor with respect to any Collateral; (vi) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent may
deem appropriate; (vii) assign any Copyright, Patent or Trademark (along
with the goodwill of the business to which any such Copyright, Patent or
Trademark pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Administrative Agent shall in its
sole discretion determine; and (viii) generally, sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent were
the absolute owner thereof for all purposes, and do, at the Administrative
Agent's option and such Grantor's expense, at any time, or from time to
<PAGE>
20
time, all acts and things which the Administrative Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and the
Administrative Agent's and the Lenders' security interests therein and to
effect the intent of this Agreement, all as fully and effectively as such
Grantor might do.
Anything in this Section 7.1(a) to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.
(b) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.
(c) The expenses of the Administrative Agent incurred in connection
with actions undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which interest would
then be payable on past due Revolving Credit Loans that are ABR Loans under the
Credit Agreement, from the date of payment by the Administrative Agent to the
date reimbursed by the relevant Grantor, shall be payable by such Grantor to the
Administrative Agent on demand.
(d) Each Grantor hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.
7.2 DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole duty
with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the New York UCC or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely to
protect the Administrative Agent's and the Lenders' interests in the Collateral
and shall not impose any duty upon the Administrative Agent or any Lender to
exercise any such powers. The Administrative Agent and the Lenders shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.
7.3 EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402 of the
New York UCC and any other applicable law, each Grantor authorizes the
Administrative Agent to file or record financing statements and other filing or
recording documents or instruments with respect to the Collateral without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement. A photographic or other reproduction
of this Agreement shall be sufficient as a financing statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.
<PAGE>
21
7.4 AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Grantors, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Grantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
SECTION 8. MISCELLANEOUS
8.1 AMENDMENTS IN WRITING. None of the terms or provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by each affected Grantor and the Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor may be waived by the Administrative Agent in a written instrument
executed by the Administrative Agent of the Credit Agreement, subject to the
terms of the Credit Agreement.
8.2 NOTICES. All notices, requests and demands to or upon the
Administrative Agent or any Grantor hereunder shall be effected in the manner
provided for in subsection 13.2 of the Credit Agreement; provided that any such
notice, request or demand to or upon any Guarantor shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.
8.3 NO WAIVER BY COURSE OF CONDUCT; CUMULATIVE REMEDIES. Neither the
Administrative Agent nor any Lender shall by any act (except by a written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Administrative Agent or any Lender of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Administrative Agent or such Lender would otherwise
have on any future occasion. The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.
8.4 ENFORCEMENT EXPENSES; INDEMNIFICATION. (a) Each Guarantor agrees to
pay or reimburse each Lender and the Administrative Agent for all its costs and
expenses incurred in collecting against such Guarantor under the guarantee
contained in Section 2 or otherwise enforcing or preserving any rights under
this Agreement and the other Loan Documents to which such Guarantor is a party,
including, without limitation, the fees and disbursements of counsel to each
Lender and of counsel to the Administrative Agent.
(b) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities with respect to, or
resulting from any delay in paying, any and all stamp, excise, sales or other
taxes which may be payable or determined to be payable with respect to any of
the Collateral or in connection with any of the transactions contemplated by
this Agreement.
<PAGE>
22
(c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders harmless from, any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement to the extent the
Borrower would be required to do so pursuant to subsection 13.5 of the Credit
Agreement.
(d) The agreements in this Section 8.4 shall survive repayment of the
Obligations and all other amounts payable under the Credit Agreement and the
other Loan Documents.
8.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of each Grantor and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns; provided
that no Grantor may assign, transfer or delegate any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
8.6 SET-OFF. Each Grantor hereby irrevocably authorizes the
Administrative Agent and each Lender at any time and from time to time while an
Event of Default shall have occurred and be continuing, without notice to such
Grantor or any other Grantor, any such notice being expressly waived by each
Grantor, to set-off and appropriate and apply any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by the Administrative Agent or such Lender to or for the credit or the
account of such Grantor, or any part thereof in such amounts as the
Administrative Agent or such Lender may elect, against and on account of the
obligations and liabilities of such Grantor to the Administrative Agent or such
Lender hereunder and claims of every nature and description of the
Administrative Agent or such Lender against such Grantor, in any currency,
whether arising hereunder, under the Credit Agreement, any other Loan Document
or otherwise, as the Administrative Agent or such Lender may elect, whether or
not the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. The Administrative Agent and each Lender shall notify such Grantor
promptly of any such set-off and the application made by the Administrative
Agent or such Lender of the proceeds thereof, provided that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of the Administrative Agent and each Lender under this Section 8.6 are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Administrative Agent or such Lender may have.
8.7 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.
8.8 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8.9 SECTION HEADINGS. The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction hereof
or be taken into consideration in the interpretation hereof.
<PAGE>
23
8.10 INTEGRATION. This Agreement and the other Loan Documents represent
the agreement of the Grantors, the Administrative Agent and the Lenders with
respect to the subject matter hereof and thereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof and thereof not expressly set forth or
referred to herein or in the other Loan Documents.
8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.12 SUBMISSION TO JURISDICTION; WAIVERS. Each Grantor hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United States of America for the
Southern District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar form of mail), postage prepaid, to such Grantor
at its address referred to in Section 8.2 or at such other address of which
the Administrative Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to
sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this Section any consequential damages.
8.13 ACKNOWLEDGEMENTS. Each Grantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a
party;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to any Grantor arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Grantors, on the one hand, and the Administrative
Agent and Lenders, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
<PAGE>
24
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Grantors and the Lenders.
8.14 WAIVER OF JURY TRIAL. EACH GRANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
8.15 ADDITIONAL GRANTORS. Each Subsidiary of the Borrower that is
required to become a party to this Agreement pursuant to subsection 8.9 of the
Credit Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.
8.16 JUDGMENT. (a) If for the purpose of obtaining judgment in any
court it is necessary to convert a sum due hereunder in one currency into
another currency, the parties hereto agree, to the fullest extent that they may
effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency in the city in which it
normally conducts its foreign exchange operation for the first currency on the
Business Day preceding the day on which final judgment is given.
(b) The obligation of each Grantor in respect of any sum due from it to
the Administrative Agent or any Lender hereunder shall, notwithstanding any
judgment in a currency (the "JUDGMENT CURRENCY") other than that in which such
sum is denominated in accordance with the applicable provisions of the Loan
Documents (the "AGREEMENT CURRENCY"), be discharged only to the extent that on
the Business Day following receipt by the Administrative Agent or such Lender of
any sum adjudged to be so due in the Judgment Currency, the Administrative Agent
or such Lender may in accordance with normal banking procedures purchase the
Agreement Currency with the Judgment Currency; if the amount of Agreement
Currency so purchased is less than the sum originally due to such Lender in the
Agreement Currency, such Grantor agrees notwithstanding any such judgment to
indemnify such Lender against such loss, and if the amount of the Agreement
Currency so purchased exceeds the sum originally due to the Administrative Agent
or any Lender the Administrative Agent or, such Lender agrees to remit to such
Borrower such excess.
8.17 RELEASES. (a) At such time as the Loans, the Reimbursement
Obligations and the other Obligations shall have been paid in full, the
Commitments have been terminated and no Letters of Credit shall be outstanding,
the Collateral shall be released from the Liens created hereby, and this
Agreement and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole expense of any Grantor following any such termination, the
Administrative Agent shall deliver to such Grantor any Collateral held by the
Administrative Agent hereunder, and execute and deliver to such Grantor such
documents as such Grantor shall reasonably request to evidence such termination.
(b) If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Administrative Agent, at the request and sole expense of such Grantor,
shall execute and deliver to such Grantor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby on
<PAGE>
25
such Collateral. At the request and sole expense of the Company, a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such Subsidiary Guarantor shall be sold, transferred or
otherwise disposed of in a transaction permitted by the Credit Agreement;
provided that the Company shall have delivered to the Administrative Agent, at
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Subsidiary Guarantor and the terms
of the sale or other disposition in reasonable detail, including the price
thereof and any expenses in connection therewith, together with a certification
by the Company stating that such transaction is in compliance with the Credit
Agreement and the other Loan Documents.
<PAGE>
26
IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee
and Collateral Agreement to be duly executed and delivered as of the date first
above written.
NBTY, INC.
By:
Title:
---------------------------
NATURE'S BOUNTY INC.,
NATURE'S BOUNTY, INC.,
VITAMIN WORLD, INC.,
PURITAN'S PRIDE, INC.
ARCO PHARMACEUTICALS, INC.
NATURAL WEALTH NUTRITION CORPORATION,
FOUNTAIN PUBLISHING, INC.
OMNI VITAMIN AND NUTRITION CORP.,
UNITED VITAMIN MANUFACTURING CORP.,
THE HUDSON CORPORATION,
GOOD'N NATURAL MANUFACTURING CORP.,
BEAUTIFUL VISIONS, NEW YORK CORP.,
PRIME NATURAL HEALTH LABORATORIES,
INC.,
AMERICAN HEALTH, INC.,
NATURE'S BOUNTY MANUFACTURING CORP.,
NABARCO ADVERTISING ASSOCIATES, INC.,
HERBAL HARVEST, INC.
By:
Title:
----------------------------
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:
Title:
----------------------------
<PAGE>
STATE OF NEW YORK )
ss:
COUNTY OF )
On August __, 1997, before me personally came ____________, to me
known, who, by me duly sworn, did depose and say that deponent resides at
_____________________________, deponent is ______________________ of each of
Nature's Bounty Inc., Nature's Bounty, Inc., Vitamin World, Inc., Puritan's
Pride, Inc., Arco Pharmaceuticals, Inc., Natural Wealth Nutrition Corporation,
Fountain Publishing, Inc., Omni Vitamin and Nutrition Corp., United Vitamin
Manufacturing Corp., The Hudson Corporation, Good 'N Natural Manufacturing
Corp., Beautiful Visions, New York Corp., Prime Natural Health Laboratories,
Inc., American Health, Inc., Nature's Bounty Manufacturing Corp., Nabarco
Advertising Associates, Inc., Herbal Harvest, Inc., the corporations described
in and which executed the foregoing instrument; that the seal affixed to said
instrument is the corporate seal of such corporation and that it was so affixed
by order to the Board of Directors of such corporation; and that deponent signed
deponent's name thereto by like order.
---------------------
Notary Public
<PAGE>
Schedule 1
----------
NOTICE ADDRESSES OF GUARANTORS
c/o NBTY, Inc.
90 Orville Drive
Bohemia, NY 11716
Telecopy: 516-567-7148
Attn: Harvey Kamil
<PAGE>
Schedule 2
----------
DESCRIPTION OF PLEDGED SECURITIES
PLEDGED STOCK:
Issuer Class of Stock Certificate No. of % of
Stock* No. Shares Pledged
- ------------------- -------- ----------------- ------ -------
Nature's Bounty Inc. 1 1 100%
Nature's Bounty, Inc. 100%
Vitamin World, Inc. 1 1,000 100%
Puritan's Pride, Inc. 1 1,000 100%
Arco Pharmaceuticals, Inc. 1 1 100%
Nature Wealth Nutrition 1 1 100%
Corporation
Fountain Publishing, Inc. 1 1 100%
Omni Vitamin and 1 1 100%
Nutrition Corp.
United Vitamin 1 1 100%
Manufacturing Corp.
The Hudson Corporation 2 1 100%
Good `N Natural 3 1 100%
Manufacturing Corp.
Beautiful Visions, 1 1 100%
New York Corp.
Prime Natural Health 1 1 100%
Laboratories, Inc.
American Health, Inc. 01 1 100%
Nature's Bounty 1 1 100%
Manufacturing Corp.
Nabarco Advertising 3 1 100%
Associates, Inc.
Herbal Harvest, Inc. 1 1 100%
Vitamin World Limited [ ] [ ] 65%
Holland & Barrett [ ] [ ] 65%
* Common, unless otherwise indicated.
<PAGE>
Schedule 3
----------
FILINGS AND OTHER ACTIONS
REQUIRED TO PERFECT SECURITY INTERESTS
Uniform Commercial Code Filings
-------------------------------
Suffolk County, New York
Secretary of State of New York
Patent and Trademark Filings
----------------------------
United States Patent and Trademark Office
Actions with respect to Pledged Stock
-------------------------------------
None
Other Actions
-------------
None
<PAGE>
Schedule 4
LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE
Grantor Jurisdiction Location
------- ------------ --------
Nature's Bounty Inc.,
Nature's Bounty Inc., 90 Orville Drive
Vitamin World, Inc., Bohemia, NY 11716
Puritan's Pride, Inc.
Arco Pharmaceuticals, Inc.
Natural Wealth Nutrition
Corporation,
Fountain Publishing, Inc.,
Omni Vitamin and Nutrition Corp.,
United Vitamin Manufacturing Corp.,
The Hudson Corporation,
Good 'N Natural Manufacturing
Corp.,
Beautiful Visions, New York Corp.,
Prime Natural Health Laboratories,
Inc.,
American Health, Inc.,
Nature's Bounty Manufacturing
Corp.,
Nabarco Advertising Associates,
Inc.,
Herbal Harvest, Inc.
<PAGE>
Schedule 5
----------
LOCATION OF INVENTORY AND EQUIPMENT
Grantor Locations
------- ---------
<PAGE>
Schedule 6
----------
COPYRIGHTS AND COPYRIGHT LICENSES
PATENTS AND PATENT LICENSES
TRADEMARKS AND TRADEMARK LICENSES
<PAGE>
Schedule 7
----------
EXISTING PRIOR LIENS
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Guarantee
and Collateral Agreement dated as of September [ ], 1997 (the "AGREEMENT"), made
by the Grantors parties thereto for the benefit of The Chase Manhattan Bank, as
Administrative Agent. The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:
1. The undersigned will be bound by the terms of the Agreement and will
comply with such terms insofar as such terms are applicable to the undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in Section 5.8(a) of
the Agreement.
3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply to
it, mutatis mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.
[NAME OF ISSUER]
By
---------------------------------------
Title
-----------------------------------
Address for Notices:
--------------------
----------------------------------------
----------------------------------------
Fax:
-------------------------------------
<PAGE>
Annex 1 to
Guarantee and Collateral Agreement
----------------------------------
ASSUMPTION AGREEMENT, dated as of _____________, made by
______________________________, a ______________ corporation (the "Additional
Grantor"), in favor of The Chase Manhattan Bank, as administrative agent (in
such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, NBTY, Inc. (the "Company"), certain of its Foreign
Subsidiaries, the Lenders and the Administrative Agent have entered into a
Credit Agreement, dated as of September [ ], 1997 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, the Company and
certain of its Subsidiaries (other than the Additional Grantor) have entered
into the Guarantee and Collateral Agreement, dated as of September [ ], 1997 (as
amended, supplemented or otherwise modified from time to time, the "Guarantee
and Collateral Agreement") in favor of the Administrative Agent for the benefit
of the Lenders;
WHEREAS, the Credit Agreement requires the Additional Grantor to become
a party to the Guarantee and Collateral Agreement; and
WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption Agreement in order to become a party to the Guarantee and Collateral
Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this
Assumption Agreement, the Additional Grantor, as provided in Section 8.15 of the
Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and
Collateral Agreement as a Grantor thereunder with the same force and effect as
if originally named therein as a Grantor and, without limiting the generality of
the foregoing, hereby expressly assumes all obligations and liabilities of a
Grantor thereunder. In furtherance of the foregoing, the Additional Grantor
hereby assigns and transfers to the Administrative Agent, and hereby grants to
the Administrative Agent, for the ratable benefit of the Lenders, a security
interest in, all of the Collateral now owned or at any time hereafter acquired
by the Additional Grantor or in which the Additional Grantor now has or at any
time in the future may acquire any right, title or interest, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Additional
Grantor's Obligations. The information set forth in Annex 1-A hereto is hereby
added to the information set forth in Schedules ____________* to the Guarantee
and Collateral Agreement. The Additional Grantor hereby represents and warrants
that each of the representations and warranties contained in Section 3 of the
- ------------------------
* Refer to each Schedule which needs to be supplemented.
<PAGE>
2
Guarantee and Collateral Agreement is true and correct on and as the date hereof
(after giving effect to this Assumption Agreement) as if made on and as of such
date.
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTOR]
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT C TO
CREDIT AND GUARANTEE AGREEMENT
[FORM OF SWING LINE LOAN PARTICIPATION CERTIFICATE]
, 199
--------- -
[Name of Lender]
[Address of Lender]
Ladies and Gentlemen:
Pursuant to subsection 2.5(d) of the Credit and Guarantee Agreement,
dated as of September , 1997 (as amended, supplemented or otherwise modified
from time to time, the "Credit and Guarantee Agreement"; unless otherwise
defined herein, terms defined in the Credit and Guarantee Agreement are used
herein as therein defined), among NBTY, Inc. (the "Company"), the Foreign
Subsidiary Borrower (together with the Company, the "Borrowers"), the Lenders
named therein and The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent"), the undersigned, as
Swing Line Lender under the Credit and Guarantee Agreement hereby acknowledges
receipt from you on the date hereof of ______________ DOLLARS ($______) as
payment for a participating interest in the following Swing Line Loan:
Date of Swing Line Loan:
--------------
Principal Amount of Swing Line Loan
Participating Interest:
--------------
Very truly yours,
THE CHASE MANHATTAN BANK
By:
------------------
Title:
<PAGE>
1
EXHIBIT E
---------
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit and Guarantee Agreement, dated as of
September , 1997 (as amended, supplemented or otherwise modified from time to
time, the "Credit and Guarantee Agreement"), among NBTY, Inc. (the "Company"),
the Foreign Subsidiary Borrower (together with the Company, the "Borrowers"),
the Lenders named therein and The Chase Manhattan Bank, as administrative agent
for the Lenders (in such capacity, the "Administrative Agent"). Unless otherwise
defined herein, terms defined in the Credit Agreement and used herein shall have
the meanings given to them in the Credit Agreement.
The Assignor identified on Schedule l hereto (the "Assignor") and the
Assignee identified on Schedule l hereto (the "Assignee") agree as follows:
(1) The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest described in Schedule 1 hereto
(the "Assigned Interest") in and to the Assignor's rights and obligations under
the Credit Agreement with respect to those credit facilities contained in the
Credit Agreement as are set forth on Schedule 1 hereto (individually, an
"Assigned Facility"; collectively, the "Assigned Facilities"), in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.
(2) The Assignor (a) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or with respect to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, any other Loan Document or any other instrument or
document furnished pursuant thereto, other than that the Assignor has not
created any adverse claim upon the interest being assigned by it hereunder and
that such interest is free and clear of any such adverse claim; (b) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrowers, any of their Subsidiaries or any other
obligor or the performance or observance by the Borrowers, any of their
Subsidiaries or any other obligor of any of their respective obligations under
the Credit Agreement or any other Loan Document or any other instrument or
document furnished pursuant hereto or thereto; and (c) attaches any Notes held
by it evidencing the Assigned Facilities and (i) requests that the
Administrative Agent, upon request by the Assignee, exchange the attached Notes
for a new Note or Notes payable to the Assignee and (ii) if the Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent exchange the attached Notes for a new Note or Notes payable to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).
<PAGE>
2
(3) The Assignee (a) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (b) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements delivered pursuant to subsection 7.1 thereof and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (c) agrees
that it will, independently and without reliance upon the Assignor, the
Administrative Agent or any other 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 the Credit Agreement, the
other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions of
the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender including, if it is organized under the laws of a
jurisdiction outside the United States, its obligation pursuant to subsection
6.12(b) of the Credit Agreement.
(4) The effective date of this Assignment and Acceptance shall be the
Effective Date of Assignment described in Schedule 1 hereto (the "Effective
Date"). Following the execution of this Assignment and Acceptance, it will be
delivered to the Administrative Agent for acceptance by it and recording by the
Administrative Agent pursuant to the Credit Agreement, effective as of the
Effective Date (which shall not, unless otherwise agreed to by the
Administrative Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).
(5) Upon such acceptance and recording, from and after the Effective
Date, the Administrative Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, fees and other
amounts) to the Assignor for amounts which have accrued to the Effective Date
and to the Assignee for amounts which have accrued subsequent to the Effective
Date. The Assignor and the Assignee shall make all appropriate adjustments in
payments by the Administrative Agent for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.
(6) From and after the Effective Date, (a) the Assignee shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
(7) This Assignment and Acceptance shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
<PAGE>
Schedule 1
to Assignment and Acceptance
Name of Assignor:
--------------------------
Name of Assignee:
--------------------------
Effective Date of Assignment:
-------------
Credit Principal Commitment Percentage Assigned
Facility Assigned Amount Assigned
$__________ __.________%
----------------- ----------------- --------------------------------
[Name of Assignee] [Name of Assignor]
By: By:
Title: Title:
------------------------------ ----------------------------
<PAGE>
2
Consented to: Consented To:
The Chase Manhattan Bank, as Administrative NBTY, INC.
Agent
By: By:
Title: Title:
------------------------------ ----------------------------
Accepted:
The Chase Manhattan Bank, as Administrative
Agent
By:
Title:
------------------------------
<PAGE>
EXHIBIT F-1 TO
CREDIT AND GUARANTEE AGREEMENT
FORM OF OPINION OF MICHAEL C. DUBAN
September ___, 1997
The Chase Manhattan Bank, as Issuer
270 Park Avenue
New York, New York 10017
We have acted as counsel to NBTY, Inc., a Delaware corporation (the
"Borrower") and its Subsidiaries, in connection with (a) the Credit and
Guarantee Agreement, dated as of September __, 1997 (the "Credit Agreement"),
among the Borrower, Holland & Barrett Holdings Limited, as Foreign Subsidiary
Borrower, the lenders named therein and The Chase Manhattan Bank, as
Administrative Agent and (b) the other Loan Documents referred to in the Credit
Agreement.
The opinions expressed below are furnished to you pursuant to
subsection 7.1(i)(i) of the Credit Agreement. Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement.
In arriving at the opinions expressed below,
(a) we have examined and relied on the originals, or copies certified
or otherwise identified to our satisfaction, of each of (1) the Credit Agreement
and (2) the other Loan Documents listed on Schedule 1 attached hereto (the
Credit Agreement and such other documents being hereinafter referred to
collectively as the "Transaction Documents");
(b) we have examined unfiled copies of the financing statements listed
on Schedule 2 (collectively, the "Financing Statements") naming the Borrower or
one of its Subsidiaries as Debtor and the The Chase Manhattan Bank, as
Administrative Agent as Secured Party and describing the Collateral (as defined
in the Guarantee & Collateral Agreement) as to which security interests may be
perfected by filing under the Uniform Commercial Code of the State of New York
(the "Filing Collateral"), which we understand will be filed in the filing
offices listed on Schedule 2 (the "Filing Offices"); and
(c) we have examined such corporate documents and records of the
Borrower and its Subsidiaries and such other instruments and certificates of
public officials, officers and representatives of the Borrower and its
Subsidiaries and other Persons as we have deemed necessary or appropriate for
the purposes of this opinion.
In arriving at the opinions expressed below, we have made such
investigations of law, in each case as we have deemed appropriate as a basis for
such opinions.
In rendering the opinions expressed below, we have assumed, with your
permission, without independent investigation or inquiry, (a) the authenticity
of all documents submitted to us as originals, (b) the genuineness of all
signatures on all documents that we examined and (c) the conformity to authentic
originals of documents submitted to us as certified, conformed or photostatic
<PAGE>
The Chase Manhattan Bank 2 September __, 1997
copies.
When our opinions expressed below are stated "to the best of our
knowledge," we have made reasonable and diligent investigation of the subject
matters of such opinions and have no reason to believe that there exist any
facts or other information that would render such opinions incomplete or
incorrect.
Based upon and subject to the foregoing, we are of the opinion that:
1. Each of the Borrower and its Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has the corporate power and authority and the legal right to
own and operate its property, to lease the property it operates as lessee and to
conduct the business in which it is currently engaged and (c) is duly qualified
as a foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business requires such qualification, except to the extent that the
failure to be so qualified could not, in the aggregate, have a Material Adverse
Effect.
2. The Borrower and each other Loan Party has the corporate power and
authority, and the legal right, to make, deliver and perform its obligations
under the Credit Agreement and each of the other Transaction Documents to which
it is a party. The Borrower and each other Loan Party has taken all necessary
corporate action to authorize the borrowing under the Credit Agreement on the
terms and conditions of the Credit Agreement and the other Transaction
Documents, to grant the security interests contemplated by the Security
Documents to which it is a party and to authorize the execution, delivery and
performance of the Credit Agreement and the other Transaction Documents to which
it is a party. Except for (a) consents, authorizations, approvals, notices and
filings described on Schedule 3 attached hereto, all of which have been
obtained, made or waived and are in full force and effect, and (b) the filings
and recordings described on Schedule 2 attached hereto, no consent or
authorization of, approval by, notice to, filing with or other act by or in
respect of, any Governmental Authority or any other Person is required in
connection with the borrowing under the Credit Agreement or with the execution,
delivery, performance, validity or enforceability of the Credit Agreement and
the other Transaction Documents or the perfection of the security interests
created by the Security Documents (other than the performance and validity of
the English Security Documents as to which we express no opinion).
3. Each of the Credit Agreement and the other Transaction Documents
(other than the English Security Documents) to which any Loan Party is a party
has been duly executed and delivered on behalf of the Borrower and the other
Loan Parties and constitutes a legal, valid and binding obligation of the
Borrower or such Loan Party, enforceable against the Borrower in accordance with
its terms.
4. The execution and delivery of the Credit Agreement and the other
Transaction Documents to which the Borrower and the other Loan Parties is a
party, the performance by the Borrower and the other Loan Parties of its
obligations thereunder, the consummation of the transactions contemplated
thereby, the compliance by the Borrower and the other Loan Parties and each of
its Subsidiaries with any of the provisions thereof, all as provided therein,
(a) will not violate, or constitute a default under, any Requirement of Law or,
to the best of our knowledge, any Contractual Obligations of the Borrower or of
any of its Subsidiaries and (b) will not result in, or require, the creation or
imposition of any Lien on any of its or their respective properties or revenues,
except the security interests created pursuant to the Loan Documents.
5. To the best of our knowledge, no litigation, investigation or
<PAGE>
The Chase Manhattan Bank 3 September __, 1997
proceeding of or before any arbitrator or Governmental Authority is pending or
threatened by or against the Borrower or any of its Subsidiaries or against any
of its or their respective properties or revenues (a) with respect to the Credit
Agreement or any of the other Transaction Documents, or (b) which could
reasonably be expected to have adversely determined a Material Adverse Effect.
6. The Borrower is not (i) an "investment company," or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or (ii) a "holding company" as defined in, or
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935. The Borrower is not subject to regulation under any Federal or state
statute or regulation which limits its ability to incur Indebtedness.
7.(a) The provisions of the Guarantee and Collateral Agreement create
in favor of the Administrative Agent for the benefit of the Lenders a legal,
valid and enforceable security interest in the Pledged Stock and the Pledged
Notes and the Proceeds (as those terms are defined in the Guarantee and
Collateral Agreement).
(b) The actions specified in subsections 7.1(m) and 7.1(t) of the
Credit Agreement are all the actions necessary to perfect the security interest
of the Administrative Agent for the benefit of the Lenders on the Pledged Stock
and the Pledged Notes, and the security interest of the Administrative Agent for
the benefit of the Lenders on the Pledged Stock and the Pledged Notes is a
perfected security interest. Assuming the Administrative Agent acquired its
interest in the Pledged Stock in good faith and without notice of any adverse
claims and that each certificate evidencing shares of Pledged Stock is either in
bearer form or registered form, issued or indorsed in the name of the
Administrative Agent or in blank, the Administrative Agent acquired its security
interest in the Pledged Stock free of adverse claims.
(c) All of the shares of capital stock described on Schedule 2 to the
Guarantee and Collateral Agreement have been duly authorized and validly issued,
and are fully paid and nonassessable and represent the percentages of the issued
and outstanding capital stock of the issuers thereof specified on Schedule 2 to
the Guarantee and Collateral Agreement.
8.(a) The provisions of the Guarantee and Collateral Agreement create
in favor of the Issuer a legal, valid and enforceable security interest in the
Collateral (as defined in the Guarantee and Collateral Agreement).
(b) The Administrative Agent upon filing of the Financing Statements in
the Filing Offices will have a perfected security interest in the Filing
Collateral for the benefit of the Lenders.
Our opinions set forth in paragraphs 3, 7, and 8 above are subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the law of the State of
New York, the General Corporate Law of the State of Delaware and the Federal
laws of the United States of America.
This opinion has been rendered solely for your benefit and for the
benefit the Lenders pursuant to Section 7.1(i)(i) of the Credit Agreement in
connection with the Credit Agreement and the transactions contemplated thereby
and may not be used, circulated, quoted, relied upon or otherwise referred to
for any other purpose without our prior written consent; provided, however, that
this opinion may be delivered to your regulators, accountants, attorneys and
other professional advisers and may be used in connection with any legal or
<PAGE>
The Chase Manhattan Bank 4 September __, 1997
regulatory proceeding relating to the subject matter of this opinion.
Very truly yours,
<PAGE>
Schedule 1
----------
TRANSACTION DOCUMENTS
1) Guarantee and Collateral Agreement
2) Notes
3) English Security Documents
<PAGE>
Schedule 2
----------
FINANCING STATEMENTS
State Filing Office
----- -------------
New York Suffolk County
Secretary of State
<PAGE>
Schedule 3
----------
CONSENTS, AUTHORIZATIONS, APPROVALS,
NOTICES AND FILINGS
[NONE]
<PAGE>
EXHIBIT G
---------
FORM OF
CLOSING CERTIFICATE
Pursuant to subsection 7.1 of the Credit and Guarantee Agreement, dated
as of September __, 1997 (as the same may be amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among NBTY, Inc., a
Delaware corporation (the "Company"), the Foreign Subsidiary Borrower and the
Lenders named therein and The Chase Manhattan Bank as Administrative Agent, the
undersigned, Executive Vice President of each Loan Party, hereby certifies as
follows:
1. The representations and warranties of each Loan Party set forth in
the Credit Agreement and each of the other Loan Documents to which it is a
party or which are contained in any certificate, document or financial or
other statement furnished pursuant to or in connection with the Credit
Agreement or any Loan Document are true and correct in all material
respects on and as of the date hereof with the same effect as if made on
the date hereof, except for representations and warranties expressly stated
to relate to a specific earlier date, in which case such representations
and warranties are true and correct in all material respects as of such
earlier date;
2. No Default or Event of Default has occurred and is continuing as of
the date hereof or will occur after giving effect to the extensions of
credit requested to be made on the date hereof or the consummation of each
of the transactions contemplated by the Loan Documents; and
3. Harvey Kamil is and at all times since _______________, 199_, has
been the duly elected and qualified [Assistant] Secretary of the each Loan
Party and the signature set forth on the signature line for such officer
below is such officer's true and genuine signature;
and the undersigned Secretary of each Loan Party hereby certifies as follows:
4. There are no liquidation or dissolution proceedings pending or to my
knowledge threatened against the Company or any of its Subsidiaries, nor
has any other event occurred affecting or threatening the corporate
existence of the Company or any of its Subsidiaries;
5. Each Loan Party is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation;
6. (_) Attached hereto as Exhibit A is a true and complete copy of
resolutions duly adopted by the Board of Directors of each Loan Party on
September __, 1997; such resolutions have not in any way been amended,
modified, revoked or rescinded and have been in full force and effect since
their adoption to and including the date hereof and are now in full force
and effect; such resolutions are the only corporate proceedings of the Loan
Parties now in force relating to or affecting the matters referred to
therein;
(_) attached hereto as Exhibit B is a true and complete copy of the
By-laws of the Company and the other Loan Parties as in effect at all times
since April 3, 1996, to and including the date hereof; and
(_) attached hereto as Exhibit C is a true and complete copy of the
Certificate of Incorporation of the Company and the other Loan Parties as
in effect at all times since April 3, 1996, to and including the date
<PAGE>
2
hereof; and
7. The following persons are now duly elected and qualified officers of
the Company and the other Loan Parties, holding the offices indicated next
to their respective names below, and such officers have held such offices
with the Company and the other Loan Parties at all times since __________
__, 199_, to and including the date hereof, and the signatures appearing
opposite their respective names below are the true and genuine signatures
of such officers, and each of such officers is duly authorized to execute
and deliver on behalf of the Company, the Credit Agreement and the other
Loan Documents to which it is a party and any certificate or other document
to be delivered by the Company pursuant to the Credit Agreement or any such
Loan Document:
Name Office Signature
---- ------ ---------
Harvey Kamil Executive Vice President _______________
Unless otherwise defined herein, capitalized terms which are defined in
the Credit Agreement and used herein are so used as so defined.
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereunto set our names and
affixed the corporate seal.
NBTY, INC. NBTY, INC.
NATURE'S BOUNTY INC. NATURE'S BOUNTY INC.
NATURE'S BOUNTY, INC. NATURE'S BOUNTY, INC.
VITAMIN WORLD, INC. VITAMIN WORLD, INC.
PURITAN'S PRIDE, INC. PURITAN'S PRIDE, INC.
ARCO PHARMACEUTICALS, INC. ARCO PHARMACEUTICALS, INC.
NATURAL WEALTH NUTRITION NATURAL WEALTH NUTRITION
CORPORATION CORPORATION
FOUNTAIN PUBLISHING, INC. FOUNTAIN PUBLISHING, INC.
OMNI VITAMIN AND NUTRITION OMNI VITAMIN AND NUTRITION
CORP. CORP.
UNITED VITAMIN MANUFACTURING CORP. UNITED VITAMIN MANUFACTURING CORP.
THE HUDSON CORPORATION THE HUDSON CORPORATION
GOOD'N NATURAL MANUFACTURING CORP. GOOD'N NATURAL MANUFACTURING CORP.
BEAUTIFUL VISIONS, NEW YORK CORP. BEAUTIFUL VISIONS, NEW YORK CORP.
PRIME NATURAL HEALTH LABORATORIES PRIME NATURAL HEALTH LABORATORIES
AMERICAN HEALTH, INC. AMERICAN HEALTH, INC.
NATURE'S BOUNTY MANUFACTURING NATURE'S BOUNTY MANUFACTURING
CORP. CORP.
NABARCO ADVERTISING ASSOCIATES, INC. NABARCO ADVERTISING ASSOCIATES,
INC.
HERBAL HARVEST, INC. HERBAL HARVEST, INC.
By: By:
-------------------------------- ---------------------------------
Name: Name:
Title: Executive Vice President Title: Secretary
Date: September __, 1997
______________________, The undersigned [President] of each Loan Party hereby
certifies the signature set forth on the signature line above for Harvey Kamil
is such officer's true and genuine signature.
By:
-----------------------
Name:
Title: President
<PAGE>
EXHIBIT H
---------
FORM OF TAX CERTIFICATE
Reference is hereby made to the Credit and Guarantee Agreement, dated
as of September __, 1997, among NBTY, INC, the Foreign Subsidiary Borrower (as
defined therein), the lenders parties thereto and The Chase Manhattan Bank, as
administrative agent (as amended, restated, supplemented or otherwise modified
from time to time, the "Credit Agreement"). Pursuant to the provisions of
Section 4.11(b)(i)(B) of the Credit Agreement, the undersigned hereby certifies
that it is not a "bank" as such term is defined in Section 881(c)(3)(A) of the
Internal Revenue Code of 1986, as amended.
[NAME OF LENDER]
By:
-------------------------
Title:
Date: _________, 19___
<PAGE>
EXHIBIT I TO
CREDIT AGREEMENT
----------------
SOLVENCY CERTIFICATE OF NBTY
Pursuant to subsection ____________ of the Credit Agreement dated as of
September __, 1997 among NBTY, Inc., a Delaware corporation (the "Borrower"),
the Foreign subsidiary Borrower and The Lenders named therein and The Chase
Manhattan Bank, as Administrative Agent (the "Credit Agreement"; terms defined
therein being used herein as therein defined), the undersigned Responsible
Officer on behalf of the Borrower hereby, in his/her capacity as such and not
individually, certifies as follows:
I have undertaken certain analyses and procedures relating to the
preparation of this Certificate. The procedures undertaken consisted of the
following which, in my view, are sufficient for the purposes of rendering this
Certificate.
(i) Read the Credit Agreement and the accompanying schedules and
annexes thereto.
(ii) Read the other Loan Documents and the Acquisition Documents.
(iii) Read the Indenture for the Subordinated Debt and the related
Purchase Agreement with Chase Securities Inc, as Initial
Purchaser.
(iv) Read the Confidential Information Memorandum dated August 1997
relating to the $50,000,000 Senior Secured Revolving Credit
Facility.
(v) Read the Confidential Offering Memorandum dated September __ 1997
relating to the Subordinated Debt.
(vi) Performed a valuation using current standards of valuation
including discounted free cash flow and comparable market
multiples approaches, as a going concern after giving effect to
the Holland & Barrett Acquisition and the other transactions
contemplated by the Credit Agreement and the other Loan
Documents, and the other Acquisition Documents.
(vii) Read historical audited consolidated financial statements of the
Company, for the fiscal year ended September 30, 1996 and of
Holland & Barrett for the fiscal year ended June 30, 1997.
(viii)Read unaudited consolidated interim financial results and the
balance sheet and cash flow statement of each of NBTY for the
fiscal periods ended March 31, 1997 and June 30, 1997.
(ix) Caused to be visited by representatives of the Borrower, all of
the facilities of the Borrower, Holland & Barrett and their
Subsidiaries and discussed the results of such visits with such
representatives, and spoke with operating and technical
management.
Based upon the foregoing, on the Closing Date and after giving effect
to the Holland & Barrett Acquisition and to all indebtedness to be incurred or
refinanced in connection therewith, including indebtedness incurred under the
Credit Agreement and the Subordinated Debt, I am of the opinion, with respect to
the Borrower, on a consolidated basis, that:
<PAGE>
2
(1) the aggregate value of the Borrower's assets, at fair value and
present fair saleable value exceeds (i) its total liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities) and (ii) the amount required to pay such liabilities
as they become absolute and mature;
(2) the Borrower has the ability to pay its debts and liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities) as they become absolute and mature; and
(3) the Borrower does not have an unreasonably small amount of
capital with which to conduct its business.
In evaluating the foregoing, the subject phrases and the definitions
ascribed thereto are as follows:
"AGGREGATE VALUE OF THE BORROWER'S ASSETS" - All assets of the Borrower
recorded on a consolidated basis. Such assets shall include all current
assets, all fixed assets such as property, plant, and equipment and all
intangible assets including contracts, tradenames, trademarks, patents,
non-compete agreements and other intangible assets including those in
the nature of goodwill and going concern value.
"FAIR VALUE" - The total amount at which the property of the Borrower
recorded on a consolidated basis, would likely sell as part of a going
concern and for continued use as part of a going concern, within a
commercially reasonable period of time, between one or more willing
buyers and a willing seller with neither party being under any
compulsion to buy or sell and with all parties having reasonable
knowledge of all facts.
"PRESENT FAIR SALEABLE VALUE" - The price that could be obtained by an
independent willing seller from an independent willing buyer with
reasonable promptness in an arms-length transaction under present
conditions for the sale of comparable business enterprises.
"DEBTS AND LIABILITIES (INCLUDING CONTINGENT, SUBORDINATED, UNMATURED
AND UNLIQUIDATED LIABILITIES)" - The pro forma debts and liabilities of
the Borrower, as of June 30, 1997, including all fees and expenses and
the principal amount of all indebtedness being incurred in connection
with the Holland & Barrett Acquisition (including indebtedness incurred
under the Credit Agreement and the Subordinated Debt) and the
Borrower's estimated amount of reasonably anticipated liabilities that
may result from contingencies, which liabilities may or may not meet
the criteria for accrual under FAS No. 5 and, therefore, may not be
included in liabilities under GAAP, including (i) pending litigation,
asserted claims and assessments, guarantees and other contingent
liabilities, including employee benefit plan liabilities relating to
retiree benefits identified to us by Responsible Officers of the
Borrower, as well as (ii) contingent liabilities relating to
environmental matters identified to us by Responsible Officers of the
Borrower.
<PAGE>
3
IN WITNESS WHEREOF, the undersigned has hereunto set his name on behalf
of the Borrower this ____ day of September, 1997.
NBTY, INC.
By:
-----------------------------
Name:
Title:
Exhibit 12.1
NBTY, INC.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in Millions, Except Ratios)
<TABLE>
<CAPTION>
Pro forma
Nine Months Pro forma Year
Ended Ended Nine Months Ended Year Ended
June 30, September 30, June 30, September 30,
----------- ------------ ------------------ ----------------------------------------
1997 1996 1997 1996 1996 1995 1994 1993 1992
-------- ------ ----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Income before income taxes $21.6 $13.4 $26.8 $13.6 $22.4 $8.4 $12.6 $15.6 $ 5.8
Add:
Interest expense 12.8 16.8 1.3 1.0 1.4 1.1 0.9 1.2 1.3
Interest component of rent 6.6 7.6 0.7 0.4 0.7 0.4 0.4 0.4 0.3
------ ------ ------ ------ ------ ------ ----- ----- -----
Earnings $41.0 $37.8 $28.8 $15.0 $24.5 $9.9 $13.9 $17.2 $ 7.4
====== ====== ====== ====== ====== ====== ===== ===== =====
FIXED CHARGES:
Interest expense $12.8 $16.8 $ 1.3 $ 1.0 $ 1.4 $1.1 $ 0.9 $1.2 $ 1.3
Interest component of rent expense 6.6 7.6 0.7 0.4 0.7 0.4 0.4 0.4 0.3
------ ------ ------ ------ ------ ------- ----- ----- -----
Fixed Charges $19.4 $24.4 $ 2.0 $ 1.4 $ 2.1 $1.5 $ 1.3 $1.6 $ 1.6
====== ====== ====== ====== ====== ====== ===== ===== =====
Ratio of earnings to fixed charges 2.1 1.5 14.4 10.7 11.7 6.6 10.7 10.8 4.6
====== ====== ====== ====== ====== ====== ===== ===== =====
</TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 (File
No.____) of our report, dated November 5, 1996, on our audits of the
consolidated financial statements of NBTY, Inc. and Subsidiaries as of September
30, 1996 and 1995, and for each of the three years in the period ended September
30, 1996. We also consent to the reference to our firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P.
------------------------------
COOPERS & LYBRAND L.L.P.
Melville, New York
November 4, 1997.
KPMG
2 Cornwall Street Tel +44(0) 121 232 3000
Birmingham Fax + 44 (0) 121 232 3500
B3 2DL DX 709850 Birmingham 26
United Kingdom
The Directors
Holland & Barrett Holdings Limited
Dodwells Bridge Industrial Estate
Hinckley Our ref dm/1/bsm/sew.3
LEICESTERSHIRE
LE10 3BZ
5 November 1997
Dear Sirs
We consent to the inclusion of our report dated August 1997, with respect to the
consolidated balance sheets of Holland & Barrett Holdings Limited (formerly
Holland & Barrett Retail Limited), as of 30 June 1996 and 1997 and the related
profit and loss accounts, cash flow statements, statements of recognised gains
and losses and reconciliation of movement in shareholders' funds for each of the
years in the three year period ended 30 June 1997, which report appears in the
Registration Statement on Form S-4 of NBTY Inc dated 5 November 1997.
We also consent to the reference to our firm under the heading "Independent
Accountants" in the Prospectus.
Yours faithfully
/s/ KPMG
- ------------------
KPMG
EX-25.1
----------------
SECURITIES AND EXCHANGE COMMISSION
----------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)_
------------------
IBJ SCHRODER BANK & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-5375195
(State of Incorporation if not a (I.R.S. Employer Identification No.)
U.S. national bank)
One State Street, New York, New York 10004
(Address of principal executive offices) (Zip code)
Terence Rawlins, Assistant Vice President
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
(212) 858-2000
(Name, Address and Telephone Number of Agent for Service)
NBTY, INC.
(Exact name of obligor as specified in its charter)
Delaware 11-2228617
(State of jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
90 Orville Drive 11716
Bohemia, NY (Zip code)
(Address of principal executive office)
----------
(Title of Indenture Securities)
NBTY, INC.
8 5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
<PAGE>
Item 1 General information
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligator is not an affiliate of the trustee.
Item 3. Voting securities of the trustee.
Furnish the following information as to each class of voting securities
of the trustee:
As of October 30, 1997
Col. A Col. B
Title of class Amount Outstanding
Not Applicable
Item 4. Trusteeships under other indentures.
If the trustee is a trustee under another indenture under which any
other securities, or certificates of interest or participation in any
other securities, of the obligor are outstanding, furnish the following
information:
(a) Title of the securities outstanding under each such other
indenture
Not Applicable
(b) A brief statement of the facts relied upon as a basis for the
claim that no conflicting interest within the meaning of
Section 310(b)(1) of the Act arises as a result of the
trusteeship under any such other indenture, including a
statement as to how the indenture securities will rank as
compared with the securities issued under such other
indenture.
Not Applicable
2
<PAGE>
Item 5. Interlocking directorates and similar relationships with the obligor or
underwriters.
If the trustee or any of the directors or executive officers of the
trustee is a director, officer, partner, employee, appointee, or
representative of the obligor or any of any underwriter for the
obligor, identify each such person having any such connection and state
the nature of each such connection.
Not Applicable
Item 6. Voting securities of the trustee owned by the obligor or its officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by the obligor and each director, partner,
and executive officer of the obligor:
As of October 30, 1997
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially represented by amount
given in Col. C
-------------------- -------------------- -------------------- -------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 7. Voting securities of the trustee owned by underwriters or their
officials.
Furnish the following information as to the voting securities of the
trustee owned beneficially by each underwriter for the obligor and each
director, partner and executive officer of each such underwriter:
As of October 30, 1997
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially represented by amount
given in Col. C
-------------------- -------------------- -------------------- -------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 8. Securities of the obligor owned or held by the trustee
Furnish the following information as to securities of the obligor owned
beneficially or held as collateral security for obligations in default
by the trustee:
As of October 30, 1997
3
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially or held as represented by amount
collateral security for given in Col. C
obligations in default
-------------------- -------------------- ------------------------ ---------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 9. Securities of underwriters owned or held by the trustee.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of an underwriter for the
obligor, furnish the following information as to each class of
securities of such underwriter any of which are so owned or held by the
trustee:
As of October 30, 1997
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially or held as represented by amount
collateral security for given in Col. C
obligations in default
-------------------- -------------------- ------------------------ ---------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 10. Ownership or holdings by the trustee of voting securities of certain
affiliates or securityholders of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default voting securities of a person who, to the
knowledge of the trustee (1) owns 10 percent or more of the voting
securities of the obligor or (2) is an affiliate, other than a
subsidiary, of the obligor, furnish the following information as to the
voting securities of such person:
As of October 30, 1997
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially or held as represented by amount
collateral security for given in Col. C
obligations in default
-------------------- -------------------- ------------------------ ---------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 11. Ownership or holdings by the trustee of any securities of a person
owning 50 percent or more of the voting securities of the obligor.
If the trustee owns beneficially or holds as collateral security for
obligations in default any securities of a person who, to the knowledge
4
<PAGE>
of the trustee, owns 50 percent or more of the voting securities of the
obligor, furnish the following information as to each class of
securities of such any of which are so owned or held by the trustee:
As of October 30, 1997
- ---------------------------- ---------------------------- ---------------------
Col. A Col. B Col. C.
Nature of Indebtedness Amount Outstanding Date Due
-------------------- -------------------- ---------------
- ---------------------------- ---------------------------- ----------------------
Not Applicable
Item 12. Indebtedness of the Obligor to the Trustee.
Except as noted in the instructions, if the obligor is indebted to the
trustee, furnish the following information:
As of October 30, 1997
<TABLE>
<CAPTION>
- ------------------------------ -------------------------- ----------------------------- -----------------------------
<S> <C> <C> <C>
Col A Col B Col. C Col. D
Name of Owner Title of class Amount owned Percent of voting securities
beneficially or held as represented by amount
collateral security for given in Col. C
obligations in default
-------------------- -------------------- ------------------------ ---------------------------
- ------------------------------ -------------------------- ----------------------------- -----------------------------
</TABLE>
Not Applicable
Item 13. Defaults by the Obligor.
(a) State whether there is or has been a default with respect to
the securities under this indenture. Explain the nature of any
such default.
Not Applicable
(b) If the trustee is a trustee under another indenture under
which any other securities, or certificates of interest or
participation in any other securities, of the obligor are
outstanding, or is trustee for more than one outstanding
series of securities under the indenture, state whether there
has been a default under any such indenture or series,
identify the indenture or series affected, and explain the
nature of any such default.
Not Applicable
Item 14. Affiliations with the Underwriters
If any underwriter is an affiliate of the trustee, describe each such
affiliation.
Not Applicable
Item 15. Foreign Trustees.
Identify the order or rule pursuant to which the foreign trustee is
authorized to act as sole trustee under indentures qualified or to be
qualified under the Act.
5
<PAGE>
Not Applicable
Item 16. List of Exhibits.
List below all exhibits filed as part of this statement of eligibility.
*1. A copy of the Charter of IBJ Schroder Bank & Trust Company as
amended to date. (See Exhibit 1A to Form T-1, Securities and
Exchange Commission File No. 22-18460).
*2. A copy of the Certificate of Authority of the Trustee to
Commence Business. (Included in Exhibit I above).
*3. A copy of the Authorization of the Trustee, as amended to
date. (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 221 9146).
*4. A copy of the existing By-Laws of the Trustee, as amended to
date. (See Exhibit 4 to Form T-1, Securities and Exchange
Commission File No. 22-19146).
5. A copy of each Indenture referred to in Item 4, if the Obligor
is in default. Not Applicable.
6. The consent of the United States institutional trustee
required by Section 321 (b) of the Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy of
the Exhibit heretofore filed with the Securities and Exchange Commission, to
which there have been no amendments or changes.
NOTE
----
In answering any item in this Statement of Eligibility which relates to matters
peculiarly within the knowledge of the obligor and its directors or officers,
the trustee has relied upon information furnished to it by the obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of
all facts on which to base responsive answers to Item 2, the answer to said Item
are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an amendment to
this Form T-1.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and
16 of this form since to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility & qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of New York, and State of New York,
on the 30th day of October, 1997.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-------------------------------
Terence Rawlins
Assistant Vice President
<PAGE>
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the issue by NBTY, INC. of its 8 5/8%
Senior Subordinated Notes due 2007, Series B, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
-----------------------------
Terence Rawlins
Assistant Vice President
Dated: As of October 30, 1997
<PAGE>
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
of New York, New York
And Foreign and Domestic Subsidiaries
Report as of June 30, 1997
Dollar Amounts
in Thousands
------------
ASSETS
------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin........ $ 41,319
Interest-bearing balances................................. $ 314,579
Securities: Held-to-maturity securities....................... $ 180,111
Available-for-sale securities..................... $ 47,600
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries
and in IBFs:
Federal Funds sold and Securities purchased under
agreements to resell..................................... $ 694,850
Loans and lease financing receivables:
Loans and leases, net of unearned income................. $1,955,686
LESS: Allowance for loan and lease losses............... $ 62,876
LESS: Allocated transfer risk reserve................... $ -0-
Loans and leases, net of unearned income,
allowance and reserve.................................... $1,892,810
Trading assets held in trading accounts....................... $ 603
Premises and fixed amounts (including capitalized leases)..... 3,709
Other real estate owned....................................... $ 202
Investments in unconsolidated subsidiaries and associated
companies..................................................... $ -0-
Customers' liability to this bank on acceptances outstanding.. $ 81
Intangible assets............................................. $ -0-
Other assets.................................................. $ 67,902
TOTAL ASSETS.................................................. $3,242,965
LIABILITIES
-----------
Deposits:
In domestic offices...................................... $1,694,675
Noninterest-bearing................................... $ 263,641
Interest-bearing...................................... $1,431,023
11
<PAGE>
Dollar Amounts
in Thousands
------------
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................ $1,121,075
Noninterest-bearing................................... $ 17,535
Interest-bearing...................................... $1,103,540
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge and Agreement
subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under
agreements to repurchase................................. $ 25,000
Demand notes issued to the U.S. Treasury...................... $ 60,000
Trading Liabilities........................................... $ 140
Other borrowed money:
a) With a remaining maturity of one year or less........ $ 38,369
b) With a remaining maturity of more than one year...... $ 1,763
c) With a remaining maturity of more than three years... $ 2,242
Bank's liability on acceptances executed and outstanding...... $ 81
Subordinated notes and debentures............................. $ -0-
Other liabilities............................................. $ 69,908
TOTAL LIABILITIES............................................. $3,013,253
Limited-life preferred stock and related surplus.............. $ -0-
EQUITY CAPITAL
Perpetual preferred stock and related surplus.................. $ -0-
Common Stock................................................... $ 29,649
Surplus (exclude all surplus related to preferred stock)....... $ 217,008
Undivided profits and capital reserves......................... $ (17,000)
Net unrealized gains (losses) on available-for-sale securities. $ 55
Cumulative foreign currency translation adjustments............ $ -0-
TOTAL EQUITY CAPITAL........................................... $ 229,712
TOTAL LIABILLITIES AND EQUITY CAPITAL.......................... $3,242,965
12
EX-99.1
LETTER OF TRANSMITTAL
NBTY, INC.
OFFER TO EXCHANGE ANY AND ALL OUTSTANDING
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
PURSUANT TO THE PROSPECTUS, DATED
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON ____________, UNLESS EXTENDED (THE
"EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
<S> <C> <C>
BY OVERNIGHT DELIVERY: BY MAIL: BY HAND:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
One State Street P.O. Box 84 One State Street
New York, NY 10004 Bowling Green Station New York, NY 10004
Attn: Securities Processing Window New York, NY 10274-0084 Attn: Securities Processing Window
Subcellar One (SC-1) Attn: Reorganization Operations Subcellar One (SC-1)
Department
</TABLE>
FACSIMILE TRANSMISSION NUMBER:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
-------------
FOR INFORMATION CALL:
(212) 858-2103
-------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
The undersigned acknowledges that it has received and reviewed the
Prospectus, dated ______________ (the "Prospectus"), of NBTY, Inc., a Delaware
corporation (the "Company"), and this Letter of Transmittal (the "Letter of
Transmittal"), which together constitute the Company's offer to exchange any and
all outstanding 8-5/8% Senior Subordinated Notes Due 2007, Series A (the
"Original Notes"), of the Company for a like aggregate principal amount of
8-5/8% Senior Subordinated Notes Due 2007, Series B (the "Exchange Notes," and,
together with the Original Notes, the "Notes"), of the Company from the holders
("Holders") thereof (the "Exchange Offer"). The Original Notes were issued on
September 23, 1997 (the "Issue Date").
For each Original Note accepted for exchange, the Holder of such
Original Note will receive an Exchange Note having a principal amount equal to
that of the surrendered Original Note. The terms of the Exchange Notes are
identical in all material respects to the Original Notes, except that (i) the
Exchange Notes will bear a Series B designation and a different CUSIP Number
from the Original Notes, (ii) the issuance of the Exchange Notes will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and, therefore, the Exchange Notes will not bear legends restricting the
transfer thereof, and (iii) holders of the Exchange Notes will not be entitled
to certain registration rights relating to the Original Notes. The Exchange
Notes, and the Original Notes remaining outstanding after the Exchange Offer,
mature on September 15, 2007. Interest on the Exchange Notes issued pursuant to
the Exchange Offer will accrue from the last interest payment date on which
interest was paid on the Original Notes surrendered in exchange therefor or, if
no interest has been paid on the Original Notes, from the Issue Date, and is
payable semi-annually in arrears on March 15 and September 15 of each year,
commencing March 15, 1998, at the rate of 8-5/8% per annum. Holders whose
Original Notes are accepted for exchange will be deemed to have waived the right
to receive any interest accrued on the Original Notes. The Exchange Notes will
be redeemable, in whole or in part, at the option of the Company, on or after
September 15, 2002 at the redemption prices set forth in the Prospectus, plus
accrued interest to the date of redemption. See "Description of the Exchange
Notes" section of the Prospectus.
The Company reserves the right, at any time or from time to time, to
extend the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the latest time and date to which the Exchange Offer is
extended. The Company will notify the Exchange Agent (as defined) of any
extension by written notice and will mail to the registered holders of Original
Notes an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
The Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered or accepted for exchange.
However, the Exchange Offer is subject to certain conditions. Please see the
Prospectus under the section entitled "The Exchange Offer - Conditions."
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, Holders of Original Notes in any jurisdiction in which the
making or acceptance of the Exchange Offer would not be in compliance with the
laws of such jurisdiction.
2
<PAGE>
This Letter of Transmittal is to be completed by a Holder of Original
Notes either if certificates are to be forwarded herewith or if a tender of
certificates for Original Notes, if available, is to be made by book-entry
transfer to the account maintained by IBJ Schroder Bank & Trust Company (the
"Exchange Agent") at the Depository Trust Company (the "Book-Entry Transfer
Facility") pursuant to the procedures set forth in "The Exchange Offer -
Procedures for Tendering" section of the Prospectus. Holders of Original Notes
whose certificates are not immediately available, or who are unable to deliver
their certificates or confirmation of the book-entry tender of their Original
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter of
Transmittal to the Exchange Agent on or prior to the Expiration Date, must
tender their Original Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer - Guaranteed Delivery Procedures" section of the
Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer
Facility 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.
3
<PAGE>
List below the Original Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, the Certificate numbers and
principal amount of Original Notes should be listed on a separate signed
schedule affixed hereto.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF ORIGINAL 1 2 3
NOTES
- ------------------------------- ------------- -------------------- -------------
Aggregate Principal
Name(s) and Address(es) Certificate Principal Amount Amount
of Registered Holder(s) Number(s)* of Original Note(s) Tendered**
- ------------------------------- ------------- -------------------- -------------
- ------------------------------- ------------- -------------------- -------------
- ------------------------------- ------------- -------------------- -------------
- ------------------------------- ------------- -------------------- -------------
- ------------------------------- Total-------- -------------------- -------------
- --------------------------------------------------------------------------------
* Need not be completed if Original Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed
to have tendered ALL of the Original Notes represented by the
Original Notes indicated in column 2. See Instruction 2.
- --------------------------------------------------------------------------------
| | CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
---------------------------------------------
DTC Participant Number:
----------------------------------------------------
Account Number: Transaction Code Number:
---------------- ---------------
| | CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
-------------------------------------------
Window Ticket Number (if any):
---------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
------------------------
Name of Institution that Guaranteed Delivery:
------------------------------
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number: Transaction Code Number:
---------------- ---------------
4
<PAGE>
| | 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:
-------------------------------------------------------------------
-------------------------------------------------------------------
5
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of
Original Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Original Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Original Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
its agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company) with respect to the tendered Original Notes
with the full power of substitution to (i) deliver certificates for such
Original Notes to the Company and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company, (ii) present such
Original Notes for transfer on the books of the Company, and (iii) receive for
the account of the Company all benefits and otherwise exercise all rights of
beneficial ownership of such Original Notes, all in accordance with the terms of
the Exchange Offer. The power of attorney granted in this paragraph shall be
deemed to be irrevocable from and after the Expiration Date and coupled with an
interest.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Original Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any Exchange Notes to be received by
the undersigned will be acquired in the ordinary course of business of the
undersigned, that at the time of the commencement of the Exchange Offer, the
undersigned has no arrangement or understanding with any person to participate
in the distribution (within the meaning of the Securities Act) of the Exchange
Notes in violation of the Securities Act and that the undersigned is not an
"affiliate" (as defined in Rule 405 under the Securities Act) of the Company.
The undersigned agrees that acceptance of any tendered Original Notes by the
Company and the issuance of Exchange Notes in exchange therefor will constitute
performance in full by the Company of its obligations under the Exchange and
Registration Rights Agreement (as defined in the Prospectus) and that the
Company will have no further obligations or liabilities thereunder (except in
limited circumstances).
The undersigned also acknowledges as follows: This Exchange Offer is being made
in reliance on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain "no-action" letters issued to
third parties and unrelated to the Company and the Exchange Offer, and based on
such interpretations, the Company believes that the Exchange Notes issued
<PAGE>
pursuant to the Exchange Offer in exchange for the Original Notes may be offered
for resale, resold and otherwise transferred by holders thereof (other than any
such holder 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 such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes in violation of the provisions of the
Securities Act. Any Holder who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the
Exchange Notes could not rely on the position of the staff of the Commission
enunciated in such "no-action" letters and, in the absence of an exemption
therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Failure to comply with such requirements in such instance may result in such
Holder incurring liability under the Securities Act for which the Holder is not
indemnified by the Company. The undersigned acknowledges, however, that the
Company has not sought its own no-action letter and there can be no assurance
that the staff of the Commission would make a similar determination with respect
to the Exchange Offer as in such other circumstances.
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Original Notes that were acquired as a
result of market making or other trading activities, the undersigned represents
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes. By acknowledging that it
will deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The above-referenced prospectus may be the
Prospectus relating to the Exchange Offer only if it contains a plan of
distribution with respect to such resale transactions (but need not name the
undersigned or disclose the amount of Exchange Notes held by the undersigned).
The undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the sale, assignment and transfer of the Original Notes tendered
hereby. All authority conferred or agreed to be conferred in this Letter of
Transmittal and every obligation of the undersigned hereunder shall be binding
upon the successors, assigns, heirs, executors, administrators, trustees in
bankruptcy and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned. This
tender may be withdrawn only in accordance with the procedures set forth in "The
Exchange Offer - Withdrawal of Tenders" section of the Prospectus.
For purposes of this Exchange Offer, the Company shall be deemed to have
accepted validly tendered Original Notes when, as and if the Company has given
oral and written notice thereof to the Exchange Agent.
The undersigned understands that tenders of the Original Notes pursuant to any
one of the procedures described under "The Exchange Offer - Procedures for
7
<PAGE>
Tendering" in the Prospectus and in the Instructions hereto will constitute a
binding agreement between the undersigned and the Company in accordance with the
terms and subject to the conditions set forth herein and in the Prospectus.
The undersigned recognizes that under certain circumstances set forth in the
Prospectus under "The Exchange Offer - Conditions" the Company will not be
required to accept for exchange any of the Original Notes tendered. Original
Notes not accepted for exchange or withdrawn will be returned (or, in the case
of Original Notes tendered by book-entry transfer through the Book-Entry
Transfer Facility, will promptly be credited to an account maintained at the
Book-Entry Transfer Facility), without expense, to the undersigned at the
address set forth below unless otherwise indicated under "Special Delivery
Instructions" below as promptly as practicable after the Expiration Date.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the Exchange Notes (and, if applicable,
substitute certificates representing Original Notes for any Original Notes not
exchanged) in the name of the undersigned or, in the case of a book-entry
delivery of Original Notes, please credit the account indicated above maintained
at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under
the box entitled "Special Delivery Instructions" below, please send the Exchange
Notes (and, if applicable, substitute certificates representing Original Notes
for any Original Notes not exchanged) to the undersigned at the address shown
above in the box entitled "Description of Original Notes."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES"
ABOVE AND SIGNING THIS LETTER OF TRANSMITTAL, WILL BE DEEMED TO HAVE TENDERED
THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX ABOVE.
8
<PAGE>
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
Dated: ................................. ..................................
...................................... ..................................
...................................... ..................................
Signature(s) by Owner Date
Area Code and Telephone Number: ................................................
If a holder is tendering any Original Notes, this Letter of Transmittal
must be signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the Original Notes or by any person(s) authorized to become
registered holder(s) by endorsements and documents transmitted herewith. If
signature is by a trustee, executor, administrator, guardian, officer or other
person acting in a fiduciary or representative capacity, please set forth full
title. See Instruction 3.
Name(s): .......................................................................
................................................................................
(Please Type or Print)
Capacity: ......................................................................
Address: .......................................................................
................................................................................
(Including Zip Code)
SIGNATURE GUARANTEE
(if required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:........................................................
(Authorized Signature)
................................................................................
(Title)
................................................................................
(Name and Firm)
................................................................................
(Date)
- --------------------------------------------------------------------------------
9
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------- ---------------------------------------------------
<S> <C>
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4) (See Instructions 3 and 4)
To be completed ONLY if certificates for To be completed ONLY if certificates for
Original Notes not exchanged and/or Exchange Notes Original Notes not exchanged and/or Exchange
are to be issued in the name of and sent to someone Notes are to be sent to someone other than the
other than the person or persons whose signature(s) person or persons whose signature(s) appear(s)
appear(s) on this Letter of Transmittal above, or on this Letter of Transmittal above or to such
if Original Notes delivered by book-entry transfer person or persons at an address other than shown
that are not accepted for exchange are to be in the box entitled "Description of Original Notes"
returned by credit to an account maintained at the on this Letter of Transmittal above.
Book-Entry Transfer Facility other than the account
indicated above.
Issue: Exchange Notes and/or Original Notes to: Issue: Exchange Notes and/or Original Notes to:
Name(s): ......................................... Name(s): .........................................
(Please Type or Print) (Please Type or Print)
.................................................. ..................................................
(Please Type or Print) (Please Type or Print)
Address:.......................................... Address:..........................................
.................................................. ..................................................
(Zip Code) (Zip Code)
(Complete Substitute Form W-9) Taxpayer Identification Number:...................
Credit unexchanged Original Notes delivered by
book-entry transfer to the Book-Entry
Transfer Facility account set forth below at the
Depository Trust Company.
- --------------------------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
- -------------------------------------------------- ---------------------------------------------------
</TABLE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH THE
CERTIFICATES FOR ORIGINAL NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER
REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE
EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY
BOX ABOVE.
10
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the
Exchange Offer for any and all outstanding
8-5/8% Senior Subordinated Notes Due 2007
in Exchange for
8-5/8% Senior Subordinated Notes Due 2007, Series B
of NBTY, Inc.
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES; GUARANTEED DELIVERY
PROCEDURES.
This Letter of Transmittal is to be completed by Holders either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer - Procedures for Tendering" section of the Prospectus. Certificates for
all physically tendered Original Notes, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile hereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address set
forth herein on or prior to the Expiration Date, or the tendering holder must
comply with the guaranteed delivery procedures set forth below.
Holders whose certificates for Original Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Original Notes pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer - Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures (i) such entry must be made through an
Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent must
receive from such Eligible Institution a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Original Notes and the amount of Original Notes
tendered, setting forth the tender is being made thereby and guaranteeing that
within three New York Stock Exchange ("NYSE") trading days after the Expiration
Date, the certificates for all physically tendered Original Notes, or a
Book-Entry Confirmation, and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent, and (iii) the certificates for all physically tendered Original Notes, in
proper form for transfer, or Book-Entry Confirmation as the case may be, and all
other documents required by this Letter of Transmittal, are received by the
Exchange Agent within three NYSE trading days after the Expiration Date.
The method of delivery of this Letter of Transmittal, the Original
Notes and all other required documents is at the election and risk of the
tendering holders, but the delivery will be deemed made only when actually
11
<PAGE>
received or confirmed by the Exchange Agent. If Original Notes are sent by mail,
it is suggested that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to 5:00 p.m., New
York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. TENDER BY HOLDER; PARTIAL TENDERS.
Only a Holder of Original Notes may tender such Original Notes in the
Exchange Offer. Any beneficial owner whose Original 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 behalf of such beneficial owner. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing this Letter of Transmittal and delivering such
owner's Original Notes, either make appropriate arrangements to register
ownership of the Original 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.
Tenders of Original Notes will be accepted only in denominations of
$1,000 or integral multiples thereof. If less than all of the Original Notes
evidenced by a submitted certificate are to be tendered, the tendering holder(s)
should fill in the aggregate principal amount of Original Notes to be tendered
in the box above entitled "Description of Original Notes - Principal Amount
Tendered." A reissued certificate representing the balance of nontendered
Original Notes will be sent to such tendering Holder (except in the case of
book-entry tenders), unless otherwise provided in the appropriate box on this
Letter of Transmittal promptly after the Expiration Date. All of the Original
Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
3. SIGNATURES OF THIS LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder of the
Original Notes tendered hereby, the signature must correspond exactly with the
name as written on the face of the certificates without any change whatsoever.
If any tendered Original Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Original Notes specified herein and tendered hereby, no
12
<PAGE>
endorsements of certificates or separate bond powers are required. If, however,
the Exchange Notes are to be issued, or any untendered Original Notes are to be
reissued, to a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate bond powers are required. Signatures
on such certificate(s) must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate bond powers, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the certificate(s) and signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates 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, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
ENDORSEMENTS ON CERTIFICATES FOR ORIGINAL NOTES OR SIGNATURES ON BOND
POWERS REQUIRED BY THIS INSTRUCTION 3 MUST BE GUARANTEED BY A FIRM THAT IS A
MEMBER OF A REGISTERED NATIONAL SECURITIES EXCHANGE OR A MEMBER OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. OR BY A COMMERCIAL BANK OR TRUST COMPANY
HAVING AN OFFICE OR CORRESPONDENT IN THE UNITED STATES (AN "ELIGIBLE
INSTITUTION").
SIGNATURES ON THIS LETTER OF TRANSMITTAL NEED NOT BE GUARANTEED BY AN
ELIGIBLE INSTITUTION, PROVIDED THE ORIGINAL NOTES ARE TENDERED: (i) BY A
REGISTERED HOLDER OF ORIGINAL NOTES (WHICH TERM, FOR PURPOSES OF THE EXCHANGE
OFFER, INCLUDES ANY PARTICIPANT IN THE BOOK-ENTRY TRANSFER FACILITY SYSTEM WHOSE
NAME APPEARS ON A SECURITY POSITION LISTING AS THE HOLDER OF SUCH ORIGINAL NOTES
TENDERED) WHO HAS NOT COMPLETED THE BOX ENTITLED "SPECIAL ISSUANCE INSTRUCTIONS"
OR "SPECIAL DELIVERY INSTRUCTIONS" ON THIS LETTER OF TRANSMITTAL, OR (ii) FOR
THE ACCOUNT OF AN ELIGIBLE INSTITUTION.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Original Notes should indicate in the applicable
box the name and address to which Exchange Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Original Notes not exchanged are
to be issued or sent, if different from the name or address of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification or social security number of the person named must
also be indicated. Holders tendering Original Notes by book-entry transfer may
request that Original Notes not exchanged be credited to such account maintained
at the Book-Entry Transfer Facility as such holder may designate hereon. If no
such instructions are given, such Original Notes not exchanged will be returned
to the name or address of the person signing this Letter of Transmittal.
13
<PAGE>
5. TAX IDENTIFICATION NUMBER
Federal income tax law generally requires that a tendering holder whose
Original Notes are accepted for exchange must provide the Company (as payor)
with such holder's correct Taxpayer Identification Number ("TIN") on Substitute
Form W-9 below, which, in the case of a tendering holder who is an individual,
is his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for exemption, such tendering holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
delivery to such tendering holder of Exchange Notes may be subject to backup
withholding in an amount equal to 31% of all reportable payments made after the
exchange. If withholding results in an overpayment of taxes, a refund may be
obtained.
Exempt holders of Original Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. See the enclosed Guidelines of
Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9
Guidelines") for additional instructions.
To prevent backup withholding, each tendering holder of Original Notes
must provide its correct TIN by completing the "Substitute Form W-9" set forth
below, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN) and that (i) the holder is exempt from backup withholding, or
(ii) the holder has not been notified by the Internal Revenue Service that such
holder is subject to backup withholding as a result of a failure to report all
interest or dividends, or (iii) the Internal Revenue Service has notified the
holder that such holder is no longer subject to backup withholding. If the
tendering holder of Original Notes is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. These forms may be obtained from the
Exchange Agent. If the Original Notes are in more than one name or are not in
the name of the actual owner, such holder should consult the W-9 Guidelines for
information on which TIN to report. If such holder does not have a TIN, such
holder should consult the W-9 Guidelines for instructions on applying for a TIN,
check the box in Part 2 of the Substitute Form W-9 and write "applied for" in
lieu of its TIN. Note: Checking this box and writing "applied for" on the form
means that such holder has already applied for a TIN or that such holder intends
to apply for one in the near future. If such holder does not provide its TIN to
the Company within 60 days, backup withholding will begin and continue until
such holder furnishes its TIN to the Company.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the
transfer of Original Notes to it or its order pursuant to the Exchange Offer.
If, however, Exchange Notes and/or substitute Original Notes not exchanged are
to be delivered to, or are to be registered or issued in the name of, any person
other than the registered holder of the Original Notes tendered hereby, or if
tendered Original Notes are registered in the name of any person other than the
14
<PAGE>
person signing this Letter of Transmittal, or if a transfer tax is imposed for
any reason other than the transfer of Original Notes to the Company or its order
pursuant to the Exchange Offer, 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 herewith, the amount of such transfer taxes will be
billed directly to such tendering holder.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE ORIGINAL NOTES SPECIFIED IN THIS LETTER
OF TRANSMITTAL.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS; WITHDRAWAL OF TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Original Notes, by execution of this Letter
of Transmittal, shall waive any right to receive notice of the acceptance of
their Original Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Notes, nor shall any of them incur any liability for failure
to give any such notice.
Tenders of Original Notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date. See "The Exchange Offer --
Withdrawal of Tenders" in the Prospectus for a description of the procedures to
be followed in such a situation.
9. MUTILATED, LOST, STOLEN OR DESTROYED ORIGINAL NOTES.
Any holder whose Original Notes have been mutilated, lost, stolen, or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent, at the address and telephone number indicated
above.
15
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------- ----------------------------------------- ------------------------------------
<S> <C> <C>
Part 1-PLEASE PROVIDE YOUR TIN IN THE
SUBSTITUTE BOX AT RIGHT AND CERTIFY BY SIGNING ---------------------
AND DATING BELOW Social Security Number
FORM W-9
Department of the Treasury or
-------------------
Employer Identification Number
or
--------------------
Individual Taxpayer Identification
Number
----------------------------------------- ----------------------------------------
Payer's Request for Taxpayer PART 2-Check the box if you are NOT subject to backup withholding under the
Identification Number (TIN) provisions of Section 3406(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 IRS has notified
you that you are no longer subject to backup withholding.
----------------------------------------------------------------------------------
CERTIFICATION-UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS Part 3 | |
FORM IS TRUE, CORRECT AND COMPLETE.
Awaiting TIN - | |
SIGNATURE DATE
---------------- -------------
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP
WITHHOLDING OF 31% OF ALL REPORTABLE 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.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF
SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number to the payor, 31% of all
payments made to me pursuant to the Exchange Offer shall be retained until I
provide a taxpayer identification number to the payor and that, if I do not
provide my taxpayer identification number within sixty (60) days, such retained
amounts shall be remitted to the Internal Revenue Service as a backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a number.
DATE:
- -------------------------------------- -------------------------------
Signature
- --------------------------------------------------------------------------------
16
<PAGE>
OFFER FOR ANY AND ALL OUTSTANDING
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
OF NBTY, INC.
PURSUANT TO THE PROSPECTUS
DATED
------------------
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , UNLESS EXTENDED (THE
"EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS
POSSIBLE.
- --------------------------------------------------------------------------------
- --------------------------
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We are enclosing herewith the materials listed below relating to the
offer by NBTY, Inc. (the "Company") to exchange, upon the terms and subject to
the conditions set forth in the Prospectus dated ____________ (the "Prospectus),
and in the related Letter of Transmittal (the "Letter of Transmittal," together
with the Prospectus, the "Exchange Offer"), any and all outstanding 8-5/8%
Senior Subordinated Notes Due 2007 (the "Original Notes"), of the Company for a
like aggregate principal amount of 8-5/8% Senior Subordinated Notes Due 2007,
Series B (the "Exchange Notes"), of the Company. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
Enclosed herewith are copies of the following documents:
1. The Prospectus;
2. The Letter of Transmittal for your use and for the information of
your clients, together with guidelines of the Internal Revenue
Service for Certification of Taxpayer Identification Number on
Substitute Form W-9 providing information relating to backup
federal income tax withholding;
3. Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if the Original Notes and all other required documents
cannot be delivered on or prior to the Expiration Date;
<PAGE>
4. Instruction to Registered Holder and/or Book-Entry Transfer
Participant from Beneficial Owner; and
5. A form of letter that may be sent to your clients for whose
account you hold the Original Notes in your name or in the name of
a nominee, accompanying the instruction form referred to above,
for obtaining such clients' instructions with regard to the
Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of
Original Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Original Notes
will represent to the Company that (i) any Exchange Notes acquired by it will be
acquired in the ordinary course of its business, (ii) at the time of the
commencement of the Exchange Offer, it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act of 1933, as amended (the "Securities Act")), of the Exchange
Notes in violation of the Securities Act, (iii) it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of Exchange Notes, and (v) if such holder
is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Original Notes that were acquired as a result of market making or
other trading activities, that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such
Exchange Notes.
Very truly yours,
-------------------------
Harvey Kamil
Secretary
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the Payor -
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. Individual Taxpayer Identification numbers have
nine digits and are used solely for tax purposes by individuals who are required
to have a taxpayer identification number but who do not have one and are not
eligible to obtain a Social Security number. The table below will help determine
the number to give the Payor.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
Give the
Give the IDENTIFICATION IDENTIFICATION
For this type of account number of For this type of account number of
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 8. Sole proprietorship account The Owner (4)
2. Two or more individuals The actual owner of the 9. A valid trust, estate, or Legal entity (Do not
(joint account) account or, if combined funds, pension trust furnish the identifying
any one of the individuals (1) funds, any one of the number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
3. Husband and wife (joint The actual owner of the 10. Corporate account The Corporation
account) account or, if joint funds, either
person (1)
4. Custodian account of a The minor (2) 11. Religious,charitable, or The organization
a minor (Uniform Gift to educational organization
Minors Act) account
5. Adult and minor (joint The adult or, if the minor is the 12. Partnership account held in The partnership
account) only contributor, the minor (1) the name of the business
6. Account in the name of The ward, minor, or 13. Association, club or other The organization
guardian or committee for incompetent person (3) tax-exempt organization
a designated ward, minor,
or incompetent person
7. a. The usual revocable The grantor-trustee (1) 14. A broker or registered The broker or nominee
savings trust account nominee
(grantor is also trustee)
b. So-called trust account The actual owner (1) 15. Account with the The public entity
that is not a legal or Department of Agriculture
valid trust under State in the name of a public
law entity (such as a State or
local governmental school
district or prison) that
receives agricultural
program payments
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
<TABLE>
<CAPTION>
<S> <C>
Obtaining a Number
If you don't have a taxpayer identification number or you . Payments of tax-exempt interest (including exempt interest
don't know your number, obtain Form SS-5, Application for dividends under section 852).
Social Security Number Card, Form W-7, Application for
Individual Taxpayer Identification Number, or Form SS-4, . Payments described in section 6049(b)(5) to nonresident
Application for Employer Identification Number, at the aliens.
local office of the Social Security Administration or the
Internal Revenue Service and apply for a number. . Payments on tax-free covenant bonds under section 1451.
Payees Exempt from Backup Withholding . Payments made to a nominee.
Payees specifically exempted from backup withholding on ALL
payments include the following: Exempt payees described above should file Form W-9 to avoid possible
. A corporation. erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
. A financial institution. YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE
. An organization exempt from tax under section FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
501(a), or an individual retirement plan. DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
. The United States or any agency or
instrumentality thereof. Certain payments other than interest, dividends, and patronage
dividends that are not subject to information reporting are also not
subject to backup withholding. For details, see the regulations under
sections 6041, 6041A(a), 6045, and 6050A.
Privacy Act Notice. - Section 6109 requires most recipients of dividend
interest, or other payments to give taxpayer identification numbers to
payers who must report the payments to IRS. IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or
not recipients are required to file tax returns. Beginning January 1,
1993, payers must generally withhold 31% of taxable interest, dividend,
and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
<PAGE>
. A State, the District of Columbia, a possession Penalties
of the United States, or any subdivision or (1) Penalty for Failure to Furnish Taxpayer
instrumentality thereof. Identification Number. - If you fail to furnish your
. A foreign government, a political subdivision of taxpayer identification number to a payer, you are
a foreign government, or any agency or subject to a penalty of $50 for each such failure unless
instrumentality Thereof. your failure is due to reasonable cause and not to
willful neglect.
(2) Civil Penalty for False Information With Respect to
Withholding. - If you make a false statement with no
. An international organization or any agency, or reasonable basis which results in no imposition of backup
instrumentality thereof. withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. -
Falsifying certifications or affirmations may subject you
. A registered dealer in securities or commodities to criminal penalties including fines and/or imprisonment.
registered in the U.S. or a possession of the U.S. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR
THE INTERNAL REVENUE SERVICE.
. A real estate investment trust.
. A common trust fund operated by a bank under
section 584(a).
. An exempt charitable remainder trust, or a
non-exempt trust described in section 4947(a)(1).
. An entity registered at all times under the
Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not
generally subject to backup withholding include the
following:
. Payments to nonresident aliens subject to
withholding under section 1441.
. Payments to Partnerships not engaged in a trade
or business in the U.S. and which have at least one
nonresident partner.
. Payments of patronage dividends where the account
received is not paid in money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to
backup withholding include the following:
. Payments of interest on obligations issued by
individuals. Note: You may be subject to backup
withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to
the payer.
</TABLE>
<PAGE>
NOTICE OF GUARANTEED DELIVERY
NBTY, INC.
OFFER FOR ANY AND ALL OUTSTANDING
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
PURSUANT TO THE PROSPECTUS DATED
---------
As set forth in the Prospectus ______________ dated (as the same may be amended
from time to time, the "Prospectus") of NBTY, Inc. (the "Company") under the
caption "The Exchange Offer - Guaranteed Delivery Procedures," and in the
accompanying Letter of Transmittal (the "Letter of Transmittal") and Instruction
1 thereto, this form or one substantially equivalent hereto must be used to
accept the Company's offer (the "Exchange Offer") to exchange any and all
outstanding 8-5/8% Senior Subordinated Notes due 2007 (the "Original Notes"), of
the Company for a like aggregate principal amount of 8-5/8% Senior Subordinated
Notes Due 2007, Series B (the "Exchange Notes"), of the Company from the holders
("Holders") thereof if (i) certificates representing the Original Notes to be
exchanged are not immediately available or (ii) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date (as defined below).
This form, properly completed and duly executed, may be delivered by mail or
hand delivery or transmitted, via facsimile, to IBJ Schroder Bank & Trust
Company (the "Exchange Agent") as set forth below. All capitalized terms used
herein but not defined herein shall have the meanings ascribed to them in the
Prospectus.
------------------------------------------------------------------------------
| |
|THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________ |
| UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR |
| TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. |
------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
<TABLE>
<CAPTION>
<S> <C> <C>
BY OVERNIGHT DELIVERY: BY MAIL: BY HAND:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company IBJ Schroder & Trust Company
One State Street P.O. Box 84 One State Street
New York, NY 10004 Bowling Green Station New York, NY 10004
Attn: Securities Processing Window New York, NY 10274-0084 Attn: Securities Processing
Subcellar One (SC-1) Attn: Reorganization Operations Window
Department Subcellar One (SC-1)
</TABLE>
FACSIMILE TRANSMISSION NUMBER:
(212) 858-2611
CONFIRM BY TELEPHONE:
(212) 858-2103
FOR INFORMATION CALL:
(212) 858-2103
Delivery of this instrument to an address other than as set forth
above, or transmission of instructions via facsimile other than as 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 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 signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender(s) to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Original Notes set forth below pursuant to the guaranteed delivery procedures
set forth in the Prospectus under the caption "The Exchange Offer - Guaranteed
Delivery Procedures."
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death or incapacity 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.
PLEASE SIGN AND COMPLETE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Signatures of Registered Holder(s) or Authorized Date:.....................................
Signatory: ........................................
................................................... Address: .................................
................................................... ..........................................
Name(s) of Registered Holder(s):................... Area Code and Telephone No.:..............
................................................... If Notes will be delivered by book-entry transfer, check
trust company below:
...................................................
...................................................
_
Principal Amount of Original Notes Tendered:....... | | The Depository Trust Company
-
Depository Account No.:...........................
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
The Notice of Guaranteed Delivery must be signed by the Holder(s) exactly as
their name(s) appear on certificates for Original Notes or on a security
position listing as the owner of Original Notes, or by person(s) authorized to
become Holder(s) by endorsements and 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:
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Capacity:
------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Do not send Original Notes with this form. Original Notes should be sent to the
Exchange Agent together with a properly completed and duly executed Letter of
Transmittal.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or a correspondent in the United States, hereby
guarantees that, within three New York Stock Exchange trading days from the date
of this Notice of Guaranteed Delivery, a properly completed and duly executed
letter of Transmittal (or a facsimile thereof), together with certificates
representing the Original Notes tendered hereby in proper form for transfer (or
confirmation of the book-entry transfer of such Original Notes into the Exchange
Agent's account at a Book-Entry Transfer Facility, pursuant to the procedure for
book-entry transfer set forth in the Prospectus under the caption "The Exchange
Offer - Procedures for Tendering"), and required documents will be deposited by
the undersigned with the Exchange Agent.
Name of Firm:
-------------------------- --------------------------------
Authorized Signature
Address: Name:
------------------------------- ----------------------------
Title:
---------------------------
Area Code and Telephone No. Date:
----------- ---------------------------
- --------------------------------------------------------------------------------
DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ACTUAL SURRENDER
OF ORIGINAL NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND VALIDLY EXECUTED
LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE>
INSTRUCTION TO REGISTERED HOLDER AND/OR BOOK-
ENTRY TRANSFER PARTICIPANT FROM BENEFICIAL OWNER
FOR
TENDER OF 8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
OF NBTY, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WIL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON ______________ UNLESS EXTENDED (THE "EXPIRATION DATE").
ORIGINAL NOTES TENDERED IN THE EXCHANGE OFFER MAY BE
WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus dated
______________ (the "Prospectus") of NBTY, Inc., a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange any and all outstanding 8-5/8% Senior Subordinated Notes Due
2007 (the "Original Notes"), of the Company for a like aggregate principal
amount of 8-5/8% Senior Subordinated Notes Due 2007, Series B (the "Exchange
Notes"), of the Company. Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry
transfer facility participant, as to the action to be taken by you relating to
the Exchange Offer with respect to the Original Notes held by you for the
account of the undersigned.
The aggregate face amount of the Original Notes held by you for the
account of the undersigned is (FILL IN AMOUNT):
$________________ of the 8-5/8% Senior Subordinated Notes Due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK THE APPROPRIATE BOX):
| | To TENDER the following Original Notes held by you for the account of
the undersigned (INSERT PRINCIPAL AMOUNT OF ORIGINAL NOTES TO BE TENDERED (IF
ANY): $______________________
| | NOT TO TENDER any Original Notes held by you for the account of the
undersigned.
<PAGE>
If the undersigned instructs you to tender the Original Notes held by
you for the account of the undersigned, it is understood that you are authorized
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)
any Exchange Notes to be received by the undersigned will be acquired in the
ordinary course of business of the undersigned, (ii) at the time of commencement
of the Exchange Offer, the undersigned had no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act of 1933, as amended (the "Securities Act")) of the Exchange Notes
in violation of the Securities Act, (iii) the undersigned is not an "affiliate"
(as defined in Rule 405 promulgated under the Securities Act) of the Company,
(iv) if the undersigned is not a broker-dealer, the undersigned is not engaged
in, and does not intend to engage in, the distribution of Exchange Notes, and
(v) if the undersigned is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Original Notes that were acquired as a result of
market making or other trading activities, that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, the undersigned is not deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
SIGN HERE
Name of beneficial owner(s):
----------------------------------------------------
Signature(s):
-------------------------------------------------------------------
Name(s) (please print):
---------------------------------------------------------
Address:
------------------------------------------------------------------------
Telephone Number:
---------------------------------------------------------------
Taxpayer Identification or Social Security Number:
------------------------------
Date:
--------------------------------------------------------------------------
<PAGE>
OFFER FOR ANY AND ALL OUTSTANDING
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR
8-5/8% SENIOR SUBORDINATED NOTES DUE 2007, SERIES B
OF NBTY, INC.
---------------
TO OUR CLIENTS:
Enclosed for your consideration is the Prospectus dated __________ (as
the same may be amended from time to time, the "Prospectus") and a related
Letter of Transmittal (the "Letter of Transmittal," together with the
Prospectus, the "Exchange Offer") relating to the offer by NBTY, Inc. (the
"Company") to exchange any and all outstanding 8-5/8% Senior Subordinated Notes
Due 2007 (the "Original Notes"), of the Company for a like aggregate principal
amount of 8-5/8% Senior Subordinated Notes Due 2007, Series B (the "Exchange
Notes"), of the Company.
Please Note that the Exchange Offer will expire at 5:00 p.m., New York
City time, on ________________ unless extended.
The Exchange Offer is not conditioned upon any minimum number of
Original Notes being tendered.
We are the registered holder of the Original Notes held by us for your
account. A tender of any such Original Notes can be made only by us as the
registered holder and pursuant to your instructions. The Letter of Transmittal
is furnished to you for your information only and cannot be used by you to
tender Original Notes held by us for your account.
Accordingly, we request instructions as to whether you wish us to
tender any or all of the Original Notes held by us for your account, pursuant to
the terms and conditions set forth in the Exchange Offer. We also request that
you confirm that we may on your behalf make the representations contained in the
Letter of Transmittal that are to be made with respect to you as beneficial
owner.
Pursuant to the Letter of Transmittal, each holder of Original Notes
will represent to the Company that (i) any Exchange Notes to be received by it
will be acquired in the ordinary course of its business, (ii) at the time of the
commencement of the Exchange Offer, it has no arrangement or understanding with
any person to participate in the distribution (within the meaning of the
Securities Act of 1933, as amended (the "Securities Act")), of the Exchange
Notes in violation of the Securities Act, (iii) it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of Exchange Notes, and (v) if such holder
is a broker-dealer that will receive Exchange Notes for its own account in
exchange for Original Notes that were acquired as a result of market making or
other trading activities, that it will deliver a prospectus meeting the
<PAGE>
requirements of the Securities Act in connection with any resale of such
Exchange Notes. By acknowledging that it will deliver and by delivering a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes, such broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act.
Very truly yours,
