As filed with the Securities and Exchange Commission on
June 20, 1994
Registration
No. 33-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
(Exact name of registrants as specified in their
charters)
Delaware 31-1199481
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
14111 Scottslawn Road, Marysville, Ohio 43041 (513)
644-0011
(Address, including zip code, and telephone number,
including area code, of registrants' principal executive
offices)
Craig D. Walley
Vice President, General Counsel and Secretary
The Scotts Company
14111 Scottslawn Road, Marysville, Ohio 43041
(513) 644-0011
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
G. Robert Lucas II George H. White
Vorys, Sater, Seymour and Pease Sullivan & Cromwell
52 East Gay Street 125 Broad Street
P.O. Box 1008 New York, New York 10004
Columbus, Ohio 43216-1008 (212) 558-4000
(614) 464-5691
Approximate date of commencement of proposed sale to the
public: from time to time after the effective date of this
Registration Statement as the Registrants shall determine.
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box. ____
If any of the securities being registered on this form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following box. X
The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants 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 Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine.
SUBJECT TO COMPLETION DATED JUNE 20, 1994
[Scotts Logo]
$100,000,000
The Scotts Company
The O.M. Scott & Sons Company
Debt Securities
The Scotts Company ("Scotts") and The O.M. Scott & Sons
Company ("OMS," and, together with Scotts, the "Issuers"), a
wholly owned subsidiary of Scotts, may offer from time to time
their unsecured senior or subordinated debt securities consisting
of notes, debt securities or other evidences of indebtedness (the
"Debt Securities") at an initial offering price (or net proceeds,
in the case of Debt Securities issued at an original issue
discount) not to exceed $100,000,000, or its equivalent in such
other currency or in composite currencies or currency units
as may be designated by
the Issuers at the time of offering. The Debt Securities may be
offered in one or more series in amounts, at prices and on terms
to be determined in light of market conditions at the time of
sale and set forth in a Prospectus Supplement or Prospectus
Supplements. Scotts is a holding company, and all of Scotts'
operations are conducted through OMS and OMS' subsidiaries. The
Debt Securities will be the joint and several obligations of the
Issuers.
The terms of each series of Debt Securities, including,
where applicable, the specific designation, rank, aggregate
principal amount, authorized denominations, maturities, rate or
rates and time or times of payment of any interest, any terms for
optional or mandatory redemption or payment of additional amounts
or any sinking fund provisions, any initial public offering
price, the proceeds to the Issuers and any other specific terms
in connection with the offering and sale of such series (the
"Offered Debt Securities") will be set forth in a Prospectus
Supplement or Prospectus Supplements.
The Debt Securities may be sold directly by the Issuers,
through agents designated from time to time or through
underwriters or dealers. See "Plan of Distribution." If any
agents of the Issuers or any underwriters are involved in the
sale of any Debt Securities in respect of which this Prospectus
is being delivered, the names of such agents or underwriters and
any applicable commissions or discounts will be set forth in a
Prospectus Supplement.
__________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1994.
Information contained herein is subject to completion or
amendment. A registration statement relating 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.
AVAILABLE INFORMATION
Scotts is subject to the informational requirements of
the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and in accordance therewith files reports, proxy statements and
other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Citicorp Center, 500 West Madison, 14th
Floor, Chicago, Illinois 60661 and Seven World Trade Center, 13th
Floor, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
The Issuers have filed a registration statement on Form
S-3
(together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as
amended. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the
Registration Statement and the exhibits filed as part thereof.
Statements contained herein concerning provisions of any document
filed as an exhibit are not necessarily complete and, in each
instance, reference is made to the copy of each document filed as
an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Scotts' Annual Report on Form 10-K for the fiscal year
ended September 30, 1993; Scotts' Current Report on Form 8-K,
dated December 30, 1993; Scotts' Quarterly Reports on Form 10-Q
for the fiscal quarters ended January 1, 1994 and April 2, 1994,
respectively; Scotts' Current Report on Form 8-K/A, dated
February 28, 1994; and all other documents filed by Scotts
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Debt Securities, which
documents are filed with the Commission (File No. 0-19768)
pursuant to the Exchange Act, are incorporated herein by
reference. Any statement contained in a document 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 modified or
superseded, to constitute a part of this Prospectus.
Scotts will provide without charge to each person to
whom a copy of this Prospectus is delivered, upon the request of
any such person, a copy of all of the documents which are
incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to
The Scotts Company, 14111 Scottslawn Road, Marysville, Ohio
43041, Attention: Chief Financial Officer, telephone
(513) 644-0011.
PROSPECTUS SUMMARY
The following summary information is qualified in its
entirety by reference to the more detailed information and
financial statements (including the notes thereto) contained
elsewhere in this Prospectus or incorporated by reference herein.
As used in this Prospectus, unless the context indicates
otherwise, the "Issuers" mean The Scotts Company ("Scotts") and
its wholly owned subsidiary, The O.M. Scott & Sons Company
("OMS"), and the "Company" means the Issuers and OMS' direct and
indirect subsidiaries, including Hyponex Corporation ("Hyponex"),
acquired in November 1988, Republic Tool & Manufacturing Corp.
("Republic"), acquired in November 1992, and Scotts-Sierra
Horticultural Products Company ("Sierra"), acquired in December
1993. Sales and market share data given for the Company in this
Prospectus do not include Sierra unless otherwise indicated.
The Company
The Company is one of the oldest and most widely
recognized manufacturers of products used to grow and maintain
landscape: lawns, gardens and golf courses. In both the consumer
and professional market segments, the Company's,
Scotts(Registered) and Turf Builder(Registered) (for consumer
lawn care), ProTurf(Registered) (for professional turf care) and
Osmocote(Registered) and Peters(Registered) (for commercial
horticulture) brands command market-leading shares more than
double those of the next ranked competitors. The Company's long
history of technical innovation, its reputation for quality and
service and its effective marketing tailored to the needs of
do-it-yourselfers and professionals have enabled the Company to
maintain leadership in its markets while delivering consistent
growth in sales and operating income and stable operating
margins. Do-it-yourselfers and professionals purchase through
different distribution channels and have different information
and product needs. Accordingly, the Company has two business
groups, Consumer and Professional, to serve these markets.
Consumer Business Group
The Consumer Business Group (which accounted for
approximately 80% of fiscal 1993 net sales) develops and markets
the products consumers need to grow and maintain beautiful lawns
and gardens: fertilizers, weed and insect controls, grass seed,
organic products and lawn spreaders. The Company estimates that
its lawn fertilizer and fertilizer/control combination products,
sold under the Scotts and Turf Builder brand names, have a 46%
share of the U.S. consumer lawn care chemicals market. The
organic product line of topsoils, potting soils, composted
manures and mulches are sold under the Hyponex(Registered) brand
and other labels. The Company has broadened and strengthened its
organic product line as a result of its recent acquisition of
Sierra, which manufactures Peters Professional(Registered)
potting soil (see "-Sierra Acquisition"). Management estimates
that the Company has the leading market share in the total
U.S. branded organic products market and over a 50% share of the
U.S. retail potting soil segment.
The Company provides a high level of service for
consumers. It backs its promise of satisfaction with an
unconditional "No Quibble" guarantee for its Scotts products and
maintains a toll-free hotline for lawn care advice. The
Company's consumer products are sold in the United States through
mass merchandisers and independent retailers, and internationally
in Canada, Japan and Europe through various distribution
channels.
Professional Business Group
The Professional Business Group (which accounted for
approximately 20% of fiscal 1993 net sales) develops and markets
products for professional users: golf courses, commercial
nurseries, sports fields, lawn care service companies and
landscapers. Scotts professional products provide these users
with a wide array of technically sophisticated controlled-release
and water-soluble fertilizers, controls, application devices and
growing media under such well-known labels as Scotts ProTurf (for
golf course and other turf applications), Osmocote and
Sierra(Registered) (for commercial horticulture),
ProGrow(Registered) (for the landscape market) and Peters and
MetroMix(Registered) (for greenhouses and commercial nurseries).
Depending on the market segment, these products are sold through
distributors, directly through the Company's agronomically-
trained technical representatives ("tech reps"), or through
Company-operated stores.
Management estimates that Scotts ProTurf fertilizer and
control products have the leading share of the U.S. non-commodity
golf course turf care market. In 1993, ProTurf products were
used on 81 of the GOLF DIGEST top 100 courses and approximately
55% of the over 14,500 golf courses in the United States. The
Company's strong research and development capabilities and
agronomically-trained sales force have enabled the Company to
introduce innovative new products and technologies and thereby
maintain its leading position in these targeted professional turf
markets.
With the acquisition of Sierra, the Company has become
the leading supplier of controlled-release and water-soluble
fertilizers to the commercial horticulture segment, with an
estimated combined market share of over 50% in the United States.
Sierra's commercial horticultural products also have significant
market positions in Europe, Australia, New Zealand and the
Pacific Rim. A recently formed unit within the Professional
Business Group, under the ProGrow name, will concentrate on
marketing products to professional turf and landscape customers
other than golf courses and sports fields, such as lawn care
service companies.
Business Strategy
The Company's business strategy is to be the premier
global manufacturer and marketer of products used in landscape
growth and maintenance. The major elements of the Company's
strategy are to:
Develop Innovative and Technologically Advanced
Products. The Company's proven ability to develop and market new
products has been instrumental in establishing its leading market
shares. The Company is fully committed to continuing this
tradition. For example, it is introducing Turf Builder for Shady
Lawns(Registered) in 1994 utilizing proprietary technology to
answer the most often expressed needs of its do-it-yourself
consumers. In its professional markets, the technical expertise
of its sales force, combined with the Company's strong research
and development efforts, have resulted in new products introduced
since 1988 accounting for 66% of the Professional Business
Group's net sales in fiscal 1993. These new professional
products often have consumer applications. With the addition of
Sierra's research and development expertise and facilities, new
product development is expected to continue and expand.
Strengthen Relationships with Mass Merchandisers and
Independent Retailers. As the only nationwide supplier of a full
line of lawn and garden products, the Company has strong
relationships with mass merchandisers and major home center
retailers such as Kmart, Home Depot and Wal-Mart. Sales to this
fastest growing segment of retailers increased approximately 28%
from fiscal 1992 to fiscal 1993 and accounted for 40% of the
Consumer Business Group's net sales in fiscal 1993. Through
customized marketing programs and product offerings, the Company
intends to further strengthen its relationship with mass
merchandisers, while continuing to support its independent
retailers.
Accelerate Growth Through Cross-Selling. The Company
intends to continue its efforts to cross-sell a wider range of
its brand name products to retailers by capitalizing on its
position as the only nationwide supplier of a full line of
landscape growth and maintenance products. The Company also
expects to improve its distribution of Scotts products
internationally using the sales distribution and manufacturing
network of the recently-acquired Sierra. Management also plans
to use the leading position of the Scotts brand name in the golf
course segment to increase sales of Sierra products and to take
advantage of Sierra's strong commercial horticulture presence
both in the United States and abroad to increase sales of various
Scotts professional products.
Expand Through Selective Strategic Acquisitions. Since
1988, the Company has completed three strategic acquisitions of
companies in the lawn and garden industry. These acquisitions
have provided the Company with the opportunity to expand its
product offerings while building upon the Company's existing
strengths in distribution, technology and brand marketing. The
Company believes its most recent acquisition of Sierra, a leading
manufacturer and marketer to the commercial horticulture markets
in the United States and abroad, will further improve the
Company's global competitiveness.
Sierra Acquisition
On December 16, 1993, the Company acquired Sierra from
W.R. Grace & Co.-Conn., and other investors, for approximately
$120 million in cash. Sierra, a leading manufacturer and
marketer of specialty fertilizers, pesticides and premium growing
media used in commercial horticulture, golf course and consumer
applications, had net sales of approximately $108.7 million for
the period from January 1, 1993, through December 16, 1993.
Its products are manufactured in six plants located in the United
States and one in the Netherlands. Sierra markets its products
in the United States and internationally under brand names
including Peters, Osmocote, Once(Registered) and
Terra-Lite(Registered). Through Sierra's overseas subsidiaries,
products are distributed in numerous foreign markets, including,
among others, Australia, Europe and the Pacific Rim.
Approximately 25% of Sierra's 1993 net sales were abroad.
For the Company's fiscal year ended September 30, 1993,
the Company had net sales of $466.0 million and net income before
extraordinary items and accounting changes of $21.0 million,
representing increases of 12.7% and 39.6%, respectively, over
fiscal 1992. Net sales and net income before cumulative effect
of accounting changes for the fiscal year ended September 30,
1993, on a pro forma basis giving effect to the Sierra
acquisition were $585.3 million and $20.3 million, respectively.
See "Unaudited Pro Forma Financial Data."
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
The following summary historical financial data should be
read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto as of September 30, 1992 and 1993
and for the three years ended September 30, 1993 included
elsewhere in this Prospectus.
<CAPTION>
Fiscal Year Ended September 30,
1989(1) 1990 1991 1992
1993(2)
(dollars in thousands, except ratios)
Statement of Operations Data(3):
<S> <C> <C> <C> <C> <C>
Net sales . . . . $328,368 $350,441 $388,120 $413,558
$466,043
Gross profit. . . 148,183 163,638 180,164 200,425
221,825
Total operating expenses . 118,634 132,988 142,777 158,260
177,344
Income from operations . . 29,549 30,650 37,387 42,165
44,481
Interest and other expenses . . . . 28,638 37,411 32,932 15,962
9,114
Income (loss) before income taxes,
extraordinary items and cumulative
effect of accounting changes. . . 911 (6,761) 4,455 26,203
35,367
Income taxes . . 1,750 143 2,720 11,124
14,320
Extraordinary items:
Loss on early extinguishment
of debt, net of tax. . . -- -- -- (4,186)
- --
Utilization of net operating
loss carryforwards . . . 1,670 -- 2,581 4,699
- --
Cumulative effect of changes
in accounting for post-
retirement benefits,
net of tax and income
taxes . . . . . -- -- -- --
(13,157)
Net income (loss) 831 (6,904) 4,316 15,592
7,890
Other Historical Data:
Depreciation and amortization $19,621 $20,474 $17,785 $15,848
$18,144
Capital expenditures . . . 6,722 8,494 8,818 19,896
15,158
EBITDA(4) . . . . 47,300 49,080 53,269 56,771
61,598
Ratio of EBITDA to interest
expense . . . . 1.46x 1.42x 1.72x 3.56x
7.29x
Ratio of earnings to fixed
charges(5). . . 1.03x ___(6) 1.14x 2.40x
4.08x
</TABLE>
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1989(1) 1990 1991 1992
1993(2)
(dollars in thousands, except for
ratios)
Balance Sheet Data (end of period):
<S> <C> <C> <C> <C>
<C>
Working capital. . . . . $ 10,363 $18,230 $21,260 $54,795
$78,891
Total assets . . . . . . 276,253 270,429 260,729 268,021
321,590
Long-term debt, including
current portion. . . . 201,203 192,915 182,954 35,897
92,524
Total stockholders'
equity (deficit) . . . 2,555 (12,677) (9,961) 175,929
143,013
<F1>
(1) Includes Hyponex from November 11, 1988.
<F2>
(2) Includes Republic from November 19, 1992.
<F3>
(3) Certain amounts have been reclassified to conform to 1993 presentation;
these changes did not impact net income.
<F4>
(4) As used herein, EBITDA is defined as income from operations plus
depreciation and amortization
included therein. Deferred financing costs which have been incurred
and capitalized in connection with financing the Company's operations
and acquisitions are being amortized and reported as a portion of
interest expense and therefore have been excluded from the calculation
of depreciation and amortization used in the calculation of EBITDA.
The Company believes that EBITDA is generally
recognized as an indicator of a
company's ability to service its debt and capital expenditure
requirements. However, EBITDA is not
intended to be a performance measure that should be regarded as an
alternative either to income from
operations or net income or as an indicator of operating performance
or cash flows as a measure of
liquidity, as determined in accordance with generally accepted
accounting principles.
<F5>
(5) The ratio of earnings to fixed charges is computed by dividing (a) the sum
of (i) income from
operations before income taxes, extraordinary items and the cumulative
effect of accounting changes and (ii) fixed charges by (b) fixed charges.
Fixed charges consist of interest on all indebtedness
(including amortization of deferred financing costs), capitalized
interest and the estimated interest component of operating leases
(assumed to be one-third of total rental expense).
<F6>
(6) Reflects a deficiency of earnings to fixed charges of $6.8 million.
</TABLE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data of
the Company has been derived from and should be read in
conjunction with the unaudited pro forma financial information
included elsewhere in this Prospectus under "Unaudited Pro Forma
Financial Data." The Pro Forma Statement of Operations Data give
effect to the acquisition of Sierra, which occurred on
December 16, 1993, as if it had occurred on October 1, 1992. The
Pro Forma Balance Sheet Data gives effect to the acquisition of
Sierra as if it had occurred on September 30, 1993.
<TABLE>
<CAPTION>
Fiscal Year Ended
September 30, 1993
(dollars in thousands,
except ratios)
Pro Forma Statement of Operations Data:
<S> <C>
Net sales . . . . . . . . . . . . $585,318
Gross profit . . . . . . . . . . 273,716
Total operating expenses . . . . 217,727
Income from operations. . . . . . 55,989
Interest and other expenses . . . 19,914
Income before income taxes and
cumulative effect of accounting
changes . . . . . . . . . . . . 36,075
Income taxes. . . . . . . . . . . 15,801
Cumulative effect of accounting
changes . . . . . . . . . . . . (13,157)
Net income. . . . . . . . . . . . 7,117
Other Pro Forma Data:
Depreciation and amortization . . $25,246
Capital expenditures. . . . . . . 16,760
EBITDA(1) . . . . . . . . . . . . 75,647
Ratio of EBITDA to interest expense. . . . . 4.89x
Ratio of earnings to fixed
charges(2). . . . . . . . . . . 2.81x
September 30, 1993
Pro Forma Balance Sheet Data:
Working capital . . . . . . . . . $ 92,240
Total assets. . . . . . . . . . . 470,205
Long-term debt, including
current portion . . . . . . . . 215,754
Total stockholders' equity. . . . 143,013
<F1>
(1) See note (4) to Summary Historical Financial Data.
<F2>
(2) See note (5) to Summary Historical Financial Data.
</TABLE>
INVESTMENT CONSIDERATIONS
Prospective purchasers of any Debt Securities should
consider carefully, in addition to the other information
contained in this Prospectus, the following factors.
Seasonality; Weather Conditions
The Company's business is highly seasonal, with
approximately 70% of net sales occurring in the second and third
fiscal quarters. Unexpected production or transportation
difficulties occurring at a time of peak production or sales
could cause sales losses which could not readily be recovered in
the current year.
In addition, the Company's consumer business may be
adversely affected by the weather. Poor weekend weather during
the Spring tends to adversely affect consumer purchases of do-it-
yourself lawn care products. Historically, the Company has
attempted to lessen the impact of possible adverse weather by
offering promotional programs at the retailer and consumer level
to encourage consumer purchases in the early Spring. Management
believes this strategy and the international scope of the
Company's business reduces, but does not eliminate, the Company's
vulnerability to poor Spring weekend weather.
Environmental Regulation
Many of the components of the Company's products and the
harvesting of certain of Hyponex's organic products are subject
to regulation by the United States Environmental Protection
Agency (the "EPA"), other federal agencies and departments, and
similar foreign, state and local agencies. Such regulations may
affect the Company by restricting or prohibiting the use of these
components or such harvesting. The EPA and similar state
agencies may also affect the Company's business by regulating the
disposal of waste generated in the conduct of the business.
Significant Customers
Kmart Corporation, including its Builders' Square unit
("Kmart"), and Home Depot accounted for approximately 21.5% and
8.8%, respectively, of the Company's net sales in fiscal 1993,
which reflects their significant position in the retail lawn and
garden market. Although the Company considers its relations with
Kmart and Home Depot to be good, the loss of either of these
customers or a substantial decrease in the amount of their
purchases could have a material adverse effect on the Company's
business.
Restrictions Imposed by Lenders
The discretion of the management of the Company with respect
to certain business matters is limited by covenants contained in
the Third Amended and Restated Credit Agreement, dated April 7,
1992, as amended (the "Bank Agreement"), among Scotts, OMS,
Chemical Bank, as agent, and the lenders named therein. Among
other things, these covenants limit or prohibit the Company from
incurring additional indebtedness, creating liens, entering into
mergers, acquisitions or divestitures, making distributions with
respect to capital stock, making capital expenditures and making
investments and loans, and require the Company to maintain
certain ratios or amounts related to interest expense coverage,
current assets, operating profit and net worth. See "Description
of the Bank Agreement" for additional information concerning the
Bank Agreement.
THE COMPANY
The Company is one of the oldest and most widely recognized
manufacturers of products used to grow and maintain landscape:
lawns, gardens and golf courses. In both the consumer and
professional market segments, the Company's Scotts and Turf
Builder (for consumer lawn care), ProTurf (for professional turf
care) and Osmocote and Peters (for commercial horticulture)
brands command market-leading shares more than double those of
the next ranked competitors. The Company's long history
of technical innovation, its reputation for quality and service
and its effective marketing tailored to the needs of do-it-
yourselfers and professionals have enabled the Company to
maintain leadership in its markets while delivering consistent
growth in sales and operating income and stable operating
margins. Do-it-yourselfers and professionals purchase through
different distribution channels and have different information
and product needs. Accordingly, the Company has two business
groups, Consumer and Professional, to serve these markets.
Consumer Business Group
The Consumer Business Group (which accounted for
approximately 80% of fiscal 1993 net sales) develops and markets
the products consumers need to grow and maintain beautiful lawns
and gardens: fertilizers, weed and insect controls, grass seed,
organic products and lawn spreaders. The Company estimates that
its lawn fertilizer and fertilizer/control combination products,
sold under the Scotts and Turf Builder brand names, have a 46%
share of the U.S. consumer lawn care chemicals market. The
organic product line of topsoils, potting soils, composted
manures and mulches are sold under the Hyponex brand and other
labels. The Company has broadened and strengthened its organic
product line as a result of its recent acquisition of Sierra,
which manufactures Peters Professional potting soil (see
"-Sierra Acquisition"). Management estimates that the Company
has the leading market share in the total U.S. branded organic
products market and over a 50% share of the U.S. retail potting
soil segment.
The Company provides a high level of service for consumers.
It backs its promise of satisfaction with an unconditional "No
Quibble" guarantee for its Scotts products and maintains a toll-
free hotline for lawn care advice. The Company's consumer
products are sold in the United States through both mass
merchandisers and independent retailers, and internationally in
Canada, Japan and Europe through various distribution channels.
Professional Business Group
The Professional Business Group (which accounted for
approximately 20% of fiscal 1993 net sales) develops and markets
products for professional users: golf courses, commercial
nurseries, sports fields, lawn care service companies and
landscapers. Scotts professional products provide these users
with a wide array of technically sophisticated controlled-release
and water-soluble fertilizers, controls, application devices and
growing media under such well-known labels as Scotts ProTurf
(for golf course and other turf applications), Osmocote and
Sierra (for commercial horticulture), ProGrow (for the landscape
market) and Peters and MetroMix (for greenhouses and commercial
nurseries). Depending on the market segment, these products are
sold through distributors, directly through the Company's
agronomically-trained technical representatives, or through
Company-operated stores.
Management estimates that Scotts ProTurf fertilizer and
control products have the leading share of the U.S. non-commodity
golf course turf care market. In 1993, ProTurf products were
used on 81 of the Golf Digest top 100 courses and approximately
55% of the over 14,500 golf courses in the Untied States. The
Company's strong research and development capabilities and
agronomically-trained sales force have enabled the Company to
introduce innovative new products and technologies and thereby
maintain its leading position in these targeted professional turf
markets.
With the acquisition of Sierra, the Company has become the
leading supplier of controlled-release and water-soluble
fertilizers to the commercial horticulture segment, with an
estimated combined market share of over 50% in the United States.
Sierra's commercial horticultural products also have significant
positions in Europe, Australia, New Zealand and the Pacific Rim.
A recently formed unit within the Professional Business Group,
under the ProGrow name, will concentrate on marketing Scotts
products to professional turf and landscape customers other than
golf courses and sports fields, such as lawn care service
companies.
Business Strategy
The Company's business strategy is to be the premier global
manufacturer and marketer of products used in landscape growth
and maintenance. The major elements of the Company's strategy
are to:
Develop Innovative and Technologically Advanced Products.
The Company's proven ability to develop and market new products
has been instrumental in establishing its leading market shares.
The Company is fully committed to continuing this tradition. For
example, it is introducing Turf Builder for Shady Lawns in 1994
utilizing proprietary technology to answer the most often
expressed needs of its do-it-yourself consumers. In its
professional markets, the technical expertise of its sales force,
combined with the Company's strong research and development
efforts, have resulted in new products introduced since 1988
accounting for 66% of the Professional Business Group's net sales
in fiscal 1993. These new professional products often have
consumer applications. With the addition of Sierra's research
and development expertise and facilities, new product development
is expected to continue and expand.
Strengthen Relationships with Mass Merchandisers and
Independent Retailers. As the only nationwide supplier of a full
line of lawn and garden products, the Company has strong
relationships with mass merchandisers and major home center
retailers such as Kmart, Home Depot and Wal-Mart. Sales to this
fastest growing segment of retailers increased approximately 28%
from fiscal 1992 to fiscal 1993 and accounted for 40% of the
Consumer Business Group's net sales in fiscal 1993. Through
customized marketing programs and product offerings, the Company
intends to further strengthen its relationship with mass
merchandisers, while continuing to support its independent
retailers.
Accelerate Growth Through Cross-Selling. The Company
intends to continue its efforts to cross-sell a wider range of
its brand name products to retailers by capitalizing on its
position as the only nationwide supplier of a full line of
landscape growth and maintenance products. The Company also
expects to improve its distribution of Scotts products
internationally using the sales distribution and manufacturing
network of the recently-acquired Sierra. Management also plans
to use the leading position of the Scotts brand name in the golf
course segment to increase sales of Sierra products and to take
advantage of Sierra's strong commercial horticulture presence
both in the United States and abroad to increase sales of various
Scotts professional products.
Expand Through Selective Strategic Acquisitions. Since
1988, the Company has completed three strategic acquisitions of
companies in the lawn and garden industry. These acquisitions
have provided the Company with the opportunity to expand its
product offerings while building upon the Company's existing
strengths in distribution, technology and brand marketing. The
Company believes its most recent acquisition of Sierra, a leading
manufacturer and marketer to the commercial horticulture markets
in the United States and abroad, will further improve the
Company's global competitiveness.
Sierra Acquisition
On December 16, 1993, the Company acquired Sierra from W.R.
Grace & Co.-Conn., and other investors, for approximately $120
million in cash. Sierra, a leading manufacturer and marketer of
specialty fertilizers, pesticides and premium growing media used
in commercial horticulture, golf course and consumer
applications, had net sales of approximately $108.7 million for
the period from January 1,1993, through December 16, 1993. Its
products are manufactured in six plants located in the United
States and one in The Netherlands. Sierra markets its products
in the United States and internationally under brand names
including Peters, Osmocote, Once and Terra-Lite. Through
Sierra's overseas subsidiaries, products are distributed in
numerous foreign markets, including, among others, Australia,
Europe and the Pacific Rim. Approximately 25% of Sierra's 1993
net sales were abroad.
For the Company's fiscal year ended September 30, 1993, the
Company had net sales of $466.0 million and net income before
extraordinary items and accounting changes of $21.0 million,
representing increases of 12.7% and 39.6%, respectively, over
fiscal 1992. Net sales and net income before cumulative effect
of accounting changes for the fiscal year ended September 30,
1993, on a pro forma basis giving effect to the Sierra
acquisition were $585.3 million and $20.3 million, respectively.
See "Unaudited Pro Forma Financial Data."
History
The Company traces its roots back to the seed business
founded in 1870 by Orlando McLean Scott in Marysville, Ohio. In
1986, OMS was purchased by Clayton & Dubilier (now Clayton,
Dubilier & Rice, Inc.), a private investment firm, members of
management and other investors from ITT Corporation in a
leveraged transaction. The Company acquired the lawn and garden
business of Hyponex in November 1988 through a series of mergers
for approximately $112 million. In February 1992, the Company
completed the initial public offering of its common stock and
received net proceeds of approximately $157 million, which were
used to redeem certain notes and debentures issued in 1986 in
connection with the leveraged transaction and to reduce other
outstanding indebtedness. The Company acquired Republic, a
garden tool and lawn spreader manufacturer, in November 1992 for
approximately $16 million. In February 1993, the Company
repurchased all 2.4 million shares of its Class A Common Stock
owned by Clayton, Dubilier & Rice, Inc. for approximately
$41.4 million. The Company acquired Sierra, then known as Grace-
Sierra Horticultural Products Company, on December 16, 1993 for
approximately $120 million.
The Company's principal executive offices are located at
14111 Scottslawn Road, Marysville, Ohio 43041, and its telephone
number is (513) 644-0011.
USE OF PROCEEDS
The Company's Bank Agreement currently provides that the net
proceeds to the Company from the offering of any of the Debt
Securities, after payment of any offering expenses and
underwriting discounts or commissions, be used to repay term
loans under the Bank Agreement. Such term loans mature semi-
annually through final maturity on September 30, 2000, and, as of
September 30, 1993, bore a weighted average interest rate of
5.5%. See "Description of Bank Agreement."
SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial
data of the Company on a consolidated basis. The statement of
operations data for the fiscal years ended September 30, 1989,
1990, 1991, 1992 and 1993, and the balance sheet data as of
September 30, 1989, 1990, 1991, 1992 and 1993 were derived from
the audited Consolidated Financial Statements of the Company.
The selected historical financial data should be read in
conjunction with the Company's Consolidated Financial Statements
and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing
elsewhere herein.
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
1989(1) 1990 1991
1992 1993(2)
(dollars in thousands, except for share
data and ratios)
<S> <C> <C> <C>
<C> <C>
Statement of Operations
Data (3)
Net sales . . . $ 328,368 $ 350,441 $ 388,120
$ 413,558 $ 466,043
Cost of sales . 180,185 186,803 207,956
213,133 244,218
Gross profit. . 148,183 163,638 180,164
200,425 221,825
Operating expenses:
Marketing . . 50,222 48,681 57,489
66,245 74,579
Distribution. 39,377 55,628 57,056
61,051 67,377
General and
administrative . . . . . . . . 24,405 23,965 22,985
24,759 27,688
Research and development . . . . 4,630 4,714 5,247
6,205 7,700
Total operating expenses . . . . 118,634 132,988 142,777
158,260 177,344
Income from operations . . . . . . 29,549 30,650 37,387
42,165 44,481
Interest and other expenses. . . . 28,638 37,411 32,932
15,962 9,114
Income (loss) before income
taxes, extraordinary items
and cumulative effect
of accounting changes . . . . . 911 (6,761) 4,455
26,203 35,367
Income taxes . 1,750 143 2,720
11,124 14,320
Income (loss) before
extraordinary items and
cumulative effect of
accounting changes . . . . . . . (839) (6,904) 1,735
15,079 21,047
Extraordinary items:
Loss on early extinguishment
of debt, net of tax. . . . . . . - - -
(4,186) -
Utilization of net operating
loss carryforwards . . . . . . . 1,670 - 2,581
4,699 -
Cumulative effect of
changes in accounting
for postretirement
benefits, net of tax
and income taxes . . . . . . . . - - -
- (13,157)
Net income (loss). . . . . . . . . $831 $(6,904) $4,316
$15,592 $ 7,890
Net income (loss) per
common share: (4)
Income (loss) before
extraordinary items
and cumulative effect of
accounting changes . . . . . . . $ (0.07) $ (0.58) $ 0.15
$ 0.84 $ 1.07
Extraordinary items:
Loss on early
extinguishment of debt,
net of tax. . - - -
(0.23) -
Utilization of net
operating loss
carryforwards . . . . . . . . . 0.14 - 0.21
0.26 -
Cumulative effect of
changes in accounting
postretirement benefits,
net of tax and income
taxes . . . . - - -
- (0.67)
Net income (loss). . . . . . . .$ 0.07 $ (0.58) $ 0.36
$ 0.87 $ 0.40
Weighted average common
shares outstanding
during the period. . . . . . . . 11,511,278 11,976,733 11,832,651
18,014,151 19,687,013
Other Historical Data:
Depreciation and amortization $19,621 $20,474 $17,785
$15,848 $ 18,144
Capital expenditures . . . . . . . 6,722 8,494 8,818
19,896 15,158
EBITDA(5) . . . 47,300 49,080 53,269
56,771 61,598
Ratio of EBITDA to interest
expense . . . 1.46x 1.42x 1.72x
3.56x 7.29x
Ratio of earnings to fixed
charges(6). . 1.03x -- (7) 1.14x
2.40x 4.08x
Balance Sheet Data (end of
period)(3)
Working capital $10,363 $18,230 $21,260
$54,795 $78,891
Property, plant and
equipment, net . . . . . . . . . 85,976 83,384 79,903
89,070 98,791
Total assets. . 276,253 270,429 260,729
268,021 321,590
Long-term debt, including
current portion. . . . . . . . . 201,203 192,915 182,954
35,897 92,524
Total stockholders'
equity (deficit) . . . . . . . . 2,555 (12,677)
(9,961) 175,929 143,013
<F1>
(1) Includes Hyponex from November 11, 1988.
<F2>
(2) Includes Republic from November 19, 1992.
<F3>
(3) Certain amounts have been reclassified to conform to 1993 presentation;
these changes did not impact net income.
<F4>
(4) Net income (loss) per share for fiscal 1991 and 1990 has been restated to
eliminate the effect of accretion to
redemption value of redeemable common stock to be comparable with fiscal
1992. All per share amounts for fiscal
1988 through 1991 have been adjusted for the January 1992 reverse stock
split, in which every 2.2 shares of old
Class A Common Stock were exchanged for one share of new Class A Common
Stock.
<F5>
(5) As used herein, EBITDA is defined as income from operations plus
depreciation and amortization included therein.
Deferred financing costs which have been incurred
and capitalized in connection with financing the Company's operations
and acquisitions are being amortized and reported as a portion of
interest expense and therefore have been excluded from the calculation
of depreciation and amortization used in the calculation of EBITDA.
The Company believes that EBITDA is generally recognized as an indicator
of a Company's ability to service its debt
and capital expenditure requirements. However, EBITDA is not intended to
be a performance measure that should be
regarded as an alternative either to income from operations or net income
or as an indicator of operating
performance or cash flows as a measure of liquidity, as determined in
accordance with generally accepted accounting
principles.
<F6>
(6) The ratio of earnings to fixed charges is computed by dividing (a) the
sum of (i) income from continuing operations
before income taxes, extraordinary items and the cumulative effect of
accounting changes and (ii) fixed charges by
(b) fixed charges. Fixed charges consist of interest on all indebtedness
(including amortization of deferred
financing costs), capitalized interest and the estimated interest
component of operating leases (assumed to be
one-third of total rental expense).
<F7>
(7) Reflects a deficiency of earnings to fixed charges of $6.8 million.
</TABLE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information of
the Company has been derived from the Consolidated Financial
Statements of the Company and the Consolidated Financial
Statements of Sierra. The Pro Forma Consolidated Statement of
Operations gives effect to the acquisition of Sierra, which
occurred on December 16, 1993, as if it had occurred on
October 1, 1992.
THE PRO FORMA INFORMATION AND ACCOMPANYING NOTES SHOULD BE
READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE HEREIN AND WITH
SIERRA'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
INCORPORATED BY REFERENCE HEREIN. THE PRO FORMA INFORMATION DOES
NOT PURPORT TO REPRESENT WHAT THE COMPANY'S RESULTS OF OPERATIONS
ACTUALLY WOULD HAVE BEEN HAD THE ACQUISITION OF SIERRA OCCURRED
ON OCTOBER 1, 1992 OR TO PROJECT THE COMPANY'S RESULTS OF
OPERATIONS FOR ANY FUTURE PERIOD. THE PRO FORMA FINANCIAL
INFORMATION IS BASED ON ESTIMATES OF FINANCIAL EFFECTS THAT MAY
NOT PROVE TO BE ACCURATE OVER TIME.
<TABLE>
Pro Forma Consolidated Statement of Operations
For the Year Ended September 30, 1993
(Unaudited)
<CAPTION>
The Scotts Sierra
Company Historical Pro Forma
Historical (1) Adjustments Pro Forma
(dollar in thousands, except per share data and
ratios)
<S> <C> <C> <C> <C>
Net sales . . . . . . . . $ 466,043 $ 119,275 $ - $
585,318
Cost of sales . . . . . . 244,218 66,135 1,249 (2)
311,602
Gross profit. . . . . . 221,825 53,140 (1,249)
273,716
Operating expenses:
Marketing . . . . . . . 74,579 23,243 -
97,822
Distribution. . . . . . 67,377 4,025 -
71,402
General and administrative . .27,688 8,837 164 (3)
36,689
Research and development . . . 7,700 4,114 -
11,814
Total operating expenses . 177,344 40,219 164
217,727
Income from operations. . 44,481 12,921 (1,413)
55,989
Interest expense. . . . . 8,454 7,514 (507) (4)
15,461
Other expense, net. . . . 660 1,030 2,763 (5)
4,453
Income before income taxes
and cumulative effect of
accounting changes. . . 35,367 4,377 (3,669)
36,075
Income taxes. . . . . . . 14,320 1,727 (246) (6)
15,801
Income before cumulative
effect of accounting
changes . . . . . . . . $ 21,047 $ 2,650 $(3,423) $
20,274
Earnings per common share
before cumulative effect
of accounting changes . $ 1.07 $
1.03
Weighted average common
shares outstanding. . . 19,687,013
19,687,013
Other Pro Forma Data:
Depreciation and
amortization. . . . . $18,144 $3,840 $3,262
$25,246
EBITDA (7). . . . . . . 60,938 15,623 (914)
75,647
Ratio of EBITDA to
interest expense. . . 7.21x 2.08x -
4.89x
Ratio of earnings to
fixed charges (8) . . 4.08x 1.49x -
2.81x
________________
<F1>
(1) Certain reclassifications have been made to Sierra's
historical statement of operations to conform to The Scotts
Company classifications. To conform Sierra's fiscal year of
December 31, 1993 to the Company's fiscal year of
September 30, 1993, Sierra's results of operations for the
three months ended December 31, 1993 have been excluded and
its results of operations for the three months ended
December 31, 1992 have been included in the pro forma
presentation. Net sales and net income for these respective
three month periods were:
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1993 1992
(dollars in thousands)
<S> <C> <C>
Net sales $25,705 $27,798
Net (loss) income (784) 485
</TABLE>
<F2>
(2)This adjustment reflects the following: (in thousands)
$ 1,140 manufacturing profit in acquired inventories
209 depreciation of the step-up of tangible assets acquired
42 amortization of patents acquired
(142) reduction in expenses related to assumed
facilities leases
$ 1,249
<F3>
(3)To amortize $164,000 of organizational costs associated with
the acquisition.
<F4>
(4) This adjustment reflects the following:
(in thousands)
$ 6,781 interest on acquisition indebtedness
326 amortization of deferred financing costs
(7,514) elimination of interest on Sierra's retired
indebtedness
(100) elimination of Sierra's deferred financing
costs
$ (507)
<F5>
(5) To amortize non-compete agreements ($1.2 million) and
goodwill ($1.6 million).
<F6>
(6) To reflect domestic income taxes not previously recorded by
Sierra due to its net operating loss position, as well as
the tax effects of pro forma adjustments to interest
expense, patent amortization, adjusted lease expense and
amortization of non-compete agreements and goodwill at
statutory federal and state income tax rates.
<F7>
(7) See note 5 to "Selected Historical Financial Data."
<F8>
(8) See note 6 to "Selected Historical Financial Data."
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with
the Company's Consolidated Financial Statements and the Unaudited
Pro Forma Financial Data and respective notes thereto included
elsewhere in this Prospectus.
General
The increasing share of consumer business attributable to
mass merchandisers, as well as the December 1993 acquisition of
Sierra, have affected and will continue to affect the Company in
several ways.
Based on its experience in the past several years,
management anticipates that a greater proportion of the Company's
consumer products will be sold through the mass merchandiser
distribution channel. Increased sales to mass merchandisers
makes the Company's sales more seasonal, as the inventory
controls and just-in-time ordering which mass merchandisers
utilize tend to concentrate the Company's sales "in season"
(i.e., during the second and third fiscal quarters). In
addition, local regulatory efforts to decrease the amount of
fertilizers and control products stored at golf courses have
resulted in increasing reluctance by golf course customers to
purchase products in the late Fall for Spring use. This
reluctance has increased, and likely will continue to increase,
the seasonality of the Company's business.
The acquisition of Sierra should have an important impact on
the Company. At the time of the acquisition, Sierra's business
was primarily professional. On a pro forma basis, Sierra would
have added approximately $100 million in net sales to the
Company's Professional Business Group and approximately $15
million to the Company's Consumer Business Group for the fiscal
year ended September 30, 1993. Management believes that Sierra's
sales should offset to some extent the increasing seasonality of
the Company's sales discussed above both because the Professional
Business Group's customers tend to purchase the Company's
products during a greater part of the fiscal year and because
Sierra has substantial sales outside of the United States, where
seasons and usage patterns are different. The Company believes
that the acquisition of Sierra will also benefit the Company by
providing fertilizer manufacturing facilities in a number of
locations outside of Ohio, including one in The Netherlands,
which, over the long term, should help ameliorate the Company's
current manufacturing capacity limitations and help to control
distribution costs while increasing customer service.
Results of Operations
Fiscal 1993 Compared with Fiscal 1992
Net sales of $466.0 million increased by $52.5 million, or
12.7%. The majority of the increase resulted from increased
sales volume of consumer products. Consumer Business Group sales
of $370.2 million increased by $47.6 million, or 14.8%. The
growth was principally derived from increased sales volume to
major retailers and from sales for Republic, acquired in November
1992, which accounted for approximately 37.5% of the increase in
Consumer Business Group sales. Professional Business Group sales
of $93.7 million increased by $3.6 million, or 4.0%. The
majority of the increase was due to increased sales volume.
Cost of sales of $244.2 million (52.4% of net sales)
compared with $213.1 million (51.5% of net sales) in fiscal 1992.
The increase was primarily caused by lower gross profit margins
on Republic's products in fiscal 1993. Cost savings from the
implementation of new controlled-release fertilizer technology,
which exceeded start-up costs incurred early in fiscal 1993,
partly offset the increase.
Operating expenses of $177.3 million increased by $19.1
million, or 12.1%. The increase was caused by increased
investment in advertising and consumer rebates in fiscal 1993,
higher distribution costs related to increased sales, and the
inclusion of operating expenses for Republic which amounted to
approximately $3.0 million from November through the end of the
fiscal year.
Income from operations of $44.5 million increased by $2.3
million or 5.5%, which resulted from increased sales, partially
offset by increased operating expenses. The increase was also
offset, in part, by additional pretax charges of $2.4 million, in
fiscal 1993, resulting from the implementation of the Financial
Accounting Standards Board ("FASB") Statement of Accounting
Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("SFAS 106").
Interest expense of $8.5 million decreased by $7.5 million
or 47.0%. The decrease resulted from reduced borrowings and
lower interest rates in fiscal 1993 including the effect of early
redemption of subordinated notes and debentures. Reduced
borrowings resulted from the application of the net proceeds of
Scotts' January 1992 initial public offering and cash flow from
operations, partly offset by the use of capital resources for the
Republic acquisition, the purchase of Scotts' Class A Common
Stock from Clayton, Dubilier & Rice, Inc. and capital investment
in 1993.
Income before extraordinary items and cumulative effect of
accounting changes increased by approximately $6.0 million, or
39.6%, primarily due to increased operating income and lower
interest expense. The increase was partially offset by a $1.4
million charge, net of tax, related to adoption of SFAS 106 in
1993.
Net income of $7.9 million decreased by $7.7 million, or
49.4%. The decrease was attributable to current expense from the
implementation of SFAS 106 and a non-recurring charge for the
cumulative effect of the change in accounting in the amount of
$14.9 million, net of tax. The decrease was partially offset by
a non-recurring benefit of $1.8 million, related to
implementation of FASB Statement of Accounting Standards No. 109,
"Accounting for Income Taxes".
Fiscal 1992 Compared to Fiscal 1991
Net sales for the fiscal year ended September 30, 1992 of
$413.6 million increased by $25.4 million, or 6.6%. Consumer
Business Group sales of $322.6 million increased by $19.4
million, or 6.4%. This growth was derived from increased sales
to major retailers, while geographical diversification offset the
effect of locally unfavorable weather conditions and the soft
economy. Professional Business Group sales of $90.1 million
increased by $5.1 million, or 6.0%, primarily due to sales of new
Poly-S(Registered) fertilizer products and improved selling
programs. Through its patented Poly-S technology, the Company
produces nutrient particles with an inner coating of sulfur and
an outer polymer coating.
Cost of sales of $213.1 million (51.5% of net sales) for
fiscal 1992 compared with $208.0 million (53.6% of net sales) for
fiscal 1991. The decrease was partly attributable to favorable
product costs, and, in part, to non-recurring costs in fiscal
1991 resulting from the contamination of certain of the Company's
professional products with atrazine, a herbicide, and the
resulting damage to the greens of a number of golf courses in the
United States and Canada. These non-recurring costs totaled $2.2
million in fiscal 1991.
Marketing expense of $66.2 million (16.0% of net sales) for
fiscal 1992 compared with $57.5 million (14.8% of net sales) for
fiscal 1991. The increase was primarily attributable to the cost
of expanding geographic coverage of Scott's Early Bird rebate
promotion and the addition of an on-bag rebate for selected
Hyponex soil and bark products.
Distribution expense of $61.1 million for fiscal 1992
compares with $57.1 million for fiscal 1991 reflecting higher
freight costs in 1992 on increased sales. Distribution expense
in both fiscal 1992 and fiscal 1991 represented approximately
14.7% of net sales.
General and administrative expense of $24.8 million (6.0% of
net sales) for fiscal 1992 compared with $23.0 million (5.9% of
net sales) for fiscal 1991. The increase was partly caused by an
increase in the cost of medical and pension benefits provided by
the Company and partly by a general increase in costs in fiscal
1992.
Other expense (net) of $.02 million for fiscal 1992 compares
with other expense (net) of $2.0 million in fiscal 1991. The
decrease was partly attributable to royalty income received in
fiscal 1992 by OMS under a licensing agreement permitting the use
of Scott's name on certain lawnmowers manufactured and
distributed by a licensee. The decrease was also attributable to
non-recurring charges recorded in fiscal 1991 offset by foreign
currency transaction losses recognized in 1992.
Liquidity and Capital Resources
Capital expenditures totaled $15.2 million and $19.9 million
for the fiscal years ended September 30, 1993 and 1992,
respectively, and are expected to total approximately $31.5
million in fiscal 1994. Capital expenditures planned for fiscal
1994 include a substantial addition to the Company's Marysville,
Ohio production facilities estimated to be $13 million. The most
significant project planned is a new production building to
manufacture products using Scott's new patented controlled-
release fertilizer Poly-S(Registered) technology. The facility
will provide additional production capacity in response to
customer demand for Poly-S(Registered) products. The Bank
Agreement, as amended on December 16, 1993, restricts the amount
the Company may spend on future capital expenditures to $35
million per year in fiscal 1994 and thereafter. These
expenditures will be financed with cash provided by operations
and utilization of available credit facilities.
Effective November 19, 1992, OMS acquired Republic for a
purchase price of approximately $16.4 million. A description of
the Republic acquisition is found in Note 2 on page F-9 of this
Prospectus.
On February 23, 1993, Scotts purchased all of the shares of
its Class A Common Stock held by a fund managed by Clayton,
Dubilier & Rice, Inc. A total of 2,414,895 shares of Class A
Common Stock were purchased for approximately $41.4 million which
was financed through the use of term loans under the Bank
Agreement which is described below.
Effective December 16, 1993, OMS completed the acquisition
of Sierra for an aggregate purchase price of approximately $123.3
million, including estimated transaction costs of $3.3 million.
The acquisition was financed through the use of term loans under
the Bank Agreement. Chemical Bank serves as agent for the
participating banks.
Primarily as the result of the inclusion of Republic's
current assets, current assets increased from $115.5 million on
September 30, 1992 to $143.7 million on September 30, 1993.
Higher inventories of the Company's products at September 30,
1993 also contributed to the increase.
Total liabilities of $178.6 million, at September 30, 1993,
increased by $86.5 million. The increase was principally due to
the addition of term loans for the purchase of Class A Common
Stock mentioned above and a long-term liability related to the
adoption of SFAS 106 effective October 1, 1992.
Total shareholders' equity decreased from $175.9 million on
September 30, 1992 to $143.0 million on September 30, 1993,
primarily due to a reduction in total shareholders' equity for
treasury stock representing the Class A Common Stock purchased in
February 1993.
The major sources of liquidity for Company operations and
expansion are funds generated internally and borrowings under the
Bank Agreement. The Bank Agreement was amended in November 1992
to permit the acquisition of Republic, amended in February 1993
to provide financing for and permission to purchase the Class A
Common Stock mentioned above and amended again in December 1993
to provide financing for and permit the acquisition of Sierra.
As amended, the Bank Agreement provides a revolving credit
commitment of $150.0 million through March 31, 1996 and $195.0
million of term loans with scheduled maturities commencing on
April 30, 1994 and extending through September 30, 2000. The
loans are provided by Chemical Bank, as agent, and thirteen other
participating banks. The increased credit availability provided
adequate capital for the acquisition of Republic and Sierra and
their estimated future working capital needs. See "Description
of Bank Agreement."
Among other requirements, the financial covenants in the
Bank Agreement require maintenance of Adjusted Operating Profit,
Consolidated Net Worth and Interest Coverage (each as defined
therein) and require the Company to reduce revolving borrowings
under the Bank Agreement to $30.0 million for thirty consecutive
days each year. The Company met all the requirements of the
financial covenants during the fiscal year ended September 30,
1993.
The Company's business is highly seasonal with approximately
69% of sales occurring in the second and third fiscal quarters
ending March and June, respectively. Seasonality is reflected in
working capital requirements. Working capital needs are greatest
from November through May, the peak production periods, and are
highest in March. Working capital needs are relatively low in
the summer months. In addition, the Company's consumer business
may be adversely affected by the weather. Poor weekend weather
during the Spring tends to adversely affect consumer purchases of
the Company's do-it-yourself products. Historically, the Company
has attempted to lessen the impact of possible adverse weather by
promotional programs at the retail and consumer levels to
encourage consumer purchases in the early Spring.
Management believes that cash flow and capital resources
will be sufficient to meet future debt service requirements and
working capital needs.
Inflation
The Company is subject to the effects of changing prices.
The Company has, however, generally been able to pass along
inflationary increases in its costs by increasing the prices of
its products. In addition, the application of purchase
accounting in connection with the Company's acquisition by a
company formed by Clayton, Dubilier & Rice and the Hyponex
acquisition mitigates the effects of changing costs on the
financial statements because assets and liabilities were adjusted
to fair values on the acquisition dates and cost of sales and
depreciation have therefore been adjusted accordingly.
Accounting Issues
The Company adopted SFAS 106 and SFAS 109 effective
October 1, 1992. The effect on 1993 net income of adopting SFAS
106 was an after-tax charge of $1.4 million for fiscal 1993 and a
non-recurring charge of $14.9 million net of tax, for the
cumulative effect of the change in accounting. The cumulative
effect of adopting SFAS 109 was a non-recurring benefit of $1.8
million. The adoption of SFAS 109 also resulted in a deferred
tax asset. A valuation reserve was not established because the
Company expects sufficient future taxable income to realize the
benefit of the deferred tax asset.
In November 1992, FASB issued Statement Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment
Benefits" ("SFAS 112") which changes the prevalent method of
accounting for benefits provided after employment but before
retirement. Scotts must adopt SFAS 112 no later than the first
quarter of fiscal 1995. Management is currently evaluating the
provisions of SFAS 112 and, at this time, the effect of adopting
SFAS 112 has not been determined.
BUSINESS
The Company is one of the oldest and most widely recognized
manufacturers of products used to grow and maintain landscape:
lawns, gardens and golf courses. In both the consumer and
professional market segments, the Company's
Scotts and Turf Builder (for consumer lawn care), ProTurf (for
professional turf care) and Osmocote and Peters (for commercial
horticulture) brands command market-leading shares more than
double those of the next ranked competitors. The Company's long
history of technical innovation, its reputation for quality and
service and its effective marketing tailored to the needs of
do-it-yourselfers and professionals have enabled the Company to
maintain leadership in its markets while delivering consistent
growth in sales and operating income and stable operating
margins. Do-it-yourselfers and professionals purchase through
different distribution channels and have different information
and product needs. Accordingly, the Company has two business
groups, Consumer and Professional, to serve these markets.
Consumer Business Group
Products
The Company's consumer products include lawn fertilizers,
fertilizer/control combination products, potting soils and other
organic products, grass seed, lawn spreaders, indoor and outdoor
plant care products and garden tools. The following table sets
forth information concerning sales of the Company's consumer
products in fiscal 1991, 1992 and 1993:
<TABLE>
Consumer Products Sales
(in millions)
Fiscal Year Ended September 30,
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Fertilizers and Combination Products . . . . $132.4 $134.2 $154.4
Organic Products . . . . . . . . . . . . . . 133.4 143.2 150.3
Grass Seed . . . . . . . . . . . . . . . . . 13.3 23.7 25.4
Lawn Spreaders . . . . . . . . . . . . . . . 11.2 10.2 28.2
Garden Products, Tools and Indoor
Products . . . . . . . . . . . . . . . . . 7.5 5.7 5.0
International. . . . . . . . . . . . . . . . 5.4 5.6 6.9
Total. . . . . . . . . . . . . . . . . . . $303.2 $322.6 $370.2
</TABLE>
Lawn Fertilizers and Combination Products. The Company's
most important consumer products are lawn fertilizers, such as
Turf Builder(Registered), and combination fertilizer/control
products, such as Turf Builder Plus 2(Registered) (which is used
to eliminate dandelions and other broadleaf weeds) and Turf
Builder Plus Halts(Registered) (to prevent crabgrass and other
weeds). Typically, these are patented, homogeneous, controlled-
release products which provide complete controlled feeding for
consumers' lawns for up to two months without the risk of damage
to the lawn presented by less expensive non-controlled-release
products. A number of the Company's products are specially
formulated for geographical differences and some, such as
Bonus(Registered) S (to control weeds in Southern grasses) are
distributed to limited areas. Most of the Company's fertilizer
and combination products are sold in dry, granular form, although
the Company also sells a small amount of liquid lawn care
products. Consumer products that utilize Sierra's technology
include Peters(Registered) Professional(Registered) all-soluble
fertilizers and Once(Registered) controlled-release lawn
fertilizer, which can provide up to three months of feeding from
one application.
Management estimates that in fiscal 1993 the Company's share
of the U.S. consumer lawn chemicals products market was
approximately 46%, more than double that of the second leading
brand.
Organic Products. The Company sells a broad line of organic
products under the Hyponex and other labels, including retail
potting soils, topsoil, peat, manures and mulches. Management
estimates that the Company's fiscal 1993 U.S. market share was
approximately 50% in potting soils, more than double that of the
next leading brand, and approximately 39% in other consumer
organic products.
Grass Seed. High quality seed was the Company's first
product. Today, the Company sells numerous varieties and blends
of grass seed, many of them proprietary, designed for different
uses and geographies. Management estimates that the Company's
share of the U.S. consumer grass seed market was approximately
28% in fiscal 1993.
Lawn Spreaders. Because Scott's granular lawn care products
perform best when applied evenly and accurately, the Company
sells a line of spreaders specifically developed for use with
Scotts products. This line includes the SpeedyGreen(Registered)
and EasyGreen(Registered) rotary spreaders, the
PrecisionGreen(Registered) and AccuGreen(Registered) drop
spreaders, and the HandyGreen(Registered) hand-held rotary
spreader.
In November 1992, the Company acquired Republic, a
manufacturer of spreaders and other lawn and garden equipment.
Republic had fiscal 1993 sales of approximately $17.8 million.
The Company intends to continue marketing both its line of Scotts
spreaders and Republic's EZ(Registered) line of spreaders in 1994
and is integrating the manufacture of its spreaders through
Republic. Management estimates that the Company's share of the
U.S. market for lawn spreaders was approximately 33% in fiscal
1993, more than double that of the next leading manufacturer.
Garden Products, Tools and Indoor Products. The Company
produces and sells a line of boxed Scotts Plant Foods, garden and
landscape fertilizers. The Company has a licensing agreement
with Union Tools, Inc. ("Union") under which Union, in return for
the payment of royalties, is granted the right to produce and
market a line of garden tools bearing the Scotts trademark and
has agreed to undertake the marketing of a line of Scotts tools
produced in Germany which were formerly marketed by the Company.
The Company also has a license agreement with NOMA Industries,
licensing that company in return for royalty payments to produce
and sell a line of power lawnmowers under the Scotts name. The
Company sells a line of indoor plant care products. In
management's estimation, the Company did not have a material
share of the markets for these products in fiscal 1993.
International. The Company produces and sells consumer lawn
and garden care products, under various labels, internationally,
principally in Canada, Japan and Europe. In 1991, the Company
established a subsidiary and a network of sales representatives
in the United Kingdom to enter the consumer lawn and garden
market in Great Britain. Sierra has a manufacturing facility in
The Netherlands and sells its fertilizer products throughout
Europe, and in Australia and New Zealand, but primarily for
professional use.
Business Strategy
The Company believes that it achieved its leading position
in the do-it-yourself lawn care market on the basis of its
sophisticated technology, the superior quality and value of its
products and the service it provides consumers. The Company
seeks to maintain and expand its market position by emphasizing
these qualities and taking advantage of the Scotts name and
reputation. Since its acquisition of Hyponex, the Company has
also focused on increasing sales of its higher margin organic
items such as potting soils.
With the acquisition of Republic in 1992, the Company was
able to begin integrating the manufacture of its important lawn
spreader product line. The more recent acquisition of Sierra
should provide the Company with numerous strategic opportunities,
including expanding the distribution of Scotts products
internationally, by using the Sierra facilities and personnel in
Europe and elsewhere. The Company also expects to increase sales
of water-soluble fertilizers manufactured by Sierra in the
consumer market and to test certain bioinsecticides for which
Sierra has licenses.
Drawing upon its strong research and development
capabilities, the Company intends to continue to develop and
introduce new and innovative lawn and garden products. The
Company believes that its ability to introduce successful new
consumer products has been a key element in Scotts' growth. New
consumer products in recent years include the
HandyGreen(Registered) hand-held spreader (1991), an improved
Hyponex Professional Mix Potting Soil (1991),
PatchMaster(Registered) (1992), a unique lawn repair product
containing seed, Starter(Registered) fertilizer and mulch, and 3-
Step Scotts Lawn Care System consisting of three products in one
easy-to-carry box (1993). For fiscal 1994, the Company has
introduced premium planting and potting soils under the Scotts
brand name, a proprietary fertilizer product, Turf Builder for
Shady Areas, and a line of grass seed coated with a fungicide to
improve germination.
The Company also seeks to capitalize upon the competitive
advantages stemming from its position as the leading nationwide
supplier of a full line of consumer lawn and garden products.
The Company believes that this gives it an important edge in
selling to larger retailers, such as mass merchandisers and home
centers, who value the efficiency of dealing with a limited
number of suppliers.
Finally, the Company has developed a program to take
advantage of Hyponex's composting expertise and the increasing
concern about landfill capacity by entering into agreements with
municipalities and waste haulers to compost yard waste. A pilot
program was started in 1991 on Company-owned land in Marysville
when the Company entered into a five-year contract with Franklin
County, Ohio, to compost a minimum of 50,000 tons of yard waste
per year for a fee of $20 per ton. During 1992, the Company
entered into agreements for composting yard waste in Greensboro,
North Carolina; Waukesha County, Wisconsin; Spokane, Washington
and Portland, Oregon. The Company now has twelve compost
facilities. In addition to service fees, the Company plans to
substitute the resulting compost for a portion of the raw
materials in Hyponex and other Company products. Revenues in
fiscal 1993 and 1992 from composting services were $2.1 million
and $0.8 million, respectively.
Marketing and Promotion
The Company employs a 93 person direct sales force for its
consumer products to cover approximately 24,000 retail outlets
and headquarters of national, regional and local chains. Most
salespeople have college degrees and prior sales experience.
Sierra's sales force is composed primarily of distributors,
supported by a technically trained field force of six. In recent
years, the percentage of sales to mass merchandisers and large
buying groups has increased. The top ten accounts represented
58% of the Consumer Business Group sales in fiscal 1993 versus
47% in 1990. See "-Matters Relating to the Company
Generally-Significant Customers."
At the same time, the Company continues to support its
independent retailers. Most importantly, the Company developed a
special line of products, marketed under the Lawn Pro(Registered)
name, which are sold exclusively by independent retailers. These
products include the 4-Step(Trademark) program, introduced in
1984, which encourages consumers to purchase four products at one
time (fertilizer plus crabgrass preventer, fertilizer plus weed
control, fertilizer plus insect control and a special fertilizer
for Fall application). The Company promotes the 4-Step program
as providing consumers with all their annual lawn care needs for
less than half of what a lawn care service would cost. The
Company believes that the Lawn Pro line has helped maintain the
loyalty of the independent retailers in the face of increasing
competition from mass merchandisers. During 1993, the Company
reintroduced its Lawn Care(Registered) magazine as part of the
direct mail promotion for the Lawn Pro 4-Step program.
The Company supports its sales efforts with extensive
advertising and promotional programs. Because of the importance
of the Spring sales season in the marketing of consumer lawn and
garden products, the Company focuses its promotional efforts on
this period. Through advertising, consumer rebates, retailer
allowances and other promotional efforts, the Company seeks to
encourage customers to make the bulk of their lawn and garden
purchases in the early Spring. The Company believes that its
early season promotions substantially moderate the risk to its
consumer sales posed by bad weekend weather.
An important part of the Company's sales effort is Scotts'
national toll-free consumer hotline, on which Scott's "lawn
consultants" answer questions about the Company's products and
give general lawn care advice to consumers. The Company's lawn
consultants responded to over 240,000 telephone and written
inquiries in fiscal 1993 and have handled over 2,000,000 calls
since the inception of the consumer hotline in 1972.
Backing up the Company's marketing effort is its well-known
"No Quibble" guarantee, instituted in 1958, which promises
consumers a full refund if for any reason they are not satisfied
with the results after using Scotts products. Refunds under this
guarantee have consistently amounted to less than 0.3% of net
sales on an annual basis.
Competition
The consumer lawn and garden market is highly competitive.
The most significant competitors for the consumer lawn care
business are lawn care service companies. At least one of these,
Tru Green Company, which also owns the ChemLawn(Registered) lawn
care service business, operates nationally and is significantly
larger than the Company. In the do-it-yourself segment, the
Company's products compete primarily against regional products
and private label products produced by various suppliers and sold
by such companies as Kmart. These products compete across the
entire range of the Company's product line. In addition, certain
of the Company's products compete against branded fertilizers,
pesticides and combination products produced by such companies as
Monsanto Company (Ortho(Registered) and Greensweep(Registered)),
Lebanon Chemical Corp. (Greenview(Registered)) and Stern's
Miracle-Gro Products, Inc.
Most competitors, with the exception of lawn care service
companies, sell their products at prices lower than those of the
Company. The Company competes primarily on the basis of its
strong brand names, quality, value, service and technological
innovation. The Company's competitive position is also supported
by its national sales force, advertising campaigns and its
unconditional guarantee. There can be no assurance, however,
that additional competition from new or existing competitors will
not erode the Company's share of the consumer market or its
profit margins.
Backlog
The major portion of annual consumer product orders (other
than organic products which are normally ordered in season on an
"as needed" basis) are received from retailers during the months
of October through January and are filled during the months of
January through March. As of April 30, 1994, orders on hand for
retail customers (excluding orders for Sierra products and
Republic's EZ brand spreaders) totaled approximately
$16.8 million compared to approximately $14.7 million on the same
date in 1993. All such orders are expected to be filled in
fiscal 1994.
Professional Business Group
The Market
The Company sells its professional products to golf courses,
sports fields, nurseries, lawn and landscape service companies
and growers of specialty agricultural crops. Among the
purchasers of the Company's products in fiscal 1993 were such
golf courses as Augusta National (Georgia), Cypress Point,
Spyglass and Pebble Beach (California), Muirfield Village (Ohio),
The Country Club (Massachusetts), Colonial Country Club (Texas)
and Butler National (Illinois), and such sports complexes as
Fenway Park, Camden Yard, Wrigley Field and the Rose Bowl.
The following table sets forth the amount of Company sales
to its professional markets in fiscal 1991, 1992 and 1993:
<TABLE>
Professional Products Sales
(in millions)
Fiscal Year Ended September 30,
<CAPTION>
1991 1992 1993
<S> <C> <C> <C>
Golf Courses (North America) . . . . . . . . . $58.2 $62.6 $68.6
Nurseries . . . . . . . . . . . . . . . . . . 8.0 7.3 7.7
Lawn/Landscape Services . . . . . . . . . . . 8.9 10.6 9.0
Specialty Agriculture . . . . . . . . . . . . 4.3 3.1 1.2
Sports Fields/Parks/Schools. . . . . . . . . . 2.4 3.0 2.9
International (other than Canada) . . . . . . 3.2 3.5 4.3
Total . . . . . . . . . . . . . . . . . $85.0 $90.1 $93.7
</TABLE>
Golf courses are the most important of the Company's
professional markets, accounting for over 70% of the Company's
Professional Business Group's net sales in fiscal 1993. In
fiscal 1993, the Company sold products to approximately 55% of
the over 14,500 golf courses in the United States, including 81
of Golf Digest's top 100 U.S courses. Management estimates,
based upon an independent biannual market survey and other
information available to the Company, that the Company's share of
the $200 million U.S. golf course turf care segment (not
including commodity products) was approximately 25% in fiscal
1993. In addition, Sierra had sales of approximately $9 million
to the golf course turf care segment in calendar 1993.
According to the National Golf Foundation, approximately 200
new golf courses have been constructed annually for the last two
years. Management believes that this increase in the number of
courses, and the trend toward more highly-maintained golf
courses, contributes to an annual sales growth rate in Scott's
targeted golf course segment of approximately 7%. The commercial
nursery and the sports field segments, management estimates, are
growing at 4-5% annually.
Sierra sells both controlled-release and water-soluble
fertilizers as well as a line of pesticides (primarily
fungicides) to the commercial horticultural segment both in the
United States and abroad with calendar 1993 sales of
approximately $55 million in the United States and $31 million
abroad. The Company estimates that, in calendar 1993, Sierra had
approximately a 33% share of the U.S. commercial ornamental
growth category overall, and over a 50% share of the U.S.
commercial ornamental fertilizer segment in the United States,
more than double the share of next leading manufacturer.
Products
The Company's professional turf products, marketed primarily
under the ProTurf(Registered) name, include a broad line of
sophisticated fertilizers, control products, growth regulators,
grass seed and application devices. The products are sold to
golf courses, lawn/landscape service companies, athletic field
managers and apartment and office complexes. Most ProTurf
products are designed for specialized applications. For example,
various fertilizers are sold for use on particular areas (e.g.,
some for golf course greens, others for fairways) and for
particular purposes (such as high phosphorous fertilizers and
fertilizer containing micronutrients to correct nutrient
deficiencies). Similarly, the Company markets a line of
fungicides primarily for use on highly maintained areas such as
bentgrass greens. A patented technology introduced in 1987,
TGR(Registered), combines a turf growth regulator and a
fertilizer to control poa annua, a serious weed problem on golf
courses. The TGR product line has since been expanded to include
other uses, including the reduction of clippings, color
enhancement and the improvement of turf density. Although
ProTurf products are primarily granular, the Company also markets
a line of liquid turf products, now numbering 15, which some turf
managers prefer for their cost effectiveness and ease-of-
application over large areas. In 1992, the Company's patented
Poly-S(Registered) fertilizer technology replaced the Company's
sulfur-coated turf fertilizer line, and has gained rapid
acceptance. Additional line extensions utilizing Poly-S
technology were introduced in 1993 in North America, Europe,
Australia, the Pacific Rim and Japan. The company's patented
Triaform(Trademark) controlled-release fertilizer technology was
introduced in 1993 in 12 new formulations. In 1993, the Company
also successfully launched its first natural control product,
Turplex(Registered) BioInsecticide, for the professional market.
Scott's horticulture products are sold primarily to
professional nurseries. The horticulture line includes
fertilizers and pesticides particularly formulated for container-
grown ornamental plants. For example, the Company markets a
proprietary fertilizer designed to meet the requirements of
commercial nursery growers who demand dependable, long-lasting
and safe controlled-release fertilizers to incorporate in their
growing media. Controlled-release fertilizer products utilizing
Poly-S technology were also introduced in 1992, and extended in
1993, into the nursery and specialty agriculture markets. A new
patented polymer coating technology, ScottKote(Registered), was
introduced late in fiscal 1993, and several new products
utilizing this technology will be added during 1994.
Sierra's products for professional users include its
Osmocote line of controlled-release fertilizers. These are sold
in various formulations for different crops and can be produced
in versions having a release period of up to 12 months. The
greenhouse segment uses water-soluble fertilizers such as Peters
Professional. Soilless growing media, under such trademarks as
Metro-Mix(Registered) and Terra-Lite(Registered) are also sold to
commercial growers. Finally, Sierra also sells a line of
proprietary pesticide products for horticultural and turf
professionals.
Business Strategy
The Company's Professional Business Group focuses its sales
efforts on the middle and high end of the professional market and
generally does not compete against sellers of commodity products.
Demand for the Company's professional products is primarily
driven by product quality, performance and technical support.
The Company seeks to meet these needs with a range of
sophisticated, specialized products and a professional,
agronomically-trained sales force.
A primary focus of the Professional Business Group's
strategy is to provide a continuing flow of innovative new
products to its professional customers. Products introduced
since 1988 accounted for 63% of the Professional Business Group's
net sales in fiscal 1993.
The Company intends to use its strong position in the golf
course segment to increase sales of Sierra products to those
users, and, conversely, to expand the distribution of its ProGrow
line in the commercial horticultural segment in which Sierra has
a strong position.
The Professional Business Group also works to increase
market coverage by focusing on various professional market
niches. In 1965, the Company established its first specialized
professional sales force, focusing on golf courses. Since 1985,
it has established separate sales forces and/or sales managers
for lawn and landscape services, sports fields, golf course
architects and construction companies, and international segments
of the professional market. In 1992, the Company introduced a
fairway application service for golf courses. This service has
been expanded and is now available in the Carolinas, Georgia,
Texas and Southern California. Additional service markets are
planned for 1994. In 1993, two new Professional Service Centers
were tested in the Washington, D.C. market. These new Company-
operated service centers offer convenient, one-stop shopping for
smaller lawn and landscape service customers. Plans are to
expand this test in 1994.
Marketing and Promotion
The Professional Business Group's sales force consists of 97
technical representatives ("tech reps") who cover approximately
11,600 accounts. Many tech reps are experienced former golf
course superintendents or nursery managers and most have degrees
in agronomy, horticulture or similar disciplines. Tech reps work
closely with golf course and sports field superintendents, turf
and nursery managers, and other landscape professionals. In
addition to marketing the Company's products, Scott's tech reps
provide consultation, testing services, and advice regarding
maintenance practices, including individualized comprehensive
programs incorporating various products for use at specified
times throughout the year. Sierra sells to the professional user
primarily through an extensive network of distributors backed up
by over 100 field sales representatives worldwide, most with
substantial experience in the horticulture market.
To reach potential purchasers, the Company uses trade
advertising and direct mail, publishes newsletters, and sponsors
seminars throughout the country. In addition, the Company
maintains a special toll-free hotline for its professional
customers. The professional customer service department
responded to over 40,000 telephone inquiries in fiscal 1993.
Competition
In the professional turf and nursery market the Company
faces a broad range of competition from numerous companies
ranging in size from multi-national chemical and fertilizer
companies such as DuPont and Dow-Elanco Company, to smaller
specialized companies such as Lesco, Inc. and Lebanon Chemical
Corp., to local fertilizer manufacturers and blenders. Portions
of this market, such as fairway and rough fertilizers for golf
courses, are sometimes served by large agricultural fertilizer
companies, while other segments, such as fertilizers and pest
controls for golf course greens and high value nursery crops, are
served by specialized, research-oriented companies. In certain
areas of the country, particularly Florida, a number of companies
have begun to offer turf care services, including product
application, to golf courses. In addition, the higher margins
available for sophisticated products to treat high value crops
continue to attract large and small chemical producers and
formulators, some of which have larger research departments and
budgets than the Company. While the Company believes that its
reputation, expertise in product development, and professional
sales force will enable it to continue to maintain and build its
share of the professional market, there can be no assurance that
the Company's market share or margins will not be eroded in the
future by new or existing competitors.
Backlog
The major portion of professional product orders are
received during the months of August through November and are
filled during the months of September through November. As of
April 30, 1994, orders on hand from professional customers
(excluding orders for Sierra products) totaled approximately
$5.8 million compared with $5.5 million on the same date in 1993.
All such orders are expected to be filled in fiscal 1994.
Matters Relating to the Company Generally
Patents, Trademarks and Licenses
The "Scotts" and "Hyponex" brand names and logos, as well as
a number of product trademarks, including "Turf Builder," "Lawn
Pro," "Osmocote" and "Peters" are federally registered and are
considered material to the Company's business. In 1989, the
Company assigned all its rights to certain Hyponex trademarks in
the Far East to a Japanese company.
As of December 31, 1993, the Company held over 100 patents
on processes, compositions, grasses, and mechanical spreaders and
has several additional patent applications pending. Over the
past two years, the Company has been granted a number of patents
covering key new process and product technologies. This new
patent protection will extend well into the next decade. The
Company also holds exclusive and non-exclusive patent licenses
from certain chemical suppliers permitting the use and sale of
patented pesticides.
Research and Development
The Company has a long history of innovation, and its
research and development successes can be measured in terms of
sales of new products and by the Company's patents. Products
introduced since 1987 accounted for over $160 million (34%) of
the Company's fiscal 1993 net sales. Virtually all of the
Company's fertilizer products, many of its grasses and many of
its mechanical devices are covered by one or more of over 100
U.S. and foreign patents owned by the Company.
The Company's research and development department is
headquartered in the Dwight G. Scott Research Center in
Marysville, Ohio. The Company also operates three research field
stations in Florida, Texas and Oregon. In addition, the Company
funds research at universities across the United States and
conducts cooperative projects with key professional customers.
Research to develop new and improved application devices is
conducted at Republic's manufacturing facility in Carlsbad,
California. Investment in research is directed toward developing
new technology and products to increase manufacturing efficiency,
reduce product cost, improve performance, solve specific
problems, improve packaging and simplify lawn, turf and
horticultural plant care.
Since its introduction of the first home lawn fertilizer in
1928, the Company has used its research and development strengths
to build the do-it-yourself market. In 1947, it introduced the
first fertilizer/control combination product; in 1950, the first
pre-emergent crabgrass control; in 1957, the first lightweight,
controlled-release fertilizer and, in 1964, the first patented
bluegrass ("Windsor"). Technology continues to be a Company
hallmark. Its introduction of the TGR line in 1987 to control
poa annua on golf courses is an example. In 1992, the Company
introduced Poly-S, a proprietary controlled-release fertilizer
technology. In 1993, ScottKote(Registered), another controlled-
release technology primarily for the nursery market, was
introduced. In addition, the Company has modified its Marysville
facility to utilize a new, patented production process which is
expected to reduce costs and improve product quality, while
increasing production capacity. (See "-Production Facilities.")
Since the Hyponex acquisition, the Company's research and
development department has worked to improve the quality and
reduce the production cost of branded organic products, in
particular potting soils. One of the results of this effort is
the introduction, in 1994, of a line of value-added, premium
quality potting soils and planting mixes under the Scotts brand.
Research has also been focused on durability, precision, and
reduced production costs of the Republic-produced spreaders.
Recently, Republic completely redesigned the major products
within the Company's consumer spreader line that can be
distributed and displayed using innovative packaging.
Sierra pioneered the use of controlled-release fertilizers
for the horticultural markets with the introduction of "Osmocote"
in the 1960s. This polymer-encapsulated technology has achieved
a large share of the horticultural markets due to its ability to
meet the strict performance requirements of professional growers.
Research and development is currently focused on product
improvement and cost reductions. A new, multi-coated controlled-
release technology has been developed by Sierra researchers. A
new production line is currently under construction at Sierra's
Charleston, South Carolina plant to commercialize this high
performance product.
In the years prior to its acquisition by the Company in
1993, Sierra's research group developed an improved, patented
line of soluble fertilizers under the "Excel" brand and
introduced reformulated potting soils and planting mixes in both
the consumer and professional markets.
Expenditures for research and development were approximately
$5.2 million (1.4% of net sales), $6.2 million (1.5% of net
sales) and $7.7 million (1.7% of net sales) in fiscal 1991, 1992,
and 1993 respectively. Approximately 14% of research and
development resources are allocated to advanced technology, 37%
to product and process development, and 49% to regulatory
compliance and other technical activities. The Company plans a
comparable level of spending for the next several years.
Production Facilities
The manufacturing plants for Scotts' consumer and
professional fertilizer-based products are located in Marysville,
Ohio, adjacent to the Company's corporate headquarters and Dwight
G. Scott Research Center. The Company's Taylor Seed Packaging
Plant is located on a separate site in Marysville. Hyponex
organic products are harvested and packaged in 20 locations
throughout the United States. Substantially all the Company's
consumer lawn spreaders are produced at the Republic facility in
Carlsbad, California. Some granular and mechanical products and
all liquid products, constituting an aggregate of approximately
16% of the Company's cost of sales in fiscal 1993, are produced
for the Company by other manufacturers. Sierra has manufacturing
sites in the United States and one located in The Netherlands.
Sierra's controlled-release fertilizers are produced in
Charleston, South Carolina, Milpitas, California, and at Heerlen,
The Netherlands. Water-soluble fertilizers are produced in
Allentown, Pennsylvania, and the potting soils are produced in
Travelers Rest, South Carolina and in Hope, Arkansas.
Management believes that each of its facilities is well-
maintained and suitable for its purpose. Substantially all the
Company's owned properties is mortgaged to secure the Company's
indebtedness under the Bank Agreement.
The Company's fertilizer processing and packaging facilities
currently operate, on average, five days per week for three
shifts. Because of the seasonal nature of the demand for the
Company's products, these facilities operate less in the Summer
and more, usually every other weekend, during the Fall and
Winter.
The Company's Marysville facilities were substantially
modified during fiscal 1992 and 1993. The Company replaced one
of the existing fertilizer production lines with a line utilizing
a new, patented process which it developed. In addition, the
Company erected a new physical-blend facility and added equipment
to apply polymer coating to fertilizer materials.
Capital Expenditures
Capital expenditures totaled $19.9 million and $15.2 million
for the fiscal years ended September 30, 1992 and 1993,
respectively. The Company expects that capital expenditures
during fiscal 1994 will total approximately $31.5 million, of
which approximately $13 million is attributable to construction
of a new Poly-S production facility to meet strong forecasted
demand. Further, approximately $4 million is for Sierra's
capital needs, including construction of a new processing line at
its Charleston, South Carolina facility to produce a
technologically advanced fertilizer.
Purchasing
The key ingredients in the Company's fertilizer and control
products are various commodity and specialty chemicals including
vermiculite, phosphates, urea, potash, herbicides, insecticides
and fungicides. Sierra purchases granulates, homogeneous
fertilizer substrates to be coated, and the resins for coating.
These resins are primarily supplied domestically by Sierra SunPol
Resins, a 97%-owned subsidiary of Sierra. The Company obtains
its raw materials from various sources, which the Company
presently considers to be adequate. No one source is considered
to be essential to either of the Company's Consumer or
Professional Business Groups, or to its business as a whole. The
Company has never experienced a significant interruption of
supply.
Sphagum peat, peat humus, vermiculite manure and bark
constitute Hyponex's most significant raw materials. At current
production levels, the Company estimates Hyponex's peat reserves
to be sufficient for its near-term needs in all locations except
the Northeast.
Regulatory activities by the Army Corps of Engineers have
prevented production at one peat harvesting facility located in
Lafayette, New Jersey. See "Environmental and Regulatory
Considerations." To meet the demand previously filled by this
facility, the Company has been purchasing peat from other nearby
producers. Bark products are obtained from sawmills and other
wood residue producers and manure is obtained from a variety of
sources, such as feed lots, race tracks and mushroom growers.
The Company is currently substituting composted yard waste for
some organic raw materials and is planning to expand this
practice. Raw materials for Republic manufacturing include
various engineered resins and metals, all of which are available
from a variety of vendors.
Distribution
The primary distribution center for the Company's products
is also located at the Company's headquarters in Marysville,
Ohio. The Company's products are shipped from Marysville by rail
and truck. While the majority of truck shipments are made by
contract carriers, a portion is made by Scotts' own fleet of
leased trucks. Inventories are also maintained in field
warehouses located in major markets.
Most of Hyponex's organic products have low sales value per
unit of weight, making freight costs significant to
profitability. Hyponex therefore has located approximately
twenty distribution locations near large metropolitan areas in
order to minimize shipping costs. Hyponex uses its own fleet of
approximately 70 trucks as well as contract haulers to transport
its products from distribution points to retail customers.
Sierra's products are produced at three fertilizer and two
organic manufacturing facilities located in the United States.
The majority of shipments are via common carriers to
distributors' warehouses. A small private trucking fleet is
maintained at the organic facilities for direct shipment of
custom orders to customers. Inventories are also maintained in
field warehouses.
Republic-produced, Scotts branded spreaders are shipped via
common carrier to regional warehouses serving the Company's
retail network. Republic's E-Z spreader line and its private
label lines are sold freight-on-board (FOB) Carlsbad with
transportation arranged by the customer.
Significant Customers
Kmart and Home Depot represented approximately 21.5% and
8.8%, respectively, of the Company's sales in fiscal 1993, which
reflects their significant position in the retail lawn and garden
market. The loss of either of these customers or a substantial
decrease in the amount of their purchases could have a material
adverse effect on the Company's business.
Employees
The Company's corporate culture emphasizes employee
participation in management, comprehensive employee benefits and
programs and profit sharing plans. As of April 30, 1994, the
Company employed approximately 2,500 full-time, year-round
workers and an additional five part-time or temporary workers.
Full-time workers average approximately 10 years employment with
the Company or its predecessors. During peak production periods,
the Company engages as many as 750 temporary employees. The
Company's employees are not unionized, except that twenty-one of
Sierra's employees at its Milpitas facility are represented by
the International Chemical Workers Union.
Environmental and Regulatory Considerations
Federal, state and local laws and regulations relating to
environmental matters affect the Company in several ways. All
products containing pesticides must be registered with the U.S.
Environmental Protection Agency (and in many cases, similar state
agencies) before they can be sold. The inability to obtain or
the cancellation of any such registration could have an adverse
effect on the Company's business. The severity of the effect
would depend on which products were involved, whether another
product could be substituted and whether the Company's
competitors were similarly affected. The Company attempts to
anticipate regulatory developments and maintain registrations of,
and access to, substitute chemicals, but there can be no
assurance that it will continue to be able to avoid or minimize
these risks. Fertilizer and organic products (including manures)
are also subject to state labeling regulations.
In addition, the use of certain pesticide and fertilizer
products is regulated by various local, state and federal
environmental and public health agencies. These restrictions may
include requirements that only certified or professional users
apply the product or that certain products be used only on
certain types of locations (such as "not for use on sod farms or
golf courses"), may require users to post notices on properties
to which products have been or will be applied, may require
notification of individuals in the vicinity that products will be
applied in the future or may ban the use of certain ingredients.
Compliance with such regulations and the obtaining of
registrations does not assure, however, that the Company's
products will not cause injury to the environment or to people
under all circumstances.
State and federal authorities generally require Hyponex to
obtain permits (sometimes on an annual basis) in order to harvest
peat and to discharge water run-off or water pumped from peat
deposits. The state permits typically specify the condition in
which the property will be left after the peat is fully
harvested, with the residual use typically being natural wetland
habitats combined with open water areas. Hyponex is generally
required by these permits to limit its harvesting and to restore
the property consistent with the intended residual use. In some
locations, Hyponex has been required to create water retention
ponds to control the sediment content of discharged water.
In July 1990, the Philadelphia district of the Army Corps of
Engineers directed that peat harvesting operations be
discontinued at Hyponex's Lafayette, New Jersey facility, and the
Company complied. In May 1992, the Department of Justice filed
suit seeking a permanent injunction against such harvesting at
that facility and civil penalties. The Philadelphia district of
the Corps has taken the position that peat harvesting activities
there require a permit under Section 404 of the Clean Water Act.
If the Corps' position is upheld, it is possible that further
harvesting of peat from this facility would be prohibited. The
Company is defending this suit and is asserting a right to
recover its economic losses resulting from the government's
actions. Management does not believe that the outcome of this
case will have a material adverse effect on the Company's
operations or its financial condition. See "Legal Proceedings."
Finally, state, federal and local agencies regulate the
disposal, handling and storage of waste and air and water
discharges from Company facilities. During fiscal 1993, the
Company had approximately $234,000 in environmental capital
expenditures and $266,600 in environmental expenses, compared
with approximately $32,000 in environmental capital expenditures
and $209,000 in environmental expenses in fiscal 1992. The
Company has budgeted $1,061,500 in environmental capital
expenditures and $341,000 in environmental expenses for fiscal
1994.
The Company has been identified by the Ohio Environmental
Protection Agency (the "Ohio EPA") as a Potentially Responsible
Party ("PRP") with respect to a site in Union County, Ohio (the
"Hershberger site") that has allegedly been contaminated by
hazardous substances whose transportation, treatment or disposal
the Company allegedly arranged. Pursuant to a consent order with
the Ohio EPA, the Company, together with four other PRPs
identified to date, is investigating the extent of contamination
in the site and developing a remediation program.
Sierra is a potentially responsible party in connection with
the Lorentz Barrel and Drum Superfund Site in California, as a
result of its predecessor having shipped barrels to Lorentz for
reconditioning or sale between 1967 and 1972. Although many
other companies are participating in the remediation of this
site, issues relating to the allocation of the costs have not yet
been resolved. In addition, Sierra is a defendant in a private
cost-recovery action relating to the Novak Sanitary Landfill,
located near Allentown, Pennsylvania. By agreement with W. R.
Grace-Conn., Sierra's liability is limited to a maximum of
$200,000 with respect to this site. The Company's management
does not believe that the outcome of these proceedings will in
the aggregate have a material adverse effect on its financial
condition or results of operations.
Legal Proceedings
In addition to the matters described in "-Environmental and
Regulatory Considerations," the Company is involved in other
lawsuits and claims which arise in the normal course of its
business. In the opinion of management, these claims, as well as
those mentioned above individually and in the aggregate are not
expected to result in an adverse effect on the Company's
financial position or results of operations.
MANAGEMENT
Executive Officers and Directors of Scotts and OMS
The executive officers of Scotts and the directors of
Scotts and OMS and, as of May 2, 1994, their positions, their
ages and years with the Company (and its predecessors) are set
forth below.
Years with
the Company
(and its
Name Age Position(s) Held Predecessors)
Tadd C. Seitz 52 Chairman of the Board; 21
Chief Executive Officer
Theodore J. Host 48 Director; President; 2
Chief Operating Officer
Paul D. Yeager 55 Executive Vice President; 19
Chief Financial Officer
Richard B. Stahl 58 Senior Vice President 26
J. Blaine McKinney 50 Senior Vice President, 1
Consumer Business Group
Bernard R. Ford 50 Vice President, Strategy 15
and Business Development
Michael P. Kelty 43 Vice President, Technology 14
and Operations
Kenneth W. Holbrook 54 Senior Vice President and
General Manager - Professional
Business Group -
Lawrence M. McCartney 53 Vice President, 19
Information Systems
Wim Pieters 52 Vice President and Managing
Director, Europe and Related
Markets -
Lisle J. Smith 37 Vice President, Administration
and Planning -
Robert A. Stern 51 Vice President, 11
Human Resources
Craig D. Walley 50 Vice President, General 9
Counsel, Secretary
Robert M. Webb 51 Vice President, 18
Manufacturing and Logistics
James B. Beard 56 Director 4
John S. Chamberlin 63 Director 4
Alberto Cribiore 48 Director 7
Joseph P. Flannery 59 Director 7
Donald A. Sherman 40 Director 10
John M. Sullivan 58 Director -
L. Jack Van Fossen 56 Director -
Executive Officers serve at the discretion of the Board
of Directors (and in the case of Mr. Host, pursuant to an
employment agreement).
The business experience of each of the persons listed
above during the past five years is as follows:
Mr. Seitz has been the Chief Executive Officer of OMS
since 1983 (and of Scotts since 1986) and Chairman of the Board
of Scotts and OMS since 1986. He was also President of the
Company from 1983 until 1991. Previously, Mr. Seitz served as
the Company's Director of Marketing and as General Manager of
Burpee. Mr. Seitz is a director of Holophane Corporation.
Mr. Host has been President and Chief Operating Officer
of OMS since October 1991 and a director of Scotts and OMS since
December 1991. From May 1990 to October 1991, he was Senior Vice
President, Marketing for Coca-Cola USA. He previously was
President of the Boyle-Midway Household Products division of
American Home Products, Inc.
Mr. Yeager has been an Executive Vice President of OMS
since 1991 and a Vice President and the Chief Financial Officer
since 1980. He was first Assistant Comptroller and then
Comptroller of OMS from 1974 to 1980. Mr. Yeager is also Vice
President and Treasurer of Scotts.
Mr. Stahl was Vice President and General Manager of the
Company's Professional Business Group from December 1987 to
December 1993. He was named Senior Vice President in December
1993. Mr. Stahl joined OMS in 1967 as a technical representative
in the golf course division.
Mr. McKinney was named Senior Vice President, Consumer
Business Group, in June 1992. From January 1990 to June 1992, he
was in marketing and sales management as Vice President of
Marketing and Sales of Salov, N.A., a manufacturer of consumer
products. From July 1989 to January 1990 he was Director of
Sales of Rickett & Colman, Ltd., a consumer products company.
Between 1965 and July 1989, he was employed by American Home
Products, Inc., becoming Vice President-Director of Sales in the
Boyle Midway Household Products Division.
Mr. Ford has been Vice President, Strategy and Business
Development of OMS since December 1987. Other positions at OMS
that Mr. Ford has held include Director of Market Development,
Director of Export Marketing Services and Director of Marketing.
Mr. Holbrook was named Senior Vice President and
General Manager of the Company's Professional Business Group in
1994. From 1991 through December 1993, Mr. Holbrook was
President of Grace-Sierra Horticultural Products Company. From
1980 to 1991, he was President of Koch Materials Company, a
division of Koch Industries.
Mr. Kelty has been a Vice President of OMS since
December 1988. He has served as Director of Research and
Development of OMS since August 1988. Prior to that, he was the
Company's Director of Advanced Technology Research, and from 1983
to 1987 he was Director, Chemical Technology Development for OMS.
Mr. McCartney has been a Vice President of OMS since
1989. He jointed OMS in 1974 as Systems and Programming Manager,
and was Director, Information Systems from 1976 until 1989.
Mr. Pieters was named a Vice President of OMS in 1994.
From January 1993 through December 1993, Mr. Pieters was a
Vice President of Grace-Sierra Horticultural Products Company, in
charge of its international business. Prior to 1993, he was
Director of Technology and Development of the Fabrics and Fiber
Division of Amoco, Europe.
Mr. Smith was named a Vice President of OMS in 1994.
From 1991 to December 1993, Mr. Smith was Vice President and
Chief Financial Officer of Grace-Sierra Horticultural Products
Company, and from 1987 to 1991 he was Comptroller.
Mr. Stern has been Vice President, Human Resources of
OMS since 1984.
Mr. Walley has been Vice President and General Counsel
of OMS since 1985. Since 1986, Mr. Walley has also been Vice
President and Secretary of Scotts.
Mr. Webb has been a Vice President of OMS since 1988.
He was Vice President-Operations of Hyponex Corporation from 1980
until 1988.
Dr. Beard became a director of Scotts and OMS in 1989.
He is a Professor of Turfgrass Physiology and Ecology at Texas
A&M University and was the first president of the International
Turfgrass Society. Dr. Beard is the author of numerous books and
articles on turfgrass science and is an active lecturer and
consultant.
Mr. Chamberlin became a director of Scotts and OMS in
1989. He has held a number of positions at General Electric
Company including Vice President and General Manager of its
Housewares and Audio Business Division. From 1976 until 1985, he
was President and Chief Executive Officer of Lenox, Inc., and in
1985 joined Avon Products, Inc. as President and Chief Operating
Officer. Since leaving Avon in 1988, he has served as advisor
for investment firms. He is also a director of The Travelers
Insurance Company.
Mr. Cribiore became a director of Scotts and OMS in
1986. He is Vice President and a director of Clayton & Dubilier,
which he joined in 1985. From 1982 to 1985, Mr. Cribiore was a
Senior Vice-President of Warner Communications. Mr. Cribiore is
a general partner of Clayton & Dubilier Associates II Limited
Partnership ("Associates"), a general partner of the general
partners of other Clayton & Dubilier managed investment
partnerships. Mr. Cribiore is also a director of other
corporations in which investment partnerships managed by Clayton
& Dubilier have invested, including CDK Holding Corporation and
its subsidiary, The Kendall Company.
Mr. Flannery became a director of Scotts and OMS in
1986. He was a consultant to Clayton & Dubilier from September,
1988 to December 1990. Mr. Flannery was President, Chief
Executive Officer and Chairman of the Board of Directors of
Uniroyal, Inc. from 1982 to 1986. Mr. Flannery has served as
President, Chief Executive Officer and Chairman of the Board of
Directors of Uniroyal Holding, Inc. since 1986. Mr. Flannery is
also a director of Ingersoll-Rand Company, Kmart Corporation,
Newmont Mining Company and Arvin Industries, Inc., as well as
other corporations in which investment partnerships managed by
Clayton & Dubilier have invested, including CDK Holding
Corporation and its subsidiary, The Kendall Company and APS
Holding Corporation and various of its subsidiaries.
Mr. Sherman became a director of Scotts and OMS in
1988. Mr. Sherman served as President of Hyponex Corporation
from 1985 until November 1988, and as Vice President -- Finance
and Treasurer of Hyponex Corporation from 1983 to 1985. He has
been President of Waterfield Mortgage Company in Fort Wayne,
Indiana since 1989.
Mr. Sullivan became a director of Scotts and OMS on
January 18, 1994. Mr. Sullivan was Chairman of the Board from
1987 to 1993, and President and Chief Executive Officer from 1984
to 1993 of Prince Holdings, Inc., a corporation which, through
its subsidiaries, manufactures sporting goods. Since his
retirement from Prince Holdings, Inc. and its subsidiaries in
1993, Mr. Sullivan has served as an independent director for
various corporations, none of which, other than the Company, are
subject to the Exchange Act.
Mr. Van Fossen became a director of Scotts and OMS in
1993. Mr. Van Fossen has been President and Chief Executive
Officer of Red Roof Inns, Inc., an owner and operator of motels,
since 1991. From 1988 to 1991, Mr. Van Fossen was self-employed
as an independent business consultant. Prior to 1988,
Mr. Van Fossen was Chairman, President and Chief Executive
Officer of Chemlawn Corporation. Mr. Van Fossen also serves as a
director of Cardinal Health, Inc.
BENEFICIAL OWNERSHIP OF CLASS A COMMON STOCK
The following table furnishes certain information as of
January 7, 1994, as to the shares of Common Stock beneficially
owned by each director and executive officer of the Company
included in the Summary Compensation Table included in the
Company's Proxy Statement, by all directors and executive
officers of the Company as a group, and, to the Company's
knowledge, by the only persons owning beneficially more than 5%
of the outstanding shares of such class.
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent
Beneficial Owner Ownership(1) Of Class(2)
<S> <C> <C>
Government of Singapore
Investment Corporation Pte Ltd. 1,060,600(3) 5.68%(3)
250 North Bridge Road
#33-00 Raffles City Tower
Singapore 0617
Thorsell, Parker Partners
Incorporated
215 Main Street
Westport, CT 06880 997,100(4) 5.34%(4)
James B. Beard 20,727 (5)
John S. Chamberlin 26,727 (5)
Alberto Cribiore -- --
Joseph P. Flannery 29,454 (5)
Theodore J. Host(6)(7) 217,593 1.16%
Tadd C. Seitz(6) 519,720 2.78%
Donald S. Sherman 26,727 (5)
John M. Sullivan -- --
L. Jack Van Fossen 1,200 (5)
J. Blaine McKinney (6) 18,742 (5)
Richard B. Stahl (6) 112,344(8) (5)
Paul D. Yeager (6) 153,507(9) (5)
All directors and executive 1,624,042(10) 8.55%
officers as a group (19 persons)
___________________
<F1>
(1) Unless otherwise indicated, the beneficial owner has sole
voting and investment power as to all of the shares of
Class A Common Stock reflected in the table.
<F2>
(2) The percent of class is based upon the sum of 18,658,535
shares of Class A Common Stock outstanding on January 7,
1994, and the number of shares of Class A Common Stock as to
which the named person has the right to acquire beneficial
ownership upon the exercise of options exercisable within 60
days of January 7, 1994.
<F3>
(3) Based on information contained in a Schedule 13D dated
October 18, 1993 filed with the Securities and Exchange
Commission, Government of Singapore Investment Corporation
Pte Ltd, an agency of the Singapore government and an
investment manager, shares voting and investment power with
respect to 749,400 shares of Class A Common Stock with the
Government of Singapore and shares voting and investment
power with respect to 311,200 shares of Class A Common Stock
with the Monetary Authority of Singapore.
<F4>
(4) Based on information provided to the Company by Thorsell,
Parker Partners Incorporated ("Thorsell, Parker"), Thorsell,
Parker, a registered investment advisor, is deemed to have
beneficial ownership of 997,100 shares of Class A Common
Stock as of December 31, 1993, all of which shares are held
in portfolios of clients for which Thorsell, Parker serves
as investment manager with investment discretion. Thorsell,
Parker also exercises sole voting power with respect to
747,825 of such shares.
<F5>
(5) Represents ownership of less than 1% of the outstanding
Class A Common Stock of the Company.
<F6>
(6) Executive officer of the Company named in the Summary
Compensation Table included in the Company's Proxy Statement
for 1994 Annual Meeting of Stockholders.
<F7>
(7) Includes 45,454 shares of Class A Common Stock which were
issued to Mr. Host at the time of his employment by the
Company and which are pledged to Bank One, N.A.
<F8>
(8) Includes 25,000 shares of Class A Common Stock held in the
Richard B. Stahl and Nancy E. Stahl 1992 Charitable
Remainder Trust. In his capacity as trustee of said Trust,
Mr. Stahl exercises sole voting and investment power with
respect to such Common Shares. Also includes 1,000 shares
of Class A Common Stock held by the son of Mr. Stahl who
shares his home.
<F9>
(9) Includes 100 shares of Class A Common Stock held by each of
Mr. Yeager's wife and his two daughters who share his home.
<F10>
(10) See Notes (7), (8) and (9) above. Also includes Class A
Common Stock held by the respective spouses of executive
officers of the Company and by their children who reside
with them.
</TABLE>
DESCRIPTION OF BANK AGREEMENT
Scotts and OMS are co-obligors under the Company's Bank
Agreement. As amended on December 16, 1993, in connection with
the acquisition of Sierra, the Bank Agreement provides for a
revolving credit facility of $150 million, which terminates on
March 31, 1996 and which includes swing-line and letter of credit
subfacilities, and term loans of $195 million. Scheduled
maturities for the term loans are as follows: $15 million due on
October 31, 1994; $10 million due semi-annually in 1995; $17.5
million due semi-annually in 1996 and $15 million due semi-
annually thereafter through final maturity on September 30, 2000.
The Bank Agreement generally requires that the Company apply the
Net Cash Proceeds (as defined therein) from the offering of Debt
Securities to the prepayment of the term loans as follows: 15% to
the installments due in 1994; 15% to the installments due in
1995; 20% to the installments due in 1996; 15% to the
installments due in 1997; 15% to the installments due in 1998;
10% to the installments due in 1999 and the balance to the
remaining installments in the inverse order of their stated
maturity.
The Bank Agreement is guaranteed by most of the Company's
subsidiaries and is secured by substantially all the assets of
the Company, as well as by the pledge of 100% of the capital
stock of each of the Company's wholly-owned domestic subsidiaries
and 65% of the Company's wholly-owned foreign subsidiaries.
Borrowings under the Bank Agreement bear interest, at the
Company's option, at a rate equal to either (i) the higher of the
agent bank's reference rate and 1/2% above the "Federal Funds"
rate or (ii) the LIBO Rate (as defined therein) plus 1 1/4%.
The Bank Agreement contains a number of affirmative and
negative covenants and customary events of default. The
agreement also contains financial covenants requiring the Company
to maintain certain levels of Adjusted Operating Profit,
Consolidated Net Worth and Interest Coverage (each as defined
therein) and requiring the Company to reduce, or "clean-down,"
non-term borrowings under the Bank Agreement to $30 million or
less for thirty consecutive days each year. An offering of Debt
Securities may require an amendment of or consent under the Bank
Agreement.
Loans under the Bank Agreement are provided by Chemical
Bank, as a lending bank and as agent for the thirteen other
participating banks. Chemical Bank is an affiliate of Chemical
Securities Inc. In addition, Chemical Bank is the trustee under
the Indentures. See "Description of Debt Securities -- The
Trustee."
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general
terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the
Debt Securities offered by any Prospectus Supplement and the
extent, if any, to which such general provisions may not apply to
the Debt Securities so offered will be described in the
Prospectus Supplement relating to such Debt Securities.
The Senior Debt Securities are to be issued under an
Indenture to be dated as of June 1, 1994 (the "Senior Indenture")
among Scotts, OMS and Chemical Bank, as trustee. The
Subordinated Debt Securities are to be issued under a separate
Indenture to be dated as of June 1, 1994 (the "Subordinated
Indenture"), also among Scotts, OMS and Chemical Bank, as
trustee. The Senior Indenture and the Subordinated Indenture are
sometimes referred to collectively as the "Indentures." Copies
of the Senior Indenture and the Subordinated Indenture have been
filed as exhibits to the Registration Statement. Chemical Bank
is hereinafter referred to as the "Trustee." The following
summaries of certain provisions of the Senior Debt Securities,
the Subordinated Debt Securities and the Indentures do not pur-
port to be complete and are subject to, and are qualified in
their entirety by reference to, all the provisions of the
Indenture applicable to a particular series of Debt Securities
(the "Applicable Indenture"), including the definitions therein
of certain terms. Wherever particular Sections, Articles or
defined terms of the Indentures are referred to, it is intended
that such Sections, Articles or defined terms shall be
incorporated herein by reference. Article and Section references
used herein are references to the Applicable Indenture. Capital-
ized terms not otherwise defined herein shall have the meaning
given in the Applicable Indenture.
General
The Debt Securities will be joint and several
obligations of the Issuers. The Indentures do not limit the
aggregate principal amount of Debt Securities which may be issued
thereunder and each Indenture provides that Debt Securities may
be issued thereunder from time to time in one or more series.
Unless otherwise specified in the Prospectus Supplement, the
Senior Debt Securities when issued will be unsecured and
unsubordinated obligations of the Issuers and will rank equally
and ratably with all other unsecured and unsubordinated
indebtedness of the Issuers. The Subordinated Debt Securities
when issued will be unsecured obligations of the Issuers
subordinated in right of payment to the prior payment in full of
all Senior Debt (as defined) of each Issuer, as described under
"Subordination of Subordinated Debt Securities" and in the
Prospectus Supplement applicable to an offering of Subordinated
Debt Securities.
Reference is made to the Prospectus Supplement relating
to the particular Debt Securities offered thereby (the "Offered
Debt Securities") which shall set forth whether the Offered Debt
Securities shall be Senior Debt Securities or Subordinated Debt
Securities, and shall further set forth the following terms of
the Offered Debt Securities: (1) the title of the Offered Debt
Securities; (2) whether the Offered Debt Securities are Senior
Debt Securities or Subordinated Debt Securities; (3) any limit on
the aggregate principal amount of the Offered Debt Securities;
(4) the price (expressed as a percentage of the aggregate
principal amount thereof) at which the Offered Debt Securities
will be issued; (5) the Person to whom any interest on the
Offered Debt Securities will be payable, if other than the Person
in whose name such Offered Debt Securities (or one or more
Predecessor Securities) are registered on any Regular Record
Date; (6) the date or dates on which the principal of the Offered
Debt Securities will be payable; (7) the rate or rates per annum
(which may be fixed, floating or adjustable) at which the Offered
Debt Securities will bear interest, if any, or the formula pur-
suant to which such rate or rates shall be determined, the date
or dates from which such interest will accrue and the dates on
which such interest, if any, will be payable and the Regular
Record Dates for such interest payment dates; (8) the place or
places where principal of (and premium, if any) and interest, if
any, on Offered Debt Securities will be payable; (9) if
applicable, the price at which, the periods within which and the
terms and conditions upon which the Offered Debt Securities may
be redeemed at the option of the Issuers, pursuant to a sinking
fund or otherwise; (10) if applicable, any obligation of the
Issuers to redeem or purchase Offered Debt Securities pursuant to
any sinking fund or analogous provisions or at the option of a
Holder thereof, and the period or periods within which, the price
or prices at which and the terms and conditions upon which the
Offered Debt Securities will be redeemed or purchased, in whole
or in part; (11) if applicable, the terms of any right to convert
or exchange the Offered Debt Securities into other securities or
property of either or both of the Issuers or otherwise; (12) if
other than denominations of $1,000 and any integral multiple
thereof, the denominations in which the Offered Debt Securities
will be issuable; (13) the currency or currencies, including
composite currencies or currency units, in which payment of the
principal of (or premium, if any) or interest, if any, on any of
the Offered Debt Securities will be payable if other than the
currency of the United States of America; (14) if the amount of
payments of principal of (or premium, if any) or interest, if
any, on the Offered Debt Securities may be determined with
reference to one or more indices, the manner in which such
amounts will be determined; (15) if the principal of (or premium,
if any) or interest, if any, on any of the Offered Debt Securi-
ties of the series is to be payable, at the election of the
Issuers or a Holder thereof, in one or more currencies, including
composite currencies, or currency units other than that or those
in which the Securities are stated to be payable, the currency,
currencies, including composite currencies, or currency units in
which payment of the principal of (or premium, if any) or
interest, if any, on Securities of such series as to which such
election is made will be payable, and the periods within which
and the terms and conditions upon which such election is to be
made; (16) the portion of the principal amount of the Offered
Debt Securities, if other than the principal amount thereof,
payable upon acceleration of maturity thereof; (17) whether all
or any part of the Offered Debt Securities will be issued in the
form of a permanent Global Security or Securities and, if so, the
depositary for, and other terms relating to, such permanent
Global Security or Securities; (18) any event or events of
default applicable with respect to the Offered Debt Securities in
addition to those provided in the Indentures; (19) any other
covenant or warranty included for the benefit of the Offered Debt
Securities in addition to (and not inconsistent with) those
included in the Indentures for the benefit of Debt Securities of
all series, or any other covenant or warranty included for the
benefit of the Offered Debt Securities in lieu of any covenant or
warranty included in the Indentures for the benefit of Offered
Debt Securities, or any combination of such covenants, warranties
or provisions; (20) if the Debt Securities are Subordinated Debt
Securities, whether the provisions of the Subordinated Indenture
described under the caption "Subordination of Subordinated Debt
Securities" or other subordination provisions will be applicable
to such Subordinated Debt Securities; (21) any restriction or
condition on the transferability of the Offered Debt Securities;
(22) if applicable, that such Offered Debt Securities, in whole
or any specified part, are defeasible pursuant to the provisions
of the Indentures described under "Defeasance and Covenant
Defeasance"; (23) any authenticating or paying agents,
registrars, conversion agents or any other agents with respect to
the Offered Debt Securities; and (24) any other terms or provi-
sions of the Offered debt Securities not inconsistent with the
Indentures. (Sections 301 and 901)
Unless otherwise indicated in the Prospectus Supplement
relating thereto, the Offered Debt Securities are to be issued as
registered securities without coupons in denominations of $1,000
or any integral multiple of $1,000. (Section 302). No service
charge will be made for any transfer or exchange of such Offered
Debt Securities, but the Issuers or the Trustee may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section
305) The Indentures also provide that the Debt Securities of any
series, if so specified with respect to a particular series, may
be issued in permanent global form. See "Permanent Global
Securities".
Debt Securities may be issued as Original Issue
Discount Debt Securities to be sold at a substantial discount
below their principal amount. Special Federal income tax,
accounting and other considerations applicable thereto will be
described in the Prospectus Supplement relating thereto.
"Original Issue Discount Debt Security" means any security which
provides for an amount less than the principal amount thereof to
be due and payable upon the declaration of acceleration of the
maturity thereof upon the occurrence and continuance of an Event
of Default. (Section 101)
If the Debt Securities are denominated in whole or in
part in any currency other than United States dollars, if the
principal of (and premium, if any) or interest, if any, on the
Debt Securities are to be payable at the election of the Company
or a Holder thereof, in a currency or currencies other than that
in which such Debt Securities are to be payable, or if any index
is used to determined the amount of payments of principal of,
premium, if any, or interest on any series of the Debt
Securities, special Federal income tax, accounting and other
considerations applicable thereto will be described in the
Prospectus Supplement relating thereto.
Since each of the Issuers is a holding company, the
rights of each Issuer, and hence the right of creditors of each
Issuer (including the Holders of Debt Securities), to participate
in any distribution of the assets of any Subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject
to the prior claims of creditors of the Subsidiary, except to the
extent that claims of an Issuer itself as a creditor of the
Subsidiary may be recognized.
The Indentures do not contain any provisions that would
provide protection to Holders of the Debt Securities against a
sudden and dramatic decline in credit quality of the Company
resulting from any takeover, recapitalization or similar
restructuring.
Payment and Paying Agents
Unless otherwise indicated in the applicable Prospectus
Supplement, payment of interest on a Debt Security on any
Interest Payment Date will be made to the Person in whose name
such Debt Security (or one or more Predecessor Debt Securities)
is registered at the close of business on the Regular Record Date
for such interest payment. (Section 307)
Unless otherwise indicated in the applicable Prospectus
Supplement, principal of and any premium and interest on the Debt
Securities of a particular series will be payable at the office
of such Paying Agent or Paying Agents as the Issuers may
designate for such purpose from time to time, except that at the
option of the Issuers payment of any interest may be made by
check mailed to the address of the Person entitled thereto as
such address appears in the Security Register. Unless otherwise
indicated in the applicable Prospectus Supplement, the corporate
trust office of the Trustee in The City of New York will be
designated as the Issuers' sole Paying Agent for payments with
respect to Debt Securities of each series. Any other Paying
Agents initially designated by the Issuers for the Debt
Securities of a particular series will be named in the applicable
Prospectus Supplement. The Issuers may at any time designate
additional Paying Agents or rescind the designation of any Paying
Agent or approve a change in the office through which any Paying
Agent acts, except that the Issuers will be required to maintain
a Paying Agent in each place of payment for the Debt Securities
of a particular series. (Section 1002)
All moneys paid by the Issuers to a Paying Agent for
the payment of the principal of or any premium or interest on any
Debt Security which remain unclaimed at the end of two years
after such principal, premium or interest has become due and
payable will be repaid to the Issuers, and the Holder of such
Debt Security thereafter may look only to the Issuers for payment
thereof. (Section 1003)
Subordination of Subordinated Debt Securities
Unless otherwise indicated in the Prospectus Supplement
relating thereto, the following provisions will apply to the
Subordinated Debt Securities.
The payment of the principal of (and premium, if any)
and interest on, and any obligation to repurchase, the
Subordinated Debt Securities will, to the extent set forth in the
Subordinated Indenture, be subordinate in right of payment to the
prior payment in full of all Senior Debt, including the Senior
Debt Securities. Upon any payment or distribution of assets to
creditors upon any liquidation, dissolution, winding up,
reorganization, assignment of the benefit of creditors,
marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings of an Issuer, the holders of
all Senior Debt will first be entitled to receive payment in full
of principal of (and premium, if any) and interest, if any, due
or to become due on such Senior Debt before the holders of the
Subordinated Debt Securities will be entitled to receive or
retain any payment in respect of the principal of (and premium,
if any) or interest, if any, on the Subordinated Debt Securities.
(Section 1402)
In the event that, notwithstanding the foregoing, upon
any such dissolution, winding up, liquidation or reorganization,
any payment or distribution of assets of an Issuer of any kind or
character, whether in cash, property or securities, including any
such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of an Issuer
being subordinated to the payment of the Subordinated Debt
Securities, shall be received by the Trustee, any paying agent or
the holders of the Subordinated Debt Securities before all Senior
Debt of an Issuer is paid in full, such payment or distribution
shall be held in trust for the benefit of and shall be paid over
to the holders of such Senior Debt or their representative or
representatives or to the trustee or the trustees under any
indenture under which any instruments evidencing any of such
Senior Debt may have been issued, ratably for application to the
payment of all Senior Debt of an Issuer remaining unpaid until
all such Senior Debt shall have been paid in full, after giving
effect to any concurrent payment or distribution to the holders
of such Senior Debt.
By reason of such subordination, in the event of
liquidation or insolvency, creditors of an Issuer who are not
holders of Senior Debt or Subordinated Debt Securities may
recover less, ratably, than holders of Senior Debt and may
recover more, ratably, than the holders of the Subordinated Debt
Securities.
In the event that any Senior Payment Default (as
defined below) shall have occurred and be continuing, then no
payment of principal of or interest on the Subordinated Debt
Securities may be made unless and until such Senior Payment
Default shall have been cured or waived or shall have ceased to
exist or all amounts then due and payable in respect of Senior
Debt shall have been paid in full, or provision shall have been
made for such payment in cash or cash equivalents or otherwise in
a manner satisfactory to the holders of Senior Debt. "Senior
Payment Default" means any default in the payment of principal of
(or premium, if any) or interest on any Senior Debt when due,
whether at the stated maturity of any such payment or by
declaration of acceleration, call for redemption or otherwise.
In the event that any Senior Nonmonetary Default (as
defined below) shall have occurred and be continuing, the, upon
the receipt by the Issuers and the Trustee of written notice of
such Senior Nonmonetary Default from holders of not less than
25% of the principal amount of such Senior Debt (or a trustee,
agent or other representative for such a holder), no payment of
principal of or interest on the Subordinated Debt Securities may
be made during the period (the "Payment Blockage Period")
commencing on the date of such receipt of such written notice
and ending on the earlier of (i) the date on which such Senior
Nonmonetary Default shall have been cured or waived or shall
have ceased to exist and any acceleration of Senior Debt shall
have been rescinded or annulled or the Senior Debt to which such
Senior Nonmonetary Default relates shall have been discharged or
(ii) the 179th day after the date of such receipt of such written
notice. No more than one Payment Blockage Period may be
commenced with respect to the Subordinated Debt Securities
during any 360-day period and there must be a period of at least
181 consecutive days in each 360-day period when no Payment
Blockage Period is in effect. For all purposes of this
paragraph, no Senior Payment Default or Senior Nonmonetary
Default that existed or was continuing on the date of
commencement of any Payment Blockage Period can be, or be made,
the basis for the commencement of a subsequent Payment Blockage
Period by the holders of Senior Debt or their representatives
unless such Senior Payment Default or Senior Nonmonetary Default
shall have been cured for a period of not less than 90
consecutive days. "Senior Nonmonetary Default" means the
occurrence or existence and continuance of any event of default,
or of any event which, after notice or lapse of time (or both),
would become an event of default, under the terms of any
instrument pursuant to which any Senior Debt is outstanding,
permitting (after notice or lapse of time or both) one or more
holders of such Senior Debt (or a trustee or agent on behalf of
the holders thereof) to declare such Senior Debt due and payable
prior to the date on which it would otherwise become due and
payable, other than a Senior Payment Default.
In the event that, notwithstanding the foregoing, the
Issuers shall make any payment of principal of or interest on
the Subordinated Debt Securities to the Trustee or any Holder
prohibited by the foregoing provisions of this Section, and if
such fact shall, at or prior to the time of such payment, have
been made known to the Trustee or, as the case may be, the
Holder, then and in such event such payment shall be paid over
and delivered forthwith to the Issuers.
Unless otherwise specified in the Prospectus Supplement
relating to the particular series of Subordinated Debt Securities
offered thereby, "Debt" has the meaning accorded thereto
under "-Certain Definitions" below.
Unless otherwise specified in the Prospectus Supplement
relating to the particular series of Subordinated Debt Securities
offered thereby, "Senior Debt" means (a) the principal of (and
premium, if any) and interest, if any, (including interest
accruing on or after the filing of any petition in bankruptcy or
for reorganization relating to an Issuer to the extent that such
claim for post-petition interest is allowed in such proceeding)
on Debt, whether incurred on or prior to the date of the
Subordinated Indenture or thereafter created, assumed or
incurred, unless, in the instrument creating or evidencing the
same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the
Subordinated Debt Securities or to other Debt which is pari passu
with, or subordinated to the Subordinated Debt Securities and
(b) any deferrals, renewals or extensions of such Senior Debt;
provided, however, that Senior Debt shall be deemed to include
(i) Debt existing under the Bank Agreement and under any Bank
Hedging Agreement and (ii) Debt existing under the Senior
Indenture; provided further, however, that Senior Debt shall
not be deemed to include (i) the Subordinated Debt Securities
or (ii) the Debt referred to in clause (vi) of the definition of
Debt. (Section 101 of the Subordinated Indenture)
The Subordinated Indenture does not limit or prohibit
the incurrence of additional Senior Debt by either Issuer, which
may include Debt that is senior to the Subordinated Debt
Securities, but subordinate to other obligations of one or both
of the Issuers. The Senior Debt Securities, when issued, will
constitute Senior Debt.
The Prospectus Supplement may further describe the
provisions, if any, applicable to the subordination of the
Subordinated Debt Securities of a particular series.
At April 2, 1994 the combined total amount of
indebtedness of the Issuers that would constitute Senior Debt was
$329.6 million.
Change of Control
Upon the occurrence of a Change of Control, the Issuers
will be required to make an Offer to Purchase all outstanding
Debt Securities at a purchase price equal to 101% of their
principal amount plus accrued interest to the date of purchase.
A "Change of Control" will be deemed to have occurred in the
event that either (a) any Person or any Persons acting together
that would constitute a group (for purposes of Section 13(d) of
the Securities Exchange Act of 1934, or any successor provision
thereto) (a "Group"), together with any Affiliates or Related
Persons thereof shall beneficially own (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, or any successor
provision thereto) at least 30% of the aggregate voting power of
all classes of Capital Stock of either Issuer entitled to vote
generally in the election of directors; or (b) any Person or
Group, together with any Affiliates or Related Persons thereof,
shall succeed in having a sufficient number of its nominees
elected to the Board of Directors of either Issuer such that such
nominees, when added to any existing director remaining on the
Board of Directors of such Issuer after such election who is an
Affiliated or Related Person of such Person or Group, will
constitute a majority of the Board of Directors of such Issuer.
Notwithstanding the foregoing, with respect to OMS, Scotts shall
be deemed not to constitute such a Person or Group for the
purposes of clauses (a) and (b) above. (Section 1009)
The Indentures provide that the Issuers will establish
a Purchase Date for any Subordinated Debt Securities on a date
subsequent to the Purchase Date established for any Senior Debt
Securities.
In the event that the Issuers make an Offer to Purchase
Debt Securities, the Issuers intend to comply with any applicable
securities laws and regulations, including any applicable
requirements of Section 14(e) of, and Rule 14e-1 under, the
Securities Exchange Act of 1934.
Consolidation, Merger and Sale of Assets
Neither of the Issuers may, in a single transaction or
a series of related transactions, consolidate with or merge into
any other Person or sell, lease or otherwise transfer its
property and assets as, or substantially as, an entirety to any
Person and neither may permit any Person to merge into or
consolidate with such Issuer unless (i) either (A) such Issuer
will be the resulting or surviving entity or (B) any successor or
purchaser is a corporation, partnership or trust organized under
the laws of the United States of America, any State or the
District of Columbia, and any such successor or purchaser
expressly assumes such Issuer's obligations on the Debt
Securities under a supplemental Indenture, (ii) immediately after
giving effect to the transaction no Event of Default, and no
event which after notice or lapse of time or both would become an
Event of Default, shall have occurred and be continuing, and
(iii) certain other conditions are met. (Section 801). Upon any
consolidation or merger into any other Person or any conveyance,
transfer or lease of an Issuer's assets substantially as an
entirety to any Person, the successor Person shall succeed to,
and be substituted for, an Issuer under the Indentures, and such
Issuer, except in the case of a lease, shall be relieved of all
obligations and covenants under the Indentures and the Debt
Securities to the extent it was the predecessor Person. (Section
802)
Events of Default and Notice Thereof
Unless otherwise specified in the Prospectus Supplement
relating to a particular series of Debt Securities, the following
events are defined in the Indentures as "Events of Default" with
respect to Debt Securities of any series: (a) failure to pay
principal (including any sinking fund payment) of (or premium, if
any, on) any Debt Security of that series when due (in the case
of the Subordinated Indenture, whether or not payment is
prohibited by the subordination provisions); (b) failure to pay
any interest on any Debt Security of that series when due,
continued for 30 days (in the case of the Subordinated Indenture,
whether or not payment is prohibited by the subordination
provisions); (c) default in the payment of the purchase price
of Debt Securities of that series required to be purchased
pursuant to an Offer to Purchase as described under "Change of
Control" when due and payable (in the case of the Subordinated
Indenture, whether or not payment is prohibited by the
subordination provisions); (d) failure to perform or comply with
the provisions described under "Merger, Consolidation and Sales
of Assets"; (e) failure to perform any other covenant or
agreement of the Issuers under the Indentures (other than a
covenant included in the Indentures solely for the benefit of a
series of Debt Securities other than that series) continued for
60 days after written notice to the Issuers by the Trustee or
Holders of at least 25% in aggregate principal amount of
outstanding Debt Securities of that series; (f) default under the
terms of any instrument evidencing or securing Debt for money
borrowed, including Debt Securities of another series, by an
Issuer or any Subsidiary having an outstanding principal
amount of $5 million individually or in the aggregate which
default results in the acceleration of the payment of such
indebtedness or constitutes the failure to pay such indebtedness
when due; (g) the rendering of a final judgment or judgments
(not subject to appeal) against an Issuer or any Subsidiary
in an amount in excess of $5 million which remains
undischarged or unstayed for a period of 60 days after the date
on which the right to appeal has expired; and (h) certain events
of bankruptcy, insolvency or reorganization affecting an Issuer
or any Subsidiary. (Section 501)
Except as defined in the Prospectus Supplement relating
thereto and except as specified in clause (f) of the preceding
paragraph, no Event of Default with respect to Debt Securities of
a particular series shall necessarily constitute an Event of
Default with respect to Debt Securities of any other series. If
an Event of Default with respect to Debt Securities of any series
at the time outstanding shall occur and be continuing, either the
Trustee or the Holders of at least 25% in principal amount of the
Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all
Debt Securities of that series to be due and payable immediately;
provided, however, that under certain circumstances the Holders
of a majority in aggregate principal amount of outstanding Debt
Securities of that series may rescind or annul such declaration
and its consequences. (Section 502). If an Event of Default
specified in clause (h) of the preceding paragraph occurs, the
outstanding Debt Securities will ipso facto become immediately
payable without any declaration or other act on the part of the
Trustee or any Holder. (Section 502)
Reference is made to the Prospectus Supplement relating
to any series of Offered Debt Securities which are Original Issue
Discount Securities for the particular provisions relating to the
principal amount of such Original Issue Discount Securities due
on acceleration upon the occurrence of an Event of Default and
the continuation thereof.
The Issuers will be required to furnish to the Trustee
annually a statement by certain officers of the Issuers as to
compliance with all conditions and covenants of the Indentures.
(Section 1004)
The Holders of a majority in principal amount of the
Outstanding Debt Securities of any series affected will have the
right, subject to certain limitations, 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 the
Trustee with respect to the Debt Securities of such series, and
to waive certain defaults. (Sections 512 and 513)
The Indentures provide that, upon the occurrence of an
Event of Default that shall be continuing, the Trustee shall
exercise such of its rights and powers under the Indentures, and
use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the
conduct of his own affairs. (Section 601). Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indentures at the request
of any of the Holders of Debt Securities unless they shall have
offered to the Trustee security or indemnity in form and
substance reasonably satisfactory to the Trustee against the
costs, expenses and liabilities which might be incurred by it in
compliance with such request. (Section 603)
No Holder of a Debt Security of any series will have
any right to institute any proceeding with respect to the
Indentures or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a
continuing Event of Default and unless also the Holders of at
least 25% in aggregate principal amount of the Outstanding Debt
Securities of the same series shall have made written request,
and offered reasonable indemnity to the Trustee, to institute
such proceeding as trustee, and the Trustee shall not have
received from the Holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of the same series a
direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. (Section 507).
However, such limitations do not apply to a suit instituted by a
Holder of a Debt Security for enforcement of payment of the
principal of (or premium, if any) or interest, if any, on such
Debt Security on or after the respective due dates expressed in
such Debt Security, or of the right to convert such Debt Security
in accordance with the Indentures (if applicable). (Section 508)
Modification and Waiver
Modifications and amendments of each Indenture may be
made by the Issuer and the Trustee, with the consent of the
Holders of not less than a majority of aggregate principal amount
of each series of the outstanding Debt Securities issued under
such Indenture which is affected by the modification or
amendment; provided, however, that no such modification or
amendment may, without the consent of each Holder of such Debt
Security affected thereby: (1) change the Stated Maturity of the
principal of (or premium, if any) or any instalment of principal
or interest, if any, on any such Debt Security; (2) reduce the
principal amount of (or premium, if any) or the interest rate, if
any, on any such Debt Security or the principal amount due upon
acceleration of an Original Issue Discount Security;
(3) adversely affect any right of repayment at the option of the
Holder of any such Debt Security; (4) reduce the amount of or
postpone the date fixed for, the payment of any sinking fund or
analogous obligation; (5) change the place or currency of payment
of principal of (or premium, if any) or the interest, if any, on
any such Debt Security; (6) impair the right to institute suit
for the enforcement of any such payment on or with respect to any
such Debt Security on or after the Stated Maturity (or, in the
case of redemption, on or after the Redemption Date); (7)
adversely change the right to convert or exchange, including
decreasing the conversion rate or increasing the conversion price
of, such Debt Security (if applicable); (8) reduce the percentage
of the principal amount of Outstanding Debt Securities of any
series, the consent of the Holders of which is necessary to
modify or amend the Applicable Indenture; (9) in the case of the
Subordinated Indenture, modify the subordination provisions in a
manner adverse to the holders of the Subordinated Debt
Securities; (10) modify the foregoing requirements or reduce the
percentage of outstanding Debt Securities necessary to waive
compliance with certain provisions of the Applicable Indenture or
for waiver of certain defaults or (11) following the mailing of
any Offer to Purchase, modify any Offer to Purchase required
under the "Change in Control" covenant contained in the
Indentures in a manner materially adverse to the holders
thereof. (Section 902)
The Subordinated Indenture also prohibits any
modification of amendment of the subordination provisions thereof
in a manner adverse to the holders of Senior Debt, without such
holders' consent. (Subordinated Indenture Section 902)
The holders of at least a majority of the aggregate
principal amount of the Outstanding Debt Securities of any series
may, on behalf of all Holders of that series, waive compliance by
the Issuers with certain restrictive provisions of the Indentures
and waive any past default under the Indentures, except a default
in the payment of principal, premium or interest or in the
performance of certain covenants. (Sections 1011 and 513)
Each Indenture provides that in determining whether the
Holders of the requisite principal amount of the Outstanding Debt
Securities or any series have given or taken any direction,
notice, consent, waiver or other action under the Applicable
Indenture as of any date, (i) the principal amount of an Original
Issue Discount Debt Security that will be deemed to be
Outstanding will be the amount of the principal thereof that
would be due and payable as of such date upon acceleration of the
Maturity thereof to such date, (ii) if, as of such date, the
principal amount payable at the Stated Maturity of a Debt
Security is not determinable (for example, because it is based on
an index), the principal amount of such Debt Security deemed to
be Outstanding as of such date will be an amount determined in
the manner prescribed for such Debt Security and (iii) the
principal amount of a Security denominated in one or more foreign
currencies or currency units that will be deemed to be
Outstanding will be the U.S. dollar equivalent, determined as of
such date in the manner prescribed for such Debt Security, of the
principal amount of such Debt Security (or, in the case of a Debt
Security described in clause (i) or (ii) above, of the amount
described in such clause). Certain Debt Securities, including
those for whose payment or redemption money has been deposited or
set aside in trust for the Holders and those that have been fully
defeased pursuant to Section 1302, will not be deemed to be
Outstanding. (Section 101)
Except in certain limited circumstances, the Issuers
will be entitled to set any day as a record date for the purpose
of determining the Holders of Outstanding Debt Securities of any
series entitled to give or take any direction, notice, consent,
waiver or other action under the Applicable Indenture, in the
manner and subject to the limitations provided in such Applicable
Indenture. In certain limited circumstances, the Trustee will be
entitled to set a record date for action by Holders. If a record
date is set for any action to be taken by Holders of a particular
series, such action may be taken only by persons who are Holders
of Outstanding Debt Securities of that series on the record
date. To be effective, such action must be taken by Holders of
the requisite principal amount of such Debt Securities within a
specified period following the record date. For any particular
record date, this period will be 180 days or such shorter period
as may be specified by the Issuers (or the Trustee, if it set the
record date), and may be shortened or lengthened (but not beyond
180 days) from time to time. (Section 104)
Defeasance and Covenant Defeasance
The Indentures provide, if such provision is made
applicable to the Debt Securities of any series pursuant to
Section 301 of the Applicable Indenture (which will be indicated
in the Prospectus Supplement applicable thereto), that the
Issuers may elect either (A) to defease and be discharged from
any and all obligations with respect to such Debt Securities then
outstanding (including, in the case of Subordinated Debt
Securities, the provisions described under "Subordination of
Subordinated Debt Securities" herein and except for the
obligations to exchange or register the transfer of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in
respect of the Debt Securities, and to hold monies for payments
in trust)("defeasance"), or (B) to be released from its obliga-
tions with respect to such Debt Securities concerning the
restrictions described under "Consolidation, Merger and Sale of
Assets" and any other covenants applicable to such Debt
Securities (including, in the case of Subordinated Debt
Securities, the provisions described under "Subordination of
Subordinated Debt Securities" herein) which are subject to
covenant defeasance ("covenant defeasance"), and the occurrence
of an event described and notice thereof in clauses (e) and (f)
under "Events of Default and Notice Thereof" (with respect to
covenants determined, pursuant to Section 301 of the Applicable
Indenture, to be subject to covenant defeasance) shall no longer
be an Event of Default, in each case, upon the irrevocable
deposit with the Trustee (or other qualifying trustee), in trust
for such purpose, of money, and/or U.S. Government Obligations
(as defined in the Indentures) (or Foreign Government Obligations
(as defined in the Indentures) in the case of Debt Securities
denominated in foreign currencies) which through the payment of
principal and interest in accordance with their terms will
provide money in an amount sufficient without reinvestment to pay
the principal of (and premium, if any) and interest, if any, on
such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor. Such a
trust may only be established if, among other things, (i) the
Issuers have delivered to the Trustee an opinion of counsel (as
specified in the Applicable Indenture) to the effect that the
Holders of such Debt Securities will not recognize income, gain
or loss for Federal income tax purposes as a result of such
defeasance or 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 defeasance or
covenant defeasance had not occurred, (ii) no Event of Default or
event which with the giving of notice or lapse of time, or both,
would become an Event of Default under the Applicable Indenture
shall have occurred and be continuing on the date of such
deposit, (iii) in the case of Subordinated Debt Securities, (x)
no default in the payment of principal of (or premium, if any) or
interest, if any, on any Senior Debt beyond any applicable grace
period shall have occurred and be continuing, or (y) no other
default with respect to any Senior Debt shall have occurred and
be continuing and shall have resulted in the acceleration of such
Senior Debt and (iv) certain other customary conditions precedent
are satisfied. In the case of defeasance under clause (A) above,
the opinion of counsel referred to in clause (i) above must refer
to an be based on a ruling of the Internal Revenue Service issued
to the Company or published as a revenue ruling or on a change in
applicable Federal income tax law, in each case after the date of
the Applicable Indenture. (Article Thirteen)
Under current Federal income tax law, defeasance would
likely be treated as a taxable exchange of such Debt Securities
for interests in the defeasance trust. As a consequence a Holder
would recognize gain or loss equal to the difference between the
Holder's cost or other tax basis for such Debt Securities and the
value of the Holder's proportionate interest in the defeasance
trust, and thereafter would be required to include in income a
proportionate share of the income, gain and loss of the
defeasance trust. Under current Federal income tax law, covenant
defeasance would ordinarily not be treated as a taxable exchange
of such Debt Securities. Purchasers of such Debt Securities
should consult their own advisors with respect to the tax
consequences to them of such defeasance and covenant defeasance,
including the applicability and effect of tax laws other than the
Federal income tax law.
The Issuers may exercise the defeasance option with
respect to such Debt Securities notwithstanding its prior
exercise of the covenant defeasance option. If the Issuers
exercise the defeasance option, payment of such Debt Securities
may not be accelerated because of an Event of Default. If the
Issuers exercise the covenant defeasance option, payment of such
Debt Securities may not be accelerated by reference to the
covenants noted under clause (B) above. In the event the Issuers
omit to comply with the remaining obligations with respect to
such Debt Securities under the Applicable Indenture after
exercising its covenant defeasance option and such Debt
Securities are declared due and payable because of the occurrence
of any Event of Default, the amount of money and U.S. Government
Obligations (or Foreign Government Obligations in the case of
Debt Securities denominated in foreign currencies) on deposit
with the Trustee may be insufficient to pay amounts due on the
Debt Securities of such series at the time of the acceleration
resulting from such Event of Default, because the required
deposit in the defeasance trust is based upon scheduled cash
flows, rather than market values, which will vary depending on
prevailing interest rates and other factors. However, the
Issuers will remain liable in respect of such payments. (Arti-
cle Thirteen)
The Prospectus Supplement may further describe the
provisions, if any, applicable to defeasance with respect to the
Debt Securities of a particular series.
Certain Definitions
Set forth below is a summary of certain of the defined
terms used in the Indentures. Reference is made to the
Applicable Indenture with respect to any particular series of
Debt Securities for the full definition of all such terms, as
well as any other terms used herein for which no definition is
provided. (Section 101)
"Affiliate" of any Person means any other Person
directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. For the
purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to
the foregoing.
"Bank Agreement" means the Third Amended and
Restated Credit Agreement, dated as of April 7, 1992, among the
Issuers, Chemical Bank (as successor to Manufacturers Hanover
Trust Company), as Agent, and the lenders identified therein (the
"Banks"), as amended by the First Amendment thereto, dated as of
November 19, 1992, the Second Amendment thereto, dated as of
February 23, 1993, and the Third Amended thereto, dated as of
December 15, 1993, as such agreement may be amended, extended,
restated or otherwise modified.
"Bank Hedging Agreement" means, with respect to an
Issuer, any agreement between such Issuer and any Bank that is a
lender under the Bank Agreement consisting of (a) any interest
rate protection agreement, interest rate future, interest rate
option, interest rate swap, interest rate cap or other interest
rate hedge or arrangement and (b) any agreement or arrangement
designed to limit or eliminate the risk and/or exposure of such
Issuer to fluctuations in currency exchange rates.
"Capital Lease Obligations" of any Person means the
obligation to pay rent or other payment amounts under a lease
of (or other Debt arrangements conveying the right to use) real
or personal property of such Person which is required to be
classified and accounted for as a capital lease or a liability on
the fact of a balance sheet of such Person in accordance with
generally accepted accounting principles. The stated maturity
of such obligation shall be the date of the last payment of rent
or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without
payment of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, participation or other equivalents (however
designated) of corporate stock of such Person.
"Debt" means (without duplication and without
regard to any portion of principal amount that has not accrued
and to any interest component thereof (whether accrued or
imputed) that is not due and payable) with respect to any Person,
whether recourse is to all or a portion of the assets of such
Person and whether or not contingent, (i) every obligation of
such Person for money borrowed; (ii) 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; (iii) every
reimbursement obligation of such Person with respect to letters
of credit, bankers' acceptances or similar facilities issued for
the account of such Person; (iv) every obligation of such Person
issued or assumed as the deferred purchase price of property or
services (but excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business); (v)
every Capital Lease Obligation of such Person; (vi) the maximum
fixed redemption or repurchase price of Redeemable Stock of such
Person at the time of determination; and (vii) every obligation
of the type referred to in clauses (i) through (vi) 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, directly or indirectly, as obligor or otherwise.
(Section 101 of the Subordinated Indenture)
"Offer to Purchase" means a written offer (the "Offer")
sent by the Issuers by first class mail, postage prepaid, to each
Holder at its address appearing in the Debt Security Register on
the date of the Offer offering to purchase up to the principal
amount of Debt Securities specified in such Offer at the purchase
price specified in such Offer (as determined pursuant to the
Applicable 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, subject to any
contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and a settlement
date (the "Purchase Date") for purchase of Debt Securities within
five Business Days after the Expiration Date. The Issuers 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 Issuers' obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Issuers or, at the
Issuers' request, by the Trustee in the name and at the expense
of the Issuers. The Offer shall contain information concerning
the business of the Issuers and their Subsidiaries which the
Issuers in good faith believe 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 Issuers' 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
Issuers to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer
to Purchase and the events requiring the Issuers 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 Debt Securities pursuant to the Offer to Purchase. The
Offer shall also state:
(1) the Section of the Applicable Indenture or
Indentures 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
Debt Securities offered to be purchased by the Issuers
pursuant to the Offer to Purchase (including, if less than
100%, the manner by which such has been determined pursuant
to the Section of the Indentures requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Issuers for
each $1,000 aggregate principal amount of Debt Securities
accepted for payment (as specified pursuant to the
Applicable Indenture or Indentures) (the "Purchase Price");
(5) that the Holder may tender all or any portion of
the Debt Securities registered in the name of such Holder
and that any portion of a Debt Security tendered must be
tendered in an integral multiple of $1,000 principal amount;
(6) the place or places where Debt Securities are to
be surrendered for tender pursuant to the Offer to Purchase;
(7) that interest on any Debt Security not tendered or
tendered but not purchased by the Issuers 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 Debt 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 a Debt
Security pursuant to the Offer to Purchase will be required
to surrender such Debt Security at the place or places
specified in the Offer prior to the close of business on the
Expiration Date (such Debt Security being, if the Issuers or
the Trustee so requires, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to
Scotts 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 Debt Securities tendered if the Issuers (or
their Paying Agent) receive, not later than the close of
business on the Expiration Date, a telegram, telex,
facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Debt Securities the
Holder tendered, the certificate number of the Debt Security
the Holder tendered and a statement that such Holder is
withdrawing all or a portion of its tender;
(11) that (a) if Debt 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 Issuers shall purchase all such Debt
Securities and (b) if Debt Securities in an aggregate
principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to
Purchase, the Issuers shall purchase Debt 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 Debt Securities in denominations of
$1,000 or integral multiples thereof shall be purchased);
and
(12) that in the case of any Holder whose Debt
Security is purchased only in part, the Issuers shall
execute, and the Trustee shall authenticate and deliver to
the Holder of such Debt Security without service charge, a
new Debt Security or Debt 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 Debt Security so tendered.
Any Offer to Purchase shall be governed by and effected in
accordance with the Offer for such Offer to Purchase.
"Subsidiary" of any Person means (i) a corporation more
than 50% of the combined voting power of the outstanding Voting
Stock of which is owned, directly or indirectly, by such Person
or by one or more other Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof or (ii) any other
Person (other than a corporation) in which such Person, or one or
more other Subsidiaries of such Person or such Person and one or
more other Subsidiaries thereof, directly or indirectly, has at
least a majority ownership and power to direct the policies,
management and affairs thereof.
"Redeemable Stock" of any Person means, when used in
an Indenture pursuant to which a particular series of Debt
Securities is outstanding, any equity security of such Person
that by its terms or otherwise is required to be redeemed prior
to the final Stated Maturity of such series of Debt Securities or
is redeemable at the option of the holder thereof at any time
prior to the final Stated Maturity of such series of Debt
Securities.
Permanent Global Securities
The Debt Securities of a series may be issued in the
form of one or more permanent Global Securities that will be
deposited with a Depositary or its nominee. In such a case, one
or more Global Securities will be issued in a denomination or
aggregate denominations equal to the portion of the aggregate
principal amount of Outstanding Debt Securities of the series to
be represented by such Global Security or Securities. The
Prospectus Supplement relating to such series of Debt Securities
will describe the circumstances, if any, under which beneficial
owners of interests in any such permanent Global Security may
exchange such interests for Debt Securities of such series and of
like tenor and principal amount in any authorized form and
denomination. Unless and until it is exchanged in whole or in
part for Debt Securities in definitive registered form, a
permanent Global Security may not be registered for transfer or
exchange except in the circumstances described in the applicable
Prospectus Supplement. (Sections 204 and 305)
The specific terms of the depositary arrangement with
respect to any portion of a series of Debt Securities to be
represented by a permanent Global Security and a description of
the Depositary will be contained in the applicable Prospectus
Supplement.
The Trustee
Chemical Bank will be the Trustee under each of the
Indentures.
In case of an Event of Default under one of the Indentures,
the Trustee, by virtue of its acting as Trustee under the other
Indenture, would be deemed to have a conflicting interest within
the meaning of the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") and may be required to resign as
Trustee under one of the Indentures.
Chemical Bank is the agent bank and a lender under the
Bank Agreement. Each Indenture contains limitations on the
right of the Trustee, as a creditor of the Issuers, to obtain
payment of claims in certain cases, or to realize on certain
property received in respect of any such claims as security or
otherwise. In addition, in case of an Event of Default under an
Indenture, the Trustee, by virtue of being a creditor of the
Issuers, would be deemed to have a conflicting interest within
the meaning of the Trust Indenture Act and may be required to
resign as Trustee under such Indenture.
Chemical Securities Inc. is an affiliate of the Trustee
and may act as underwriter with respect to one or more series of
Debt Securities or for other securities of the Issuers. In case
of an Event of Default under an Indenture, if Chemical Securities
Inc. had acted as underwriter of securities of an Issuer within
one year prior to such time, the Trustee would be deemed to
have a conflicting interest within the meaning of the Trust
Indenture Act and may be required to resign as Trustee under
such Indenture.
The Trustee or its affiliates act as depositary for funds
of, make loans to and perform other services for, of may be a
customer of, the Issuers in the ordinary course of business.
Governing Law
The Indentures and the Debt Securities are governed by
and shall be construed in accordance with the laws of the State
of New York.
PLAN OF DISTRIBUTION
The Issuers may sell Debt Securities to one or more
underwriters for public offering and sale by them or may sell
Debt Securities to investors or other persons directly or through
agents. The Issuers may sell Debt Securities as soon as
practicable after effectiveness of the Registration Statement,
provided that favorable market conditions exist. Any such
underwriter or agent involved in the offer and sale of the Debt
Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Debt Securities at
a fixed price or prices, which may be changed, or at prices
related to prevailing market prices or at negotiated prices. The
Issuers also may, from time to time, authorize firms acting as
agents of the Issuers to offer and sell the Debt Securities upon
such terms and conditions as shall be set forth in any Prospectus
Supplement. In connection with the sale of Debt Securities,
underwriters may be deemed to have received compensation from the
Issuers in the form of underwriting discounts or commissions and
may also receive commissions from purchasers of Debt Securities
for whom they may act as agent. Underwriters may sell Debt
Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions (which may be changed
from time to time) from the purchasers for whom they may act as
agent.
Any underwriting compensation paid by the Issuers to
underwriters or agents in connection with the offering of Debt
Securities, and any discounts, concessions or commissions allowed
by underwriters to participating dealers, will be set forth in an
applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Debt Securities
may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on
resale of the Debt Securities may be deemed to be underwriting
discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under
agreements with the Issuers, to indemnification against and
contribution toward certain civil liabilities, including
liabilities under the Securities Act, and to reimbursement by the
Issuers for certain expenses.
Underwriters, dealers and agents may engage in
transactions with, or perform services for, or be customers of,
the Issuers in the ordinary course of business.
The Debt Securities may or may not be listed on a
national securities exchange or a foreign securities exchange.
No assurances can be given that there will be a market for the
Debt Securities.
VALIDITY OF THE DEBT SECURITIES
The validity of the Debt Securities will be passed upon for
the Issuers by Vorys, Sater, Seymour and Pease, Columbus, Ohio.
EXPERTS
The consolidated balance sheets of the Company as of
September 30, 1992 and 1993, and the consolidated statements of
income, changes in shareholder's equity (deficit) and cash flows
for each of the three years in the period ended September 30,
1993, included in this Prospectus have been audited by Coopers &
Lybrand, independent accountants, as stated in their report
appearing in this Prospectus, and are included in reliance upon
the report, which includes an explanatory paragraph on changes in
accounting for income taxes and postretirement benefits
other than pensions, of such firm given upon their authority
as experts in accounting and auditing.
The consolidated balance sheet of Grace-Sierra Horticultural
Products Company ("Grace-Sierra") as of December 16, 1993, and
the consolidated statement of operations, changes in common
shareholder's deficit and cash flows for the period from January
1, 1993 to December 16, 1993, included in the Company's Current
Report on Form 8-K/A dated February 28, 1994, have been audited
by Coopers & Lybrand, independent accountants, and are
incorporated herein by reference in reliance upon the report of
such firm given upon their authority as experts in accounting and
auditing.
The consolidated balance sheet of Grace-Sierra as of and the
consolidated statement of operations, changes in common
shareholder's deficit and cash flows for the year ended December
31, 1992, included in the Company's Current Report on Form 8-K/A
dated February 28, 1994, have been audited by Price Waterhouse,
independent accountants, and are incorporated herein by reference
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
THE SCOTTS COMPANY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements of The Scotts Company and
Subsidiaries:
Report of Independent Accountants
F-1
Consolidated Balance Sheets at September 30, 1992 and 1993
F-2
Consolidated Statements of Income for the years ended
September 30, 1991, 1992 and 1993
F-3
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the years ended September 30, 1991, 1992 and
1993
F-4
Consolidated Statements of Cash Flows for the years ended
September 30, 1991, 1992 and 1993
F-5
Notes to Consolidated Financial Statements
F-6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of
Directors of The Scotts Company
We have audited the accompanying consolidated balance sheets of
The Scotts Company and Subsidiaries as of September 30, 1992 and
1993, and the related consolidated statements of income, changes
in shareholders' equity (deficit), and cash flows for each of the
three years in the period ended September 30, 1993. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of The Scotts Company and Subsidiaries as of
September 30, 1992 and 1993, and the consolidated results of
their operations and their cash flows for each of the three years
in the period ended September 30, 1993, in conformity with
generally accepted accounting principles.
As discussed in Notes 3 and 6 to the consolidated financial
statements, effective the beginning of fiscal 1993 the Company
changed its method of accounting for postretirement benefits
other than pensions and income taxes.
Coopers & Lybrand
Columbus, Ohio
November 19, 1993, except as to Note 12, which is as of
December 16, 1993.
F-1
<TABLE>
<CAPTION>
THE SCOTTS COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1992 and 1993
(in thousands except share amounts)
ASSETS
1992 1993
<S> <C> <C>
Current Assets:
Cash $ 880 $ 2,323
Accounts receivable, less allowance of
$2,110 in 1992 and $2,511 in 1993 51,580 60,848
Inventories 59,697 76,654
Prepaid and other assets 3,376 3,917
Total current assets 115,533 143,742
Property, plant and equipment, at cost:
Land and land improvements 18,537 19,817
Buildings 31,307 36,300
Machinery and equipment 62,082 87,250
Furniture and fixtures 5,561 5,952
Construction in progress 16,914 4,687
134,401 154,006
Less accumulated depreciation 45,331 55,215
89,070 98,791
Patents and other intangibles, net of
accumulated amortization of $17,932
in 1992 and $21,053 in 1993 20,272 19,972
Deferred financing and organizational
costs, net of accumulated amortization
of $6,673 in 1992 and $7,770 in 1993 3,708 3,530
Excess of costs over underlying value
of net assets acquired (goodwill),
net of accumulated amortization
of $4,119 in 1992 and $5,123 in 1993 36,030 41,340
Other assets 3,408 14,215
Total Assets $268,021 $321,590
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Revolving credit $ 4,000 $ -
Current portion of term debt 543 5,444
Bank line of credit 1,658 705
Accounts payable, trade 29,313 28,279
Accrued liabilities 7,315 9,135
Accrued payroll and fringe benefits 10,293 12,035
Accrued taxes 7,616 9,253
Total current liabilities 60,738 64,851
Long-term debt, less current portions 31,354 87,080
Postretirement benefits other than
pensions - 26,646
Total Liabilities 92,092 178,577
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, $.01 par value,
authorized 10,000,000 shares; none issued - -
Class A Common stock, voting, par value
$.01 per share; authorized 35,000,000
shares; 21,073,430 issued in 1992
and 1993 211 211
Class B Common stock, non-voting,
par value $.01 per share; authorized
35,000,000 shares; none issued - -
Capital in excess of par value 192,604 193,263
Deficit (16,886) (9,020)
Treasury stock 2,414,895 shares in
1993, at cost - (41,441)
Total Shareholders' Equity 175,929 143,013
Total Liabilities and Shareholders'
Equity $268,021 $321,590
The accompanying notes to consolidated financial
statements are an integral part of these
statements.
</TABLE>
F-2
<TABLE>
<CAPTION>
THE SCOTTS COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
for the years ended September 30, 1991, 1992 and 1993
(in thousands except share amounts)
1991 1992
1993
<S> <C> <C>
<C>
Net sales $388,120
$413,558 $466,043
Cost of sales 207,956
213,133 244,218
Gross profit 180,164
200,425 221,825
Operating expenses:
Marketing 57,489
66,245 74,579
Distribution 57,056
61,051 67,377
General and administrative 22,985
24,759 27,688
Research and development 5,247
6,205 7,700
Total operating expenses 142,777
158,260 177,344
Income from operations 37,387
42,165 44,481
Other expenses, net, including
interest expense of $30,932 in 1991,
$15,942 in 1992 and $8,454 in 1993 32,932
15,962 9,114
Income before income taxes, extraordinary items
and cumulative effect of accounting changes 4,455
26,203 35,367
Income taxes 2,720
11,124 14,320
Income before extraordinary items and
cumulative effect of accounting changes 1,735
15,079 21,047
Extraordinary items:
Loss on early extinguishment of debt, net of tax -
(4,186) -
Utilization of net operating loss carryforwards 2,581
4,699 -
Cumulative effect of changes in accounting for post-
retirement benefits, net of tax and income taxes -
- - (13,157)
Net income $ 4,316 $
15,592 $ 7,890
Net income per common share:
Income before extraordinary items and
accounting changes $ .15 $
.84 $ 1.07
Extraordinary items:
Loss on early extinguishment of debt, net of tax -
(.23) -
Utilization of net operating loss carryforwards .21
.26 -
Cumulative effect of changes in accounting for
postretirement benefits, net of tax
and income taxes -
- - (.67)
Net income $ .36* $
.87 $ .40
Weighted average common
shares outstanding during the period 11,832,651
18,014,151 19,687,013
* - Net income per share for fiscal 1991 has been restated to eliminate the
effect of
accretion to redemption value of redeemable common stock to be
comparable with
fiscal
1992 and 1993.
The accompanying notes to consolidated financial
statements are an integral part of these statements.
</TABLE>
F-3
<TABLE>
<CAPTION>
THE SCOTTS COMPANY AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders'
Equity (Deficit)
for the years ended September 30, 1991, 1992
and 1993
(in thousands except share amounts)
Capital in
Total
Shareholders'
Class A Common Stock excess of
Treasury Stock Equity(Deficit)
Shares Amount Par Value (Deficit)
Shares Amount
<S> <C> <C> <C> <C> <C>
<C> <C>
Balance, September 30, 1990 9,500,000 $ 95 $ 19,264 $(32,036)
- - $(12,677)
Purchase of redeemable
common stock 235,227 2 733
235,227 $(710) 25
Issuance of redeemable
common stock (118,182) (1) (289)
(118,182) 290 -
Net income 4,316
4,316
Accretion to redemption
value of redeemable
common stock (1,625)
(1,625)
Balance, September 30, 1991 9,617,045 96 18,083 (27,720)
117,045 (420) (9,961)
Adjustment for redeemable
common stock 2,162,500 22 9,826
9,848
Issuance of common stock held
in treasury 310
(112,499) 407 717
Exchange of warrants for
common stock 325,454 3 4,754 (4,770)
(4,546) 13 -
Issuance of common stock 8,968,750 90 159,430
159,520
Net income 15,592
15,592
Amortization of unearned
compensation 24
24
Options outstanding 177
177
Foreign currency translation
adjustment 12
12
Adjustment for fractional
shares (319)
-
Balance, September 30, 1992 21,073,430 211 192,604 (16,886)
- - 175,929
Net income 7,890
7,890
Amortization of unearned
compensation 24
24
Options outstanding 635
635
Foreign currency translation
adjustment (24)
(24)
Purchase of common stock
(2,414,895) (41,441) (41,441)
Balance, September 30, 1993 21,073,430 $ 211 $193,263 $ (9,020)
(2,414,895) $(41,441) $143,013
The accompanying notes to consolidated
financial
statements are an integral part of these
statements.
</TABLE>
F-4
<TABLE>
<CAPTION>
THE SCOTTS COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the years ended September 30, 1991, 1992 and 1993
(in thousands)
1991 1992
1993
<S> <C> <C>
<C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net income $ 4,316 $
15,592 $ 7,890
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 10,670
10,206 12,278
Amortization 7,115
5,642 5,866
Extraordinary loss on early extinguishment of debt -
4,186 -
Cumulative effect of change in accounting for
postretirement benefits -
- - 24,280
Postretirement benefits -
- - 2,366
Deferred income taxes -
1,588 (12,740)
Loss on sale of equipment 1,414
392 94
Provision for losses on accounts receivable 1,068
990 1,409
Other -
204 748
Changes in assets and liabilities:
Accounts receivable (1,514)
(5,476) (10,002)
Inventories 1,735
(3,291) (11,147)
Prepaid and other current assets 1,216
(268) (393)
Accounts payable 1,826
(654) (2,390)
Accrued liabilities (4,750)
(5,351) 1,630
Other assets and liabilities 3,542
3,682 4,784
Net cash provided by operating activities 26,638
27,442 24,673
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in plant and equipment (8,818)
(19,896) (15,158)
Acquisition of Republic, net of cash acquired -
- - (16,366)
Proceeds from sale of equipment 215
131 194
Net cash used in investing activities (8,603)
(19,765) (31,330)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under term debt 941
- - 70,000
Payments on term and other debt (11,008)
(58,307) (640)
Net payments under revolving credit (6,000)
(36,500) (18,238)
Net borrowings (payments) under bank line of credit 58
349 (953)
Redemption of senior subordinated notes -
(53,223) -
Redemption of subordinated debentures -
(21,132) -
Deferred financing cost incurred -
(1,117) (628)
Net proceeds from issuance of Class A Common Stock -
160,237 -
Purchase of Class A Common Stock -
- - (41,441)
Net purchase of redeemable Class A Common Stock (241)
- - -
Net cash (used in) provided by
financing activities (16,250)
(9,693) 8,100
Net increase (decrease) in cash 1,785
(2,016) 1,443
Cash, beginning of period 1,111
2,896 880
Cash, end of period $ 2,896 $
880 $ 2,323
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest (net of amount capitalized) $ 29,592 $
16,240 $ 6,169
Income taxes paid 72
1,189 11,500
The accompanying notes to consolidated financial
statements are an integral part of these statements.
</TABLE>
F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The Scotts Company ("Scotts") through its wholly-owned
subsidiaries, The O. M. Scott & Sons Company ("OMS"), Hyponex
Corporation ("Hyponex") and Republic Tool and Manufacturing Corp.
("Republic"), collectively, the "Company"), is engaged in the
manufacture and sale of lawn care and garden products.
Substantially all of the assets currently held by Scotts consist
of the capital stock of OMS and advances to OMS. The
consolidated financial statements include the financial
statements of Scotts and OMS. All material intercompany
transactions have been eliminated.
Shareholders' equity, shares outstanding and per share
amounts for all periods have been adjusted for the January 1992
reverse stock split, in which every 2.2 shares of old Class A
Common Stock were exchanged for one share of new Class A Common
Stock.
Inventories
Inventories are principally stated at the lower of cost or
market determined by the FIFO method; certain inventories of
Hyponex primarily organic products) are accounted for by the
LIFO method. At September 30, 1992 and 1993, approximately 28%
and 24% of inventories, respectively, are valued at the lower of
LIFO cost or market. Inventories include the cost of raw
materials, labor and manufacturing overhead.
The Company makes provisions for obsolete or slow-moving
inventories as necessary to properly reflect inventory value.
Inventories as of September 30, 1992 and 1993, net of such
provisions, consisted of:
<TABLE>
<CAPTION>
1992 1993
<S> <C> <C>
Finished Goods $34,605,000 $44,735,000
Raw Materials 26,063,000 31,905,000
FIFO Cost 60,668,000 76,640,000
LIFO Reserve (971,000) 14,000
$59,697,000 $76,654,000
</TABLE>
Advertising and Consumer Guarantee
The Company has a cooperative advertising program with
customer dealers whereby the Company reimburses dealers for the
qualifying portion of dealer advertising costs. Such advertising
allowances are based on the timing of dealer orders and
deliveries. The Company provides for the cost of this program in
the period the sales to dealers are recorded.
F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company accrues amounts for product non-performance
claims by consumers under the Company's product guarantee
program. The provision is determined by applying an experience
rate to sales in the period the related products are shipped to
dealers.
Property, Plant and Equipment
Property, plant and equipment, including significant
improvements, are stated at cost. Expenditures for maintenance
and repairs are charged to operating expenses as incurred. When
properties are retired, or otherwise disposed of, the cost of the
asset and the related accumulated depreciation are removed from
the accounts.
Depletion of applicable land is computed on the
units-of-production method. Depreciation of other property,
plant and equipment is provided on the straight-line method and
is based on the estimated useful economic lives of the assets as
follows:
Land improvements 10-25 years
Buildings 10-40 years
Machinery and equipment 3-15 years
Furniture and fixtures 6-10 years
Property subject to capital leases in the amount of
$1,951,000 and $1,484,000 (net of accumulated amortization of
$1,128,000 in 1992 and $1,560,000 in 1993) has been included in
machinery and equipment at September 30, 1992 and 1993,
respectively.
The Company capitalized interest costs of $380,000 in fiscal
1992 as part of the cost of major asset construction projects.
Research and Development
Significant costs are incurred each year in connection with
research and development programs that are expected to contribute
profits to operations of future years. All costs associated with
research and development are charged to expense as incurred.
Intangible Assets
Goodwill is being amortized over 40 years on a straight-line
basis. Financing costs incurred in obtaining long-term debt are
capitalized and amortized over the life of the related debt using
the effective-interest method. Other intangible assets consist
primarily of patents and are being amortized on a straight-line
basis over their estimated useful economic lives varying from 7
to 24 years.
Foreign Currency
The Company has operations located in the United Kingdom
where the local currency is the functional currency. Foreign
currency financial statements of these operations are translated
using exchange rates in effect at period end for assets and
liabilities
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and average exchange rates during the period for results of
operations. Related foreign currency translation
adjustments of $12,000 and ($12,000) are reported as a component
of shareholders' equity as of September 30, 1992 and 1993,
respectively.
Gains and losses from foreign currency transactions are
included in other expenses, net. In fiscal 1991, 1992 and 1993,
the Company recorded foreign exchange losses of $141,000,
$324,000 and $196,000, respectively.
Income Taxes
Effective October 1, 1992, the Company adopted Statement of
Financial Accounting Standard ("SFAS") No. 109, "Accounting for
Income Taxes", which requires recognition of deferred tax assets
and liabilities for the expected future tax consequences of
events that have been recognized in the financial statements or
tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the
financial statement and tax bases of the assets and liabilities
using enacted tax rates.
Prior to fiscal 1993, the Company's deferred income tax
provision was based on differences between financial reporting
and taxable income.
Reclassifications
Certain reclassifications have been made to the prior years'
financial statements to conform to fiscal 1993 classifications.
2. ACQUISITION
Effective November 19, 1992, the Company acquired Republic
headquartered in Carlsbad, California. Republic designs,
develops, manufactures and markets lawn and garden equipment with
the substantial majority of its revenue derived from the sale of
its products to mass merchandisers, home centers and garden
outlets in the United States. The purchase price of
approximately $16,366,000 was financed under the Company's
revolving credit agreement.
The acquisition was accounted for using the purchase method.
Accordingly, the purchase price was allocated among the assets
acquired and liabilities assumed based on their estimated fair
values at the date of acquisition. The excess of purchase price
over the estimated fair values of the net assets acquired
("goodwill") of approximately $6,400,000 is being amortized on a
straight-line basis over 40 years.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following represents the pro forma results of operations
assuming the acquisition had occurred effective October 1, 1991
after giving effect to certain adjustments, including
depreciation and amortization on tangible and intangible
property, increased interest on acquisition debt and related
income tax effects. Republic's results of operations have been
included in the Company's Consolidated Statement of Income since
November 19, 1992. As such, the Company's fiscal 1993 pro forma
results of operations are not materially different from actual
results and are therefore not presented.
<TABLE>
<CAPTION>
Year Ended
September 30, 1992
(unaudited)
<S> <C>
Net sales $ 427,706,000
Income before extraordinary items $ 13,968,000
Net income $ 14,481,000
Earnings per common share on
income before extraordinary items $ .77
Earnings per common share $ .80
</TABLE>
The pro forma information provided does not purport to be
indicative of actual results of operations if the acquisition had
occurred asof October 1, 1991, and is not intended to be
indicative of future results or trends.
3. ASSOCIATE BENEFITS
OMS has a defined benefit pension plan covering
substantially all full-time associates who have completed one
year of eligible service or reached the age of 21, whichever is
later. Benefits are based on years of service and the
associates' average final compensation and are adjusted for
Social Security Benefits as defined in the plan. The Company's
funding policy is to contribute an amount that can be deducted
for Federal income tax purposes subject to Employee Retirement
Income Security Act limitations.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The following table sets forth the plan's funded status and the
related amounts recognized in the consolidated balance sheets at
September 30, 1992 and 1993.
<CAPTION>
1992 1993
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation:
Vested benefits $(26,112,000) $(28,904,000)
Nonvested benefits (1,649,000) (1,875,000)
Additional obligation for
projected compensation increases (6,028,000) (5,530,000)
Projected benefit obligation for
service rendered to date (33,789,000) (36,309,000)
Plan assets at fair value, primarily
corporate bonds, U.S. bonds and
cash equivalents 30,890,000 33,214,000
Plan assets less than projected
benefit obligations (2,899,000) (3,095,000)
Unrecognized net asset being
recognized over 11 1/2 years (757,000) (626,000)
Unrecognized net loss 5,323,000 4,609,000
Prepaid pension costs $ 1,667,000 $ 888,000
</TABLE>
<TABLE>
<CAPTION>
Pension cost includes the following components:
Year Ended September
30,
1991 1992
1993
<S> <C> <C>
<C>
Service cost $ 1,172,000 $ 1,571,000 $
1,571,000
Interest cost 2,172,000 2,438,000
2,628,000
Actual return on plan assets (2,450,000) (2,602,000)
(2,774,000)
Net amortization and deferral (132,000) (133,000)
(18,000)
Net pension cost $ 762,000 $ 1,274,000 $
1,407,000
</TABLE>
The weighted average settlement rate used in determining the
actuarial present value of the projected benefit obligation was
9%, 8% and 8% as of September 30, 1991, 1992 and 1993,
respectively. Future compensation is assumed to increase 5%
annually for fiscal 1991 and 1992, and 4% annually for fiscal
1993. The expected long-term rate of return on plan assets
was 10% in fiscal 1991 and 1992, and 9% in fiscal 1993.
The Company provides comprehensive major medical benefits to some
of its retired associates and their dependents. Substantially
all of the Company's associates become eligible for these
benefits if they retire at age 55 or older with more than ten
years of service. The plan requires certain minimum
contributions from retired associates and includes
provisions to limit the overall cost increases the Company is
required to cover. The Company funds its portion of retiree
medical benefits on a pay-as-you-go basis.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective October 1, 1992, the Company changed its method of
accounting for postretirement benefit costs other than
pensions by adopting SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The Company
elected to immediately recognize the cumulative effect of the
change in accounting which resulted in a charge of $14,932,000,
net of income taxes of $9,348,000, or $.76 per share. In
addition to the cumulative effect, the Company's retiree medical
costs applying the new accounting method increased $1,437,000,
net of income taxes of $929,000, or $.07 per share, during fiscal
1993 as a result of the change in accounting.
Net periodic postretirement benefit cost for fiscal 1993
included the following components:
Service cost - benefits attributed to
associate service during the year $ 930,000
Interest cost on accumulated
postretirement benefit obligation 2,038,000
Net periodic postretirement benefit cost $ 2,968,000
The following table sets forth the retiree medical plan
status reconciled to the amount included in the consolidated
balance sheet as of September 30, 1993.
Accumulated postretirement benefit obligation:
Retirees $ 6,738,000
Fully eligible active plan participants 314,000
Other active plan participants 8,305,000
Total accumulated postretirement
benefit obligation 15,357,000
Unrecognized prior service cost 9,494,000
Unrecognized gains from changes
in assumptions 1,795,000
Accrued postretirement benefit cost $26,646,000
The discount rate used in determining the accumulated
postretirement benefit obligation was 8.5%. For measurement
purposes, a 14% annual rate of increase in per capita cost of
covered retiree medical benefits was assumed for fiscal 1994; the
rate was assumed to decrease gradually to 5.5% through the year
2051 and remain at that level thereafter. A 1% increase in the
health care cost trend rate assumptions would increase the
accumulated postretirement benefit obligation as of September 30,
1993 by $875,000.
Both OMS and Hyponex have defined contribution profit
sharing plans. Both plans provide for associates to become
participants following one year of service. The Hyponex plan
also requires associates to have reached the age of 21 for
participation. The plans provide for annual contributions which
are entirely at the
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
discretion of the Board of Directors. Contributions are
allocated among the participants employed as of the last day of
the calendar year, based upon participants' earnings. Each
participant's share of the annual contributions vest according to
the provisions of the plans. The Company has provided a profit
sharing provision for the plans of $1,750,000, $1,750,000 and
$1,993,000 for fiscal 1991, 1992 and 1993, respectively. The
Company's policy is to deposit the contributions with the trustee
in the following year.
The Company is self-insured for certain health benefits up
to $125,000 per occurrence per individual. The cost of such
benefits is recognized as expense in the period the claim
occurred. This cost was $5,293,000, $6,439,000 and $6,662,000 in
1991, 1992 and 1993, respectively. The Company is self-insured
for State of Ohio workers compensation up to $500,000 per claim.
The cost for workers compensation was $139,000, $127,000 and
$268,000 in 1991, 1992 and 1993, respectively. Claims in excess
of stated limits of liability and claims for workers compensation
outside of the State of Ohio are insured with commercial
carriers. The Company had an accrued vacation liability of
$3,404,000 and $3,612,000 at September 30, 1992 and 1993,
respectively.
In November 1992, the Financial Accounting Standards Board
issued SFAS No. 112, "Employers' Accounting for Postemployment
Benefits", which changes the prevalent method of accounting for
benefits provided after employment but before retirement. The
Company is required to adopt SFAS No. 112 no later than the first
quarter of fiscal 1995. Management is currently evaluating the
provisions of SFAS No. 112 and, at this time, the effect of
adopting SFAS No. 112 has not been determined.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
September 30,
1992 1993
<S> <C> <C>
Revolving Credit Loan $ 34,000,000 $ 21,000,000
Term Loan - 70,000,000
Capital lease obligations and other 1,897,000 1,524,000
35,897,000 92,524,000
Less current portions 4,543,000 5,444,000
$ 31,354,000 $ 87,080,000
</TABLE>
Maturities of term debt in 1994 through 1996 are $5,000,000
in each year; 1997 and 1998 maturities are $10,000,000 in each
year; and aggregate maturities thereafter are $35,000,000.
On February 23, 1993, the Company entered into an amendment
to the Third Amended and Restated Credit Agreement ("Agreement")
with Chemical Bank ("Chemical") and various participating banks.
This
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
amendment to the Agreement provides the Company with
$70,000,000 of term loans with scheduled maturities commencing on
March 31, 1994 and extending through September 30, 2000. The
Agreement continues to provide a revolving credit commitment of
$150,000,000 through the scheduled termination date of March 31,
1996. The Agreement permits up to $75,000,000 of the revolving
credit commitment to be utilized in support of commercial paper
and up to $15,000,000 to be utilized for letters of credit. The
facility contains a requirement limiting the maximum amount
borrowed under the revolving credit commitment to $30,000,000 for
a minimum of 30 consecutive days each fiscal year.
For both term and revolving credit borrowings under the
Agreement, the Company can elect to borrow domestic funds at the
reference rate ("prime") of Chemical or Eurodollars at 1 1/4% in
excess of the London Interbank Offered Rate ("LIBOR"). Interest
on Chemical rate loans is payable quarterly and interest on
Eurodollar loans is payable at three month intervals from the
date of each Eurodollar contract. Applicable rates for Chemical
and Eurodollar loans were 6.0% and 4.5%, respectively, at
September 30, 1993. A commitment fee of 3/8 of 1% is charged on
the average daily unused portion of the available commitment. An
additional 1/4 of 1% is charged on the average daily aggregate
principal amount of commercial paper obligations outstanding.
Loans under the Agreement are collateralized by substantially all
of the Company's tangible and intangible assets.
The Agreement contains certain financial and operating
covenants, the most restrictive of which requires the Company to
maintain earnings before interest, taxes, profit sharing, certain
depreciation charges and the effect of certain accounting
changes, as defined, to meet specified requirements. The Company
was in compliance with all required covenants at September 30,
1993.
At September 30, 1993, the Company had available an
unsecured $2,000,000 line of credit with a bank, which is
renewable annually, of which $1,658,000 and $705,000 was
outstanding at September 30, 1992 and 1993, respectively.
During fiscal 1992, the Company recorded an extraordinary
charge of $4,186,000, net of income taxes of $2,157,000, related
to the early extinguishment of 13% Senior Subordinated Notes and
13.5% Subordinated Debentures.
5. SHAREHOLDERS' EQUITY
The Class A and Class B Common Stock are identical in all
respects except for voting rights and the right of the holder of
non-voting Class B stock to convert into an equal number of
shares of voting Class A stock and the right of the holder of
voting Class A stock to convert into an equal number of shares of
non-voting Class B stock.
In January 1992, every 2.2 shares of old Scotts Class A
Common Stock were exchanged for one share of new Scotts Class A
Common Stock ("Shares"). On February 7, 1992, the Company closed
the initial public offering of its Shares pursuant to which
Scotts sold 8,968,750 newly issued Shares and certain
non-management shareholders of Scotts sold an aggregate of
5,406,250 Shares. The Scotts Class A Common Stock is listed on
the NASDAQ National Market System under the symbol "SCTT."
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On February 23, 1993, the Company purchased all of the
shares of Class A Common Stock held by a fund managed by Clayton,
Dubilier & Rice, Inc. In aggregate, 2,414,895 shares of Class A
Common Stock were purchased for approximately $41,441,000,
including transaction costs. As a result of this transaction,
18,658,535 shares of Class A Common Stock were outstanding as of
September 30, 1993.
In accordance with the provisions of certain of the
Management Stock Subscription Agreements ("MSS Agreements") under
which certain Shares were sold to management investors
("Purchaser") during periods prior to the initial public
offering, under specified conditions Purchasers could require the
Company to purchase all of the Shares held by the Purchaser at a
formula price based on book value. Pursuant to requirements of
the Securities and Exchange Commission, Shares issued by the
Company under the MSS Agreements were considered redeemable
Shares, excluded from shareholders' equity and were subject to
accretion to the current redemption value of the Shares. Upon
closing of the initial public offering, the obligation of the
Company to purchase Shares terminated.
Accordingly, Shares previously classified as redeemable
common stock were reclassified to shareholders' equity. During
the year ended September 30, 1991, activity in redeemable Shares
consisted of 235,227 Shares being redeemed for $710,100 and
118,182 Shares being issued for $469,550. Accretion totalled
$1,625,000 for fiscal 1991.
On November 4, 1992, the Company adopted The Scotts Company
1992 Long Term Incentive Plan (the "Plan"). The Plan was
accepted by the shareholders at Scotts' annual meeting on
February 25, 1993. Under the Plan stock options, stock
appreciation rights and performance share awards may be granted
to officers and other key employees of the Company. The Plan
also provides for Board members, who are neither employees of the
Company nor associated with Clayton, Dubilier & Rice, Inc., to
receive stock options. The maximum number of shares of Class A
Common Stock that may be issued under the Plan is 1,700,000, plus
the number of shares surrendered to exercise options (other than
director options) granted under the Plan, up to a maximum of
1,000,000 surrendered shares.
In addition, pursuant to various employment agreements, the
Company granted 136,364 and 300,000 stock options in fiscal 1992
and 1993, respectively.
<TABLE>
Aggregate stock option activity consists of the following:
<CAPTION>
Year Ended September 30,
1992 1993
<S> <C> <C>
Options outstanding at October 1 - 136,364
Options granted 136,364 449,925
Options exercised - -
Options cancelled - -
Options outstanding at September 30 136,364 586,289
Options exercisable at September 30 45,455 90,910
Option prices per share:
Granted $ 9.90 $16.25-$18.75
</TABLE>
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During fiscal 1993, 128,880 performance share awards were
granted.
These awards entitle the grantee to receive shares or, at
the grantees election, the equivalent value in cash or stock
options, subject to stock ownership requirements. These awards
are conditioned on the attainment of certain performance and
other objectives established by the Compensation Committee of the
Company's Board of Directors.
Compensation for certain stock options results from the
difference between the grant price and market price at the date
of grant, and is recognized over the vesting period of the
options. Compensation for performance share awards is initially
measured at the grant date based upon the current market value of
the common stock, with adjustments made quarterly for market
price fluctuations. The Company recognized compensation expense
for stock options and performance share awards of $177,000 and
$635,000 in fiscal 1992 and 1993, respectively.
In October 1991, an officer of Scotts purchased 22,727
Shares and three other Scotts associates purchased an aggregate
of 44,318 Shares at a purchase price of $3.98 per share.
Pursuant to an employment agreement, an officer of Scotts
purchased 45,454 Shares at a purchase price of $9.90 per share in
January 1992. The Company has recognized $118,000 of unearned
compensation equivalent to the difference between the fair market
value and the purchase price of the Shares as a charge to capital
in excess of par value. This unearned compensation is being
amortized on a straight line basis over the period of the
employment agreement.
A significant portion of the price paid by certain officers
and management associates is financed by a major bank. The
Company has guaranteed the full and prompt payment of debt
outstanding by management investors to purchase stock of
approximately $1,729,000 and $230,000 at September 30, 1992 and
1993, respectively.
In connection with the 1988 acquisition of the lawn and
garden business of Hyponex, the Company entered into a warrant
purchase agreement with the prior majority shareholder of
Hyponex. In January 1992, the warrants were exchanged for 330,000
Shares. The repurchase and retirement of the warrants was valued
at the estimated value of the Shares at the date of the exchange
less the original consideration received.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INCOME TAXES
The Company adopted SFAS No. 109 effective October 1, 1992,
resulting in a benefit of $1,775,000 being reported as a
cumulative effect of accounting change in the fiscal 1993
Consolidated Statement of Income. Assets recorded in prior
business combinations net-of-tax were adjusted to pre-tax
amounts, resulting in recognition of $1,501,000 of deferred tax
liabilities at the date of adoption. Prior to fiscal 1993 the
Company accounted for income taxes under Accounting Principles
Board Opinion No. 11.
<TABLE>
The provision for income taxes consists of the following:
<CAPTION>
Year Ended September 30,
1991 1992 1993
<S> <C> <C> <C>
Currently Payable:
Federal $ 139,000 $ 1,802,000 $14,537,000
State - 878,000 1,400,000
Deferred:
Federal - 1,588,000 (11,694,000)
State - - (1,046,000)
Income Tax Expense $ 139,000 $ 4,268,000 $ 3,197,000
Income tax expense is included in the financial statements as
follows:
Operations $ 2,720,000 $11,124,000 $14,320,000
Cumulative effect of change
in accounting principles - - (11,123,000)
Extraordinary items (2,581,000) (6,856,000) -
Income Tax Expense $ 139,000 $ 4,268,000 $ 3,197,000
</TABLE>
Deferred income taxes for fiscal 1993 reflect the impact of
"temporary differences" between the amounts of assets and
liabilities for financial reporting purposes and such
amounts as determined by tax regulations. These temporary
differences are determined in accordance with SFAS No. 109 and
are more inclusive in nature than "timing differences" as
determined under previously applicable accounting principles.
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
The components of the net deferred tax asset (liability) are
as follows:
<CAPTION>
September 30,
1993
<S> <C>
Assets
Accounts receivable $ 687,000
Inventory 2,359,000
Accrued expenses 6,589,000
Postretirement benefits 10,458,000
Other 652,000
Gross deferred tax assets $ 20,745,000
Liabilities
Property and equipment (9,913,000)
Safe harbor leases (1,181,000)
Gross deferred tax liabilities (11,094,000)
Net asset $ 9,651,000
</TABLE>
<TABLE>
The net current and non-current components of deferred
income taxes recognized in the balance sheet at September 30, 1993
are:
<S> <C>
Net current liability $ (57,000)
Net non-current asset 9,708,000
Net asset $ 9,651,000
</TABLE>
<TABLE>
A reconciliation of the Federal corporate income tax rate
and the effective tax rate on income before income taxes is
summarized below:
<CAPTION>
Year Ended September 30,
1991 1992 1993
<S> <C> <C> <C>
Statutory income tax rate 34.0% 34.0% 35.0%
Pension amortization 5.8 0.3 0.7
Goodwill amortization and other
permanent differences resulting
from purchase accounting 25.4 4.0 4.7
State taxes, net of federal benefit - 2.2 3.4
Other (4.1) 2.0 (3.3)
Effective income tax rate 61.1% 42.5% 40.5%
</TABLE>
In fiscal 1991 and 1992, for financial reporting purposes
the Company utilized $8,000,000 and $13,800,000 of net operating
loss carryforwards and reflected the related tax benefits of
$2,581,000 and $4,699,000, respectively, as extraordinary items.
At September 30, 1992, the Company fully utilized its financial
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reporting net operating loss carryforwards. For tax
purposes, the Company has remaining net operating loss
carryforwards of approximately $5,000,000 which will be utilized
on the fiscal 1993 Federal income tax return. The variance
between the operating loss carryforwards on a tax basis and a
financial reporting basis is principally due to excess tax
depreciation, uniform capitalization rules, nondeductible
reserves, capitalization and amortization of package and design
costs, and various accrued liabilities that are not deductible
for tax purposes until paid. Deferred taxes were not recorded
during fiscal 1991 as the Company was in a net operating loss
carryforward position at the end of that year. During 1992,
the Company recognized $1,588,000 of deferred taxes previously
offset by net operating loss carryforwards.
During fiscal 1991 and 1992, the Company was subject to the
alternative minimum tax ("AMT") for financial reporting
purposes resulting in AMT expense of $139,000 and $1,200,000,
respectively. The net operating loss carryforwards for AMT
purposes were approximately $18,500,000 and $18,600,000 for
financial reporting and income tax purposes, respectively, at
September 30, 1991. During fiscal 1992, the Company fully
utilized its AMT net operating loss carryforwards. AMT paid
results in a tax credit carryforward which can be used in
subsequent years to offset regular income tax to the extent it
exceeds AMT tax in those years. At September 30, 1992, the
Company had $1,480,000 of AMT credit carryforwards which
will be utilized on the fiscal 1993 Federal income tax
return.
7. LEASES
The Company leases buildings, land and equipment under
various noncancellable lease agreements for periods of two to six
years. The lease agreements generally provide that the Company
pay taxes, insurance and maintenance expenses related to the
leased assets. Certain lease agreements contain purchase
options. At September 30, 1993, future minimum lease payments
were as follows:
<TABLE>
<CAPTION>
Year Ending Capital Operating
September 30, Leases Leases Total
<S> <C> <C> <C>
1994 $ 566,000 $ 5,775,000 $ 6,341,000
1995 508,000 4,054,000 4,562,000
1996 367,000 3,068,000 3,435,000
1997 54,000 2,204,000 2,258,000
1998 - 860,000 860,000
1999 and
thereafter - 159,000 159,000
Total minimum
lease payments 1,495,000 $ 16,120,000 $ 17,615,000
Less: Amount
representing
interest 223,000
Present value
of net minimum
lease payments $ 1,272,000
</TABLE>
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company also leases transportation and production
equipment under various one-year operating leases, which provide
for the extension of the initial term on a monthly or annual
basis. Total rental expense for operating leases was $6,003,000,
$7,281,000 and $9,125,000 for fiscal 1991, 1992 and 1993,
respectively.
8. COMMITMENTS AND CONTINGENCIES
Seed production agreements obligate the Company to make
future purchases. Seed purchases under production agreements for
fiscal 1991, 1992 and 1993 were approximately $5,124,000,
$9,281,000 and $4,692,000, respectively. At September 30, 1993,
estimated annual seed purchase commitments were as follows:
Year Ending
September 30,
1994 $ 10,670,000
1995 5,463,000
1996 3,037,000
1997 692,000
The Company is involved in various lawsuits and claims which
arise in the normal course of business. In the opinion of
management, these claims individually and in the aggregate are
not expected to result in a material adverse effect on the
Company's financial position or results of operations, however,
there can be no assurance that future quarterly or annual
operating results will not be materially affected by final
resolution of these matters. The following details the more
significant of these matters.
The Company has been involved in studying a landfill to
which it is believed some of the Company's solid waste had been
hauled in the 1970's. In September 1991, the Company was named
by the Ohio Environmental Protection Agency ("Ohio EPA") as a
Potentially Responsible Party ("PRP") with respect to this
landfill. Pursuant to a consent order with the Ohio EPA, the
Company, together with four other PRP's identified to date, is
investigating the extent of contamination at the landfill and
developing a remediation program.
In July 1990, the Company was directed by the Army Corps of
Engineers (the "Corps") to cease peat harvesting operations at
its New Jersey facility. The Corps' has alleged that the peat
harvesting operations were in violation of the Clean Water
Act ("CWA"). The United States Department of Justice has
commenced a legal action to seek a permanent injunction against
peat harvesting at this facility and to recover civil penalties
under the CWA. This action had been suspended while the parties
engaged in discussion to resolve the dispute. Those discussions
have not resulted in a settlement and accordingly the action has
been reinstated. The Company intends to defend the action
vigorously but if the Corps' position is upheld the Company could
be prohibited from further
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
harvesting of peat at this location and penalties could be
assessed against the Company. In the opinion of management, the
outcome of this action will not have a material adverse effect on
the Company's financial position or results of operations.
Furthermore, management believes the Company has sufficient raw
material supplies available such that service to customers will
not be adversely affected by continued closure of this peat
harvesting operation.
9. CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company
to concentration of credit risk consist principally of trade
accounts receivable. The Company sells its consumer products to
a wide variety of retailers, including mass merchandisers, home
centers, independent hardware stores, nurseries, garden outlets,
warehouse clubs and local and regional chains. Professional
products are sold to golf courses, sportsfields, nurseries, lawn
care service companies and growers of specialty agricultural
crops. One customer accounted for 16.6% of consolidated net
sales in fiscal 1991; in 1992 and 1993 two customers accounted
for 15.3% and 7.5%, and 18.0% and 9.3% of consolidated net sales,
respectively. No other customer accounted for more than 5% of
consolidated net sales. As of September 30, 1993, two accounts
comprised 9.2% and 7.9% of trade accounts receivable,
respectively. The Company performs a credit review before
extending credit to a customer. The Company establishes its
allowance for doubtful accounts based on factors surrounding the
credit risk of specific customers, historical trends and other
information.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
The following is a summary of the unaudited quarterly results of
operations for fiscal 1992 and 1993 (in thousands except share data):
<CAPTION>
Fiscal Quarter Ended,
Fiscal 1992 December 28 March 28 June 27 September
30 Full Year
<S> <C> <C> <C> <C>
<C>
Net sales $ 61,638 $150,780 $130,219 $ 70,921
$41,558
Gross profit 28,960 73,919 63,271 34,275
200,425
Income (loss) before
extraordinary items (2,677) 9,266 7,277 (1) 1,213
15,079
Net income (loss) (2,677) 13,965 3,091 1,213
15,592
Net income (loss) per
common share:
Income (loss) before
extraordinary items (.23) .52 .34 (1) .06
.84
Net income (loss) (.23) .79 .15 .06
.87
Weighted average common
shares outstanding
during the period 11,815,642 17,690,462 21,117,117 21,123,574
18,014,151
Fiscal 1993 January 2 April 3 July 3 September 30
Full Year
Net sales $ 67,757 $161,102 $156,327 $ 80,857
$466,043
Gross profit 30,703 78,621 74,814 37,687
221,825
Income (loss) before
cumulative effect of
accounting changes (2) (471) 10,847 7,986 2,685
21,047
Net income (loss) (3) (13,628) 10,847 7,986 2,685
7,890
Net income (loss) per
common share:
Income (loss) before
cumulative effect of
accounting changes (2) (.02) .54 .43 .14
1.07
Net income (loss) (3) (.65) .54 .43 .14
.40
Weighted average common
shares outstanding
during the period 21,128,564 20,138,585 18,743,752 18,737,150
19,687,013
<F1>
(1) Income before extraordinary items for the quarter ended June 27,
1992 has been
restated from that previously reported as a result of a change in
the estimated
effective tax rate attributable to the loss on early retirement of
debt reported
in that quarter. This change did not impact net income for the
quarter.
<F2>
(2) Income (loss) before cumulative effect of accounting changes for
each of the first
three quarters of fiscal 1993 has been restated to reflect the
ongoing charge
resulting from the adoption of SFAS 106 effective October 1, 1992.
The net of tax
charge was $462 or $.02 per share for the quarter ended January 2,
1993 and $325
or $.02 per share for each of the subsequent two quarters.
<F3>
(3) The net loss for the quarter ended January 2, 1993 has been restated
to reflect
the cumulative effect of accounting for postretirement benefits (a
net of tax
charge of $14,932 or $.71 per share) and income taxes (a benefit of
$1,775 or
$.08 per share).
</TABLE>
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. RELATED PARTIES
Clayton, Dubilier & Rice, Inc., a private investment firm in
which a director of the Company is an owner, was paid $300,000 in
fiscal 1991 and 1992, and $125,000 in 1993 by the Company for
financial advisory and management consulting services. These
services ceased effective with the Class A Common Stock purchase
described in Note 5.
12. SUBSEQUENT EVENTS
Effective December 16, 1993, the Company completed the
acquisition of Grace-Sierra Horticultural Products Company
("Grace-Sierra") for an aggregate purchase price of approximately
$123,300,000, including estimated transaction costs of
$3,300,000. Grace-Sierra, based in Milpitas, California, is a
leading international manufacturer and marketer of specialty
fertilizers and related products for the nursery, golf course,
greenhouse and consumer markets with calendar 1992 worldwide net
sales of approximately $107,000,000.
In connection with the acquisition of Grace-Sierra, the
Company amended its Agreement with Chemical, whereby term debt
commitments available thereunder were increased to $195,000,000
to enable the Company to consummate the acquisition.
F-22
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 buy
any securities other than the securities to which it relates or
an 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 sale made hereunder shall, under any
circumstances, create any 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
Page
Available Information
2
Incorporation of Certain Documents
by Reference
2
Prospectus Summary
4
Investment Considerations
12
The CompanY
14
Use of Proceeds
19
Selected Historical Financial Data
19
Unaudited Pro Forma Financial Data
22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations
29
Business
35
Management
52
Beneficial Ownership of Class A Common
Stock
56
Description of Bank Agreement
59
Description of the Debt Securities
60
Validity of the Debt Securities
81
Experts
82
Index to Financial Statements
The Scotts Company
The O.M. Scott &
Sons Company
Debt Securities
[Scotts Logo]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated (except for the
Securities and Exchange Commission registration fee and the
National Association of Securities Dealers, Inc. filing fee) fees
and expenses (other than underwriting discounts and commissions)
in connection with the Offering described in this Registration
Statement:
Securities and Exchange Commission registration
fee. . . . . . . . . . . . . . . . . . . . . . . . . $34,483
National Association of Securities Dealers, Inc.
filing fee . . . . . . . . . . . . . . . . . . . . . 10,500
Trustee fees . . . . . . . . . . . . . . . . . . . . . 5,000
Blue Sky filing and counsel fees and expenses. . . . . 22,000
Printing and engraving costs . . . . . . . . . . . . . 50,000
Legal fees and expenses. . . . . . . . . . . . . . . . 125,000
Accounting fees and expenses . . . . . . . . . . . . . 50,000
Miscellaneous expenses . . . . . . . . . . . . . . . .$ 13,017
Total. . . . . . . . . . . . . . . . . . . . . . .$ 310,000
Item 15. Indemnification of Directors and Officers
General
Article Sixth of Scotts' Certificate of Incorporation
eliminates the personal liability of directors to Scotts or its
stockholders for monetary damages for breaches of fiduciary duty
as directors to the fullest extent permitted by Delaware law.
Article Sixth of Scotts' By-laws defines the rights of certain
individuals, including directors and officers, to indemnification
by Scotts in the event of personal liability or expenses incurred
by them as a result of certain litigation against them.
Elimination of Liability in Certain Circumstances
Article Sixth of the Certificate of Incorporation and
Article VI of the By-laws of Scotts protects Scotts' directors
against personal liability for monetary damages resulting from
breaches of their fiduciary duty of care, except as set forth
below. Under the Delaware General Corporation Law ("DGCL"),
absent such provisions, directors could be held liable for gross
negligence in the performance of their duty of care but not for
simple negligence. Article Sixth of the Certificate of
Incorporation absolves directors of liability for negligence in
the performance of their duties, including gross negligence.
Directors remain liable for breaches of their duty of loyalty to
Scotts and its stockholders, as well as acts or omissions not in
good faith or which involve intentional misconduct or a knowing
violation of law and transactions from which a director derives
improper personal benefit. Article Sixth of the Certificate of
Incorporation also does not absolve directors of liability under
Section 174 of the DGCL, which makes directors personally liable
for unlawful dividends or unlawful stock repurchases or
redemptions and expressly sets forth a negligence standard with
respect to such liability.
Indemnification
Under the DGCL, directors and officers as well as other
employees and individuals may be indemnified against expenses
(including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation -- a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in or not
opposed to the best interest of Scotts and, with respect to any
criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful. A similar standard of care is
applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys'
fees) incurred in connection with defense or settlement of such
an action and the DGCL requires court approval before there can
be any indemnification of expenses where the person seeking
indemnification has been found liable to Scotts.
Article VI of Scotts' By-laws provides that each person who
was or is made a party to, or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was or has agreed to become a
director or officer of Scotts (or is or was or has agreed to
serve at the request of the Company as a director or officer,
employee or agent for another entity) while serving in such
capacity shall be indemnified and held harmless by Scotts to the
full extent authorized by the DGCL, as in effect (or, to the
extent indemnification is broadened, as it may be amended)
against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf.
Pursuant to Article VI of its By-laws, Scotts is required to
purchase and maintain insurance on behalf of such directors and
officers, provided that such insurance is available on acceptable
terms as determined by the Board of Directors.
Item 16. Exhibits.
Exhibit
No. Exhibits
1 Form of Underwriting Agreement
4(a) Form of Senior Indenture dated as of June 1, 1994
between Scotts, OMS and Chemical Bank, as Trustee
4(b) Form of Subordinated Indenture dated as of June 1,
1994 between Scotts, OMS and Chemical Bank, as Trustee
5 Opinion of Vorys, Sater, Seymour and Pease
12* Computation of Ratio of Earnings to Fixed Charges
23(a)* Consents of Coopers & Lybrand, Independent Accountants
23(b)* Consent of Price Waterhouse, Independent Accountants
23(c)* Consent of Vorys, Sater, Seymour and Pease
24* Powers of Attorney
25 Statement of Eligibility of Trustee under the Trust
Indenture Act of 1939 on Form T-1 (bound separately)
*Previously filed.
Item 17. Undertakings.
(1) The undersigned registrants hereby undertake:
(a) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration statement (or the most recent post-
effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
provided, however, that paragraphs (1)(a)(i) and (1)(a)(ii) do
not apply if the registration statement is no Form S-3 or Form
S-8, and the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the registrants pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(b) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(2) The undersigned registrants hereby undertake that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrants' annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 maybe permitted to directors,
officers and controlling persons of the registrants pursuant to
the foregoing provisions, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the
registrants in the successful defense of any action, suit or
proceeding) is asserted against the registrants by such director,
officer or controlling person in connection with the securities
being registered, the registrants 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.
(4) The undersigned registrants hereby undertake that:
(a) For purposes of determining any liability under
the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrants pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as
of the time it was declared effective.
(b) For the purposes of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
as amended, the Registrants certify that they have reasonable
grounds to believe that they meet all of the requirements for
filing on Form S-3 and have duly caused this Amendment No. 1
Registration Statement on Form S-3 to be signed on their behalf
by the undersigned, thereunto duly authorized, in the City of
Marysville, State of Ohio, on June 17, 1994.
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
By /s/Tadd C. Seitz*
Tadd C. Seitz
Chairman and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933,
as amended, this Amendment No. 1 Registration Statement has been
signed below by the following persons in the capacities and on
the dates indicated.
Signature Title Date
/s/James B. Beard* Director June 17, 1994
James B. Beard
/s/John S. Chamberlin* Director June 17, 1994
John S. Chamberlin
______________________ Director
Alberto Cribiore
/s/Joseph P. Flannery* Director June 17, 1994
Joseph P. Flannery
/s/Theodore J. Host* Director/President/ June 17, 1994
Theodore J. Host Chief Operating
Officer
/s/Tadd C. Seitz* Chairman/Chief June 17, 1994
Tadd C. Seitz Executive Officer
/s/Donald A. Sherman* Director June 17, 1994
Donald A. Sherman
/s/John M. Sullivan* Director June 17, 1994
John M. Sullivan
/s/L. Jack Van Fossen* Director June 17, 1994
L. Jack Van Fossen
/s/Paul D. Yeager Executive Vice June 17, 1994
Paul D. Yeager President/Chief
Financial Officer/
Principal Accounting
Officer
* By /s/ Paul D. Yeager
Paul D. Yeager
(Attorney-in-Fact)
<EX-1>
(PAGE) 1
Draft of
June 16, 1994
The Scotts Company
The O.M. Scott & Sons Company
Debt Securities
Underwriting Agreement
July __, 1994
To the Representatives of the
several Underwriters named in the
respective Pricing Agreements
hereinafter described.
Ladies and Gentlemen:
From time to time The Scotts Company, a Delaware
corporation (the "Company"), and The O.M. Scott & Sons Company, a
Delaware corporation ("Scott" and, together with the Company, the
"Issuers," and each of the Company and Scott individually, an
"Issuer") propose to enter into one or more Pricing Agreements in
the form of Annex I hereto, with such additions and deletions as
the parties thereto may determine, and, subject to the terms and
conditions stated herein and therein, to issue and sell to the
firms named in Schedule I to the applicable Pricing Agreement
(such firms constituting the "Underwriters" with respect to such
Pricing Agreement and the securities specified therein) certain
of its debt securities (the "Securities") specified in Schedule
II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities").
The terms and rights of any particular issuance of
Designated Securities shall be as specified in the Pricing
Agreement relating thereto and in or pursuant to the indenture
(the "Indenture") identified in such Pricing Agreement.
1. Particular sales of Designated Securities may be
made from time to time to the Underwriters of such Securities,
for whom the firms designated as representatives of the
Underwriters of such Securities in the Pricing Agreement relating
thereto will act as representatives (the "Representatives"). The
term "Representatives" also refers to a single firm acting as
sole representative of the Underwriters and to an Underwriter or
Underwriters who act without any firm being designated as its or
their representatives. This Underwriting Agreement shall not be
construed as an obligation of the Issuers to sell any of the
Securities or as an obligation of any of the Underwriters to
purchase the Securities. The obligation of the Issuers to issue
and sell any of the Securities and the obligation of any of the
Underwriters to purchase any of the Securities shall be evidenced
by the Pricing Agreement with respect to the Designated
Securities specified therein. Each Pricing Agreement shall
specify the aggregate principal amount of such Designated
Securities, the initial public offering price of such Designated
Securities, the purchase price to the Underwriters of such
Designated Securities,
(PAGE) 2
the names of the Underwriters of such Designated Securities, the
names of the Representatives of such Underwriters and the
principal amount of such Designated Securities to be purchased by
each Underwriter and shall set forth the date, time and manner
of delivery of such Designated Securities and payment therefor.
The Pricing Agreement shall also specify (to the extent not set
forth in the Indenture under which such Designated Securities are
to be issued and the registration statement and prospectus with
respect thereto) the terms of such Designated Securities. A
Pricing Agreement shall be in the form of an executed writing
(which may be in counterparts), and may be evidenced by an
exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of
communications transmitted. The obligations of the Underwriters
under this Agreement and each Pricing Agreement shall be
several and not joint.
2. Each of the Issuers jointly and severally
represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement in respect of the
Securities has been filed with the Securities and Exchange
Commission (the "Commission"); such registration statement and
any post-effective amendment thereto, each in the form heretofore
delivered or to be delivered to the Representatives and,
excluding exhibits to such registration statement, but including
all documents incorporated by reference in the prospectus
contained therein, to the Representatives for each of the other
Underwriters, have been declared effective by the Commission in
such form; no other document with respect to such registration
statement or document incorporated by reference therein has
heretofore been filed or transmitted for filing with the
Commission; and no stop order suspending the effectiveness of
such registration statement has been issued and no proceeding for
that purpose has been initiated or, to the knowledge of the
Issuers, threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and regulations
of the Commission under the Securities Act of 1933, as amended
(the "Act"), is hereinafter called a "Preliminary Prospectus";
the various parts of such registration statement, including all
exhibits thereto and the documents incorporated by reference in
the prospectus contained in the registration statement at the
time such part of the registration statement became effective but
excluding Form T-1, each as amended at the time such part of the
registration statement became effective, are hereinafter
collectively called the "Registration Statement"; the prospectus
relating to the Securities, in the form in which it has most
recently been filed, or transmitted for filing, with the
Commission on or prior to the date of this Agreement being
hereinafter called the "Prospectus"); any reference herein to any
Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein
pursuant to the applicable form under the Act, as of the date of
such Preliminary Prospectus or Prospectus, as the case may be;
any reference to any amendment or supplement to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and
include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and incorporated by reference in such Preliminary Prospectus or
Prospectus, as the case may be; any reference to any amendment to
the Registration Statement shall be deemed to refer to and
include any annual report of an Issuer filed pursuant to Sections
13(a) or 15(d) of the Exchange Act after the effective date of
the Registration Statement that is incorporated by reference in
the Registration Statement; and any reference to the Prospectus
as amended or supplemented shall be deemed to refer to the
Prospectus as amended or supplemented in relation to the
applicable Designated Securities in the form in which it is filed
with the Commission pursuant to Rule 424(b) under the Act in
accordance with Section 5(a)
(PAGE) 3
hereof, including any documents incorporated by reference therein
as of the date of such filing);
(b) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission
thereunder, and none of such documents at the time they became
effective or were filed with the Commission, as the case may be,
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the
Prospectus or any further amendment or supplement thereto, when
such documents become effective or are filed with the Commission,
as the case may be, will conform in all material respects to the
requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will
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; provided, however,
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Issuers by an
Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented
relating to such Securities;
(c) The Registration Statement and the Prospectus
conform, and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in all
material respects to the requirements of the Act and the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act") and
the rules and regulations of the Commission thereunder; The
Registration Statement does not and will not, as of the
applicable effective date as to the Registration Statement and
any amendment thereto 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 the Prospectus does not and will not, as of the
applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material
fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that this
representation and warranty shall not apply to (i) any statements
or omissions made in reliance upon and in conformity with
information furnished in writing to the Issuers by an Underwriter
of Designated Securities through the Representatives expressly
for use in the Prospectus as amended or supplemented relating to
such Securities or (ii) to that part of the Registration
Statement that constitutes the Statement of Eligibility and
Qualification (Form T-1) under the Trust Indenture Act of the
Trustee;
(d) Neither of the Issuers nor any of their
subsidiaries has sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business material to
the Issuers and their subsidiaries taken as a whole from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Prospectus; and, since the respective dates
as of which information is given in the Registration Statement
and the Prospectus, there has not been any material change in
(PAGE) 4
the capital stock or any material increase in the short-term debt
or long-term debt of the Issuers and their subsidiaries on a
consolidated basis or any material adverse change, or any
development involving a prospective material adverse change, in
or affecting the general affairs, management, consolidated
financial position, consolidated stockholders' equity or
consolidated results of operations of the Issuers and their
subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus;
(e) The Issuers and their respective subsidiaries
have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by
them, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as
do not materially affect the value of such property and do not
interfere with the use made and proposed to be made of such
property by the Issuers and their respective subsidiaries; and
any real property and buildings held under lease by the Issuers
and their respective subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to
be made of such property and buildings by the Issuers and their
respective subsidiaries;
(f) Each of the Issuers, Hyponex Corporation
("Hyponex"), Scotts-Sierra Horticultural Products Company
("Sierra") and the Republic Tool & Manufacturing Corp.
("Republic") (collectively, the "Material Subsidiaries") has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction of its
incorporation, with power and authority (corporate and other) to
own its properties and conduct its business as described in the
Prospectus, and each other subsidiary of each Issuer has been
duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation; and each of the Issuers, the Material Subsidiaries
and each other subsidiary of each Issuer has been duly qualified
as a foreign corporation for the transaction of business and is
in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, so
as to require such qualification, or is subject to no liability
or disability by reason of the failure to be so qualified in any
such jurisdiction, except to the extent that the failure to be so
incorporated, validly existing, in good standing or qualified
would not have a material adverse effect on the general affairs,
management, consolidated financial position, consolidated
stockholders' equity or consolidated results of operations of the
Issuers and their subsidiaries taken as a whole (a "Material
Adverse Effect");
(g) Scotts has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital
stock of each Issuer have been duly and validly authorized and
issued and are fully paid and non-assessable; and all of the
issued shares of capital stock of each Material Subsidiary have
been duly and validly authorized and issued, are fully paid and
non-assessable and (except for directors' qualifying shares and
except as otherwise set forth in the Prospectus) are owned
directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims; all of the issued shares
of capital stock of each other subsidiary of each issuer have
been duly and validly authorized and issued, are fully paid and
non-assessable and (except as otherwise set forth in the
Prospectus) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims, except
to the extent that the failure of such shares to be so
authorized, issued, fully paid, non-assessable and owned would
not have a Material Adverse Effect;
(PAGE) 5
(h) The Securities have been duly authorized, and,
when Designated Securities are executed and authenticated in
accordance with the provisions of the applicable Indenture (as
defined below) and delivered to and paid for by the Underwriters
pursuant to this Agreement and the Pricing Agreement with respect
to such Designated Securities, such Designated Securities will
have been duly executed, authenticated, issued and delivered and
will constitute valid and legally binding obligations of each of
the Issuers entitled to the benefits provided by either the
Indenture to be dated as of June 1, 1994 (the "Senior
Indenture"), among the Issuers and Chemical Bank as Trustee (the
"Senior Trustee"), or the Indenture to be dated as of June 1,
1994 (the "Subordinated Indenture" and, together with the Senior
Indenture, the "Indentures"), among the Issuers and Chemical Bank
as Trustee (the "Subordinated Trustee"), under which they are to
be issued, which such Indenture will be substantially in the form
filed as an exhibit to the Registration Statement; the Indentures
have been duly authorized and duly qualified under the Trust
Indenture Act and, at the Time of Delivery for any series of such
Designated Securities (as defined in Section 4 hereof), the
Indenture under which such Designated Securities are to be issued
will constitute a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Indentures
conform, and the Designated Securities will conform, in all
material respects to the descriptions thereof contained in the
Prospectus as amended or supplemented with respect to such
Designated Securities;
(i) The statements set forth in the Prospects under
the caption "Description of Debt Securities", insofar as they
purport to constitute a summary of the terms of the Securities,
and under the caption "Plan of Distribution", insofar as they
purport to describe the provisions of the documents referred to
therein, are accurate, complete and fair;
(j) Neither of the Issuers nor any of their
subsidiaries is in violation of its respective Certificate of
Incorporation or By-laws or in default in the performance or
observance of any obligation,
agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by which
it or its properties may be bound, except to the extent that such
violation or default would not have a Material Adverse Effect;
(k) The issue and sale of the Securities and the
compliance by the Issuers with all of the provisions of the
Securities, the Indentures, this Agreement and any Pricing
Agreement, and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a
material breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to
which an Issuer or any of its subsidiaries is a party or by which
an Issuer or any of its subsidiaries is bound or to which any of
the property or assets of an Issuer or any of its subsidiaries is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of an
Issuer or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over an
Issuer or any of its subsidiaries or any of their properties; and
no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Securities or the
consummation by the Issuers of the transactions contemplated by
this Agreement or any Pricing Agreement
(PAGE) 6
or the Indenture, except such as have been, or will have been
prior to the Time of Delivery, obtained under the Act and the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters; and
(l) Other than as set forth in the Prospectus, there
are no legal or governmental proceedings pending to which an
Issuer or any of its subsidiaries is a party or of which any
property of an Issuer or any of its subsidiaries is the subject
which, if determined adversely to an Issuer or any of its
subsidiaries, would individually or in the aggregate have a
Material Adverse Effect; and, to the best of the knowledge of
each of the Issuers, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others.
(m) Neither of the Issuers is or, after giving
effect to the offering and sale of the Securities, would be an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act
of 1940, as amended (the "Investment Company Act");
(n) Neither of Issuers nor any of their affiliates
does business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075,
Florida Statutes; and
(o) The independent accountants of the Issuers, who
have certified certain financial statements of the Issuers and
their subsidiaries, are independent public accountants as
required by the Act and the rules and regulations of the
Commission thereunder; and
(p) The Issuers and their subsidiaries have obtained
all environmental permits, licenses and other authorizations
required by federal, state and local law which are material to
the Issuers and their subsidiaries taken as a whole; the
operations of the Issuers and their subsidiaries are in
compliance with such permits, licenses and authorizations, and
with all applicable environmental laws, except where failure to
be in compliance does not have, and may not reasonably be
expected to have a Material Adverse Effect; and other than as
described in the Prospectus as amended or supplemented, there has
been no incident in which hazardous or toxic substances escaped
or were released or improperly disposed of into the ground, water
or air and which has, or may reasonably be expected to have a
Material Adverse Effect.
3. Upon the execution of the Pricing Agreement
applicable to any Designated Securities and authorization by the
Representatives of the release of such Designated Securities, the
several Underwriters propose to offer such Designated Securities
for sale upon the terms and conditions set forth in the
Prospectus as amended or supplemented.
4. Designated Securities to be purchased by each
Underwriter pursuant to the Pricing Agreement relating thereto,
in definitive form to the extent practicable, and in such
authorized denominations and registered in such names as the
Representatives may request upon at least forty-eight hours'
prior notice to the Issuers, shall be delivered by or on behalf
of the Issuers to the Representatives for the account of such
Underwriter, against payment by such Underwriter or on its behalf
of the purchase price therefor by certified or official bank
check or checks, payable to the order of the Issuers in the funds
specified in such Pricing
(PAGE) 7
Agreement all at the place and time and date specified in such
Pricing Agreement or at such other place and time and date as the
Representatives and the Issuers may agree upon in writing, such
time and date being herein called the "Time of Delivery" for such
Securities.
5. Each of the Issuers agrees with each of the
Underwriters of any Designated Securities:
(a) To prepare the Prospectus as amended and
supplemented in relation to the applicable Designated Securities
in a form approved by the Representatives and to file such
Prospectus pursuant to Rule 424(b) under the Act not later than
the Commission's close of business on the second business day
following the execution and delivery of the Pricing Agreement
relating to the applicable Designated Securities or, if
applicable, such earlier time as may be required by Rule 424(b);
to make no further amendment or any supplement to the
Registration Statement or Prospectus as amended or supplemented
after the date of the Pricing Agreement relating to such
Securities and prior to the Time of Delivery for such Securities
which shall be disapproved by the Representatives for such
Securities promptly after reasonable notice thereof; to advise
the Representatives promptly of any such amendment or supplement
after such Time of Delivery and furnish the Representatives with
copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by such
Issuer with the Commission pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act for so long as the delivery of a
prospectus is required in connection with the offering or sale of
such Securities, and during such same period to advise the
Representatives, promptly after it receives notice thereof, of
the time when any amendment to the Registration Statement has
been filed or becomes effective or any supplement to the
Prospectus or any amended Prospectus has been filed with the
Commission, of the issuance by the Commission of any stop order
or of any order preventing or suspending the use of any
prospectus relating to the Securities, of the suspension of the
qualification of such Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or
Prospectus or for additional information; and, in the event of
the issuance of any such stop order or of any such order
preventing or suspending the use of any prospectus relating to
the Securities or suspending any such qualification, to promptly
use its best efforts to obtain the withdrawal of such order;
(b) Promptly from time to time to take such action
as the Representatives may reasonably request to qualify such
Securities for offering and sale under the securities laws of
such jurisdictions as the Representatives may request and to
comply with such laws so as to permit the continuance of sales
and dealings therein in such jurisdictions for as long as may be
necessary to complete the distribution of such Securities,
provided that in connection therewith neither Issuer shall be
required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the
Prospectus as amended or supplemented in such quantities as the
Representatives may from time to time reasonably request, and, if
the delivery of a prospectus is required at any time in
connection with the offering or sale of such Designated
Securities and if at such time any event shall have occurred as a
result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the
(PAGE) 8
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall
be necessary during such same period to amend or supplement the
Prospectus or to file under the Exchange Act any document
incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to
notify the Representatives and upon their request to file such
document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as the
Representatives may from time to time reasonably request of an
amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission or effect such compliance;
(d) To make generally available to its security
holders as soon as practicable, but in any event not later than
eighteen months after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Act), an earnings
statement of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules
and regulations of the Commission thereunder (including at the
option of the Company Rule 158);
(e) During the period beginning from the date of the
Pricing Agreement for such Designated Securities and continuing
to and including the later of (i) the termination of trading
restrictions for such Designated Securities, as notified to the
Issuers by the Representatives and (ii) the Time of Delivery for
such Designated Securities, not to offer, sell, contract to sell
or otherwise dispose of any debt securities of the Issuers which
mature more than one year after such Time of Delivery and which
are substantially similar to such Designated Securities, without
the prior written consent of the Representatives;
(f) To furnish to the holders of the Securities as
soon as practicable after the end of each fiscal year an annual
report (including a balance sheet and statements of income,
stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public
accountants) and, as soon as practicable after the end of each of
the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial
information of the Company and its subsidiaries for such quarter
in reasonable detail; and to furnish to the holders of the
Securities all other documents specified in Section 1010 of the
Indentures all in the manner so specified;
(g) During a period of five years from the effective
date of the Registration Statement to furnish to the
Representatives copies of all reports or other communications
(financial or other) furnished to stockholders, and deliver to
the Representatives (i) as soon as they are available, copies of
any reports and financial statements furnished to or filed with
the Commission or any national securities exchange on which the
Securities or any class of securities of the Issuers is listed
and the documents specified in Sections 704 and 1010 of the
Indenture as in effect at the Time of Delivery; and (ii)
such additional information concerning the business and financial
condition of the Issuers and Scott as the Representatives may
from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission);
and
(PAGE) 9
(h) To apply the net proceeds from the sale of the
Securities for the purposes set forth in the Prospectus as
amended or supplemented.
6. The Issuers jointly and severally covenant and
agree with the several Underwriters that the Issuers will pay or
cause to be paid the following: (i) the fees, disbursements and
expenses of the Issuers' counsel and accountants in connection
with the registration of the Securities under the Act and all
other expenses in connection with the preparation, printing
and filing of the Registration Statement, any Preliminary
Prospectus and the Prospectus and amendments and supplements
thereto and the mailing and delivering of copies thereof to the
Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, any Pricing
Agreement, any Indenture, any Blue Sky and Legal Investment
Memoranda and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii)
all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as
provided in Section 5(b) hereof, including the reasonable fees
and disbursements of counsel for the Underwriters in connection
with such qualification and in connection with the Blue Sky and
Legal Investment Surveys; (iv) any fees charged by securities
rating services for rating the Securities; (v) any filing fees
incident to any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the
Securities; (vi) any fees and expenses incident to the
application for and listing of such Securities on the New
York Stock Exchange; (vii) the cost of preparing the Securities;
(viii) the fees and expenses of any Trustee and any agent of any
Trustee and the fees and disbursements of counsel for any Trustee
in connection with any Indenture and the Securities; and (ix) all
other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that,
except as provided in this Section, and Sections 8 and 11
hereof, the Underwriters will pay all of their own costs and
expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters of any
Designated Securities under the Pricing Agreement relating to
such Designated Securities shall be subject, in the discretion of
the Representatives, to the condition that all representations
and warranties and other statements of the Issuers in or
incorporated by reference in the Pricing Agreement relating to
such Designated Securities are, at and as of the Time of
Delivery for such Designated Securities, true and correct, the
condition that the Issuers shall have performed all of their
obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in
relation to the applicable Designated Securities shall have been
filed with the Commission pursuant to Rule 424(b) within the
applicable time period prescribed for such filing by the rules
and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been
complied with to the Representatives' reasonable satisfaction;
(b) Counsel for the Underwriters reasonably
satisfactory to the Issuers shall have furnished to the
Representatives such opinion or opinions, dated the Time of
Delivery for such Designated Securities, with respect to the
matters covered in paragraphs (i), (iii), (iv), (v), (vii) and
(viii) of subsection (c) below and in paragraph (i)
(PAGE) 10
of subsection (d) below as well as such other related matters as
the Representatives may reasonably request, and such counsel
shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Counsel for the Issuers reasonably satisfactory
to the Representatives shall have furnished to the
Representatives their written opinion, dated the Time of Delivery
for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) Each of the Issuers has been duly
incorporated and isvalidly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation,
with power and authority (corporate and other) to own its
properties and conduct its business as described in the
Prospectus as amended or supplemented;
(ii) This Agreement and the Pricing Agreement
with respect to the Designated Securities have been duly
authorized, executed and delivered by the Issuers;
(iii) The Designated Securities have been duly
authorized and executed and, when authenticated by the Trustee
and delivered to the Underwriters against payment therefor in
accordance with this Agreement, the Pricing Agreement and the
Indenture, will have been validly issued and delivered, and will
constitute valid and legally binding obligations of the Issuers
entitled to the benefits provided by the Indenture under which
they have been issued; and the Designated Securities and such
Indenture conform in all material respects to the descriptions
thereof in the Prospectus as amended or supplemented; and such
Securities have been duly authorized for listing, subject to
official notice of issuance, on the New York Stock Exchange;
(iv) The Indenture under which the Designated
Securities have been issued has been duly authorized, executed
and delivered by the Issuers and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity
principles; and such Indenture has been duly qualified under the
Trust Indenture Act;
(v) The statements set forth in the Prospectus
under the captions "Description of Debt Securities", "Plan of
Distribution", in each case as such statements constitute
summaries of the legal matters or documents referred to therein,
fairly present the information called for with respect to such
matters or documents and fairly summarize the matters or
documents referred to therein;
(vi) No consent, approval, authorization, order,
registration or qualification of or with any court or
governmental agency or body having jurisdiction over an Issuer or
any of its subsidiaries or any of their properties is required
for the issuance and sale of the Designated Securities or the
consummation by the Issuers of the transactions contemplated by
this Agreement or such Pricing Agreement or the Indenture under
which such
(PAGE) 11
Securities have been issued, except such as have been obtained
under the Act and the Trust Indenture Act, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Designated
Securities by the Underwriters;
(vii) Neither of the Issuers is an "investment
company" or an entity "controlled" by an "investment company", as
such terms are defined in the Investment Company Act;
(viii) The documents incorporated by reference in
the Prospectus as amended or supplemented (other than the
financial statements and other financial information therein or
incorporated therein, as to which such counsel need express no
opinion), when they became effective or were filed with the
Commission, as the case may be, complied as to form in all
material respects with the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the
Commission thereunder;
(ix) The Registration Statement and the
Prospectus as amended or supplemented and any further amendments
and supplements thereto made by an Issuer prior to the Time of
Delivery for the Designated Securities (other than (i) the
financial statements and other financial information therein or
incorporated therein and (ii) that part of the Registration
Statement that constitutes the Trustee's Statement of Eligibility
and Qualification (Form T-1) under the Trust Indenture Act, as to
which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the
Trust Indenture Act and the rules and regulations thereunder.
Such counsel shall also have stated that, while they
have not themselves checked the accuracy or completeness of or
otherwise verified, and are not passing upon and assume no
responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statements or the
Prospectus, except for those referred to in the opinion in
subsection (v) of this Section 7(c), they have no reason to
believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by an Issuer
prior to the Time of Delivery (other than the financial
statements and other financial information therein or
incorporated therein, as to which such counsel need express no
belief) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that,
as of its date, the Prospectus as amended or supplemented or any
further amendment or supplement thereto made by an Issuer prior
to the Time of Delivery (other than the financial statements and
other financial information therein or incorporated therein, as
to which such counsel need express no belief) contained an untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or that,
as of the Time of Delivery, either the Registration Statement or
the Prospectus as amended or supplemented or any further
amendment or supplement thereto made by the Company prior to the
Time of Delivery (other than the financial statements and other
financial information therein or incorporated therein, as to
which such counsel need express no belief) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in light of the
circumstances under which
(PAGE) 12
they were made, not misleading; and they have no reason to
believe that any of the documents incorporated by reference in
the Prospectus as amended or supplemented (other than the
financial statements and other financial information therein or
incorporated therein, as to which counsel need express no
belief), when they became effective or were so filed, as the case
may be, contained, in the case of a registration statement which
became effective under the Act, an untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading, or, in the case of other documents which were filed
under the Act or the Exchange Act with the Commission, an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light
of the circumstances under which they were made when such
documents were so filed, not misleading; and they do not know of
any amendment to the Registration Statement required to be filed
or any contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus as amended or
supplemented or required to be described in the Registration
Statement or the Prospectus as amended or supplemented which are
not filed or incorporated by reference or described as required;
In rendering such opinions, such counsel (i) may
state that they express no opinion as to the laws of any
jurisdiction other than the Federal laws of the United States,
the laws of the State of Ohio and the General Corporation Law of
the State of Delaware and, and to the extent such opinion relates
to the law of the State of New York, such counsel may rely
exclusively upon the opinion of counsel for the Issuers delivered
pursuant to Section 7(d), and (ii) may rely as to matters of
fact, to the extent they deem proper, on certificates of
responsible officers of the Issuers and on certificates of public
officials, provided that such counsel shall state that they
believe that both such counsel and the Underwriters are justified
in relying upon such certificates and provide you with copies of
such certificates.
(d) The Vice-President, General Counsel and
Secretary of each of the Issuers shall have furnished to the
Representatives his written opinion, dated such Time of Delivery
for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) Each of the Company, Scott, Hyponex, Sierra
and Republic has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus as amended or
supplemented;
(ii) Each of the Company, Scott, Hyponex, Sierra
and Republic has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the
laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require
suchqualification, or is subject to no liability or disability by
reason of failure to be so qualified in any such jurisdiction
except to the extent that the failure to be so qualified or in
good standing would not have a Material Adverse Effect (such
counsel being entitled to rely in respect of the opinion in this
clause upon opinions of local counsel and in respect of matters
of fact upon certificates of officers of the Issuers, provided
that such counsel shall state that he or she believes that both
(PAGE) 13
the Underwriters and such counsel are justified in relying upon
such opinions and certificates);
(iii) Scotts has an authorized capitalization as
set forth in the Prospectus as amended or supplemented; all of
the issued shares of capital stock of each of Scott, Hyponex and
Republic have been duly and validly authorized and issued, are
fully paid and non-assessable, and (except for directors'
qualifying shares and except as otherwise set forth in the
Prospectus as amended or supplemented) are owned directly or
indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims (such counsel being entitled to
rely in respect of the opinion in this clause and in respect of
matters of fact upon certificates of officers of the Company or
its subsidiaries, provided that such counsel shall state that he
or she believes that both the Underwriters and such counsel are
justified in relying upon such opinions and certificates);
(iv) Neither the Issuers nor any of their
subsidiaries is in violation of its certificate of Incorporation
or By-laws or in default in the performance or observance or any
material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease
or other instrument to which it is a party or by which it or its
properties may be bound, except to the extent that such violation
or default would not have a Material Adverse Effect;
(v) This Agreement and the Pricing Agreement
with respect to the Designated Securities have been duly
authorized, executed and delivered by the Issuers;
(vi) The Designated Securities have been duly
authorized and executed and, when authenticated by the Trustee
and delivered to the Underwriters against payment therefor in
accordance with this Agreement, the Pricing Agreement and the
Indenture, will have been validly issued and delivered, and will
constitute valid and legally binding obligations of the Issuers
entitled to the benefits provided by the Indenture under which
they have been issued;
(vii) The Indenture under which the Designated
Securities have been issued has been duly authorized, executed
and delivered by the Issuers and constitutes a valid and legally
binding instrument, enforceable in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating
to or affecting creditors' rights and to general equity
principles;
(viii) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which an Issuer or any of its
subsidiaries is a party or of which any property of an Issuer or
any of its subsidiaries is the subject which, individually or in
the aggregate, have or may reasonably be expected to have (to the
extent not covered by insurance) a material adverse effect on the
consolidated financial position or results of operations of the
Company and its subsidiaries taken as a whole; and, to the best
of such counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or threatened by
others;
(PAGE) 14
(ix) The issue and sale of the Designated
Securities and the compliance by the Issuers with all of the
provisions of the Designated Securities, this Agreement, the
Indenture under which such Securities have been issued and the
Pricing Agreement with respect to the Designated Securities and
the consummation of the transactions herein and therein
contemplated will not result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument known to such counsel to which an Issuer
or any of its subsidiaries is a party or by which an Issuer or
any of its subsidiaries is bound or to which any of the property
or assets of an Issuer or any of its subsidiaries is subject
which breach violation or default would have a material adverse
effect on the consolidated financial position or results of
operations of the Company and its subsidiaries taken as a whole,
nor will such action result in any violation of the provisions of
the Certificate of Incorporation or By-laws of either Issuer or
any statute or any order, rule or regulation known to such
counsel of any court or governmental agency or body having
jurisdiction over an Issuer or any of its subsidiaries or any of
their properties; and
(x) No consent, approval, authorization, order,
registration or qualification of or with any such
court or governmental agency or body is required for the issuance
and sale of the Designated Securities or the consummation by the
Issuers of the transactions contemplated by this Agreement or
such Pricing Agreement or the Indenture under which such
Securities have been issued, except such as have been obtained
under the Act and the Trust Indenture Act, and such consents,
approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in
connection with the purchase and distribution of the Designated
Securities by the Underwriters.
Such counsel shall also have stated that, while he
has not himself checked the accuracy, completeness or fairness of
or otherwise verified, and is not passing upon and assumes no
responsibility for the accuracy or completeness of, the
statements contained in the Registration Statement or the
Prospectus as amended or supplemented, in the course of his
review and discussion of the contents of the Registration
Statement and Prospectus as amended or supplemented with certain
officers and employees of Issuers and their independent
accountants, but without independent check or verification, no
facts have come to his or her attention which have caused him or
her to believe (except as to the financial statements and other
financial information therein or incorporated therein, as to
which such counsel need express no belief) that the Registration
Statement, at the time it became effective, or the Prospectus as
amended or supplemented, as of its date, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that any of the documents incorporated
by reference in the Prospectus as amended or supplemented (other
than the financial statements and other financial information
therein or incorporated therein, as to which such counsel need
express no belief), when they became effective or were filed with
the Commission, as the case may be, contained, in the case of a
registration statement which became effective under the Act, an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, or, in the case of other
documents which were filed under the Act or the Exchange Act with
the
(PAGE) 15
Commission, an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made when such documents were so filed, not misleading or that,
as of such Time of Delivery of such Designated Securities, either
the Registration Statement or the Prospectus as amended or
supplemented or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery of such Designated
Securities (other than the financial statements and other
financial information therein or incorporated therein, as to
which such counsel need express no belief) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and he or
she does not know of any amendment to the Registration Statement
required to be filed or of any contracts or other documents of a
character required to be filed as an exhibit to the Registration
Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as
required.
In rendering such opinion, such counsel may state
that he expresses no opinion as to the laws of any jurisdiction
other than the Federal laws of the United States, the laws of the
States of Ohio and New York and the General Corporation Law of
the State of Delaware.
(e) On the date of the Pricing Agreement for such
Designated Securities and at the Time of Delivery for such
Designated Securities, the independent accountants of the Issuers
who have certified the financial statements of the Issuers and
their subsidiaries included or incorporated by reference in the
Registration Statement shall have furnished to the
Representatives a letter, dated the effective date of the
Registration Statement or the date of the most recent report
filed with the Commission containing financial statements and
incorporated by reference in the Registration Statement, if the
date of such report is later than such effective date, and a
letter dated such Time of Delivery, respectively, to the effect
set forth in Annex II hereto, and with respect to such letter
dated such Time of Delivery, as to such other matters as the
Representatives may reasonably request and in form and
substance satisfactory to the Representatives;
(f) (i) Neither an Issuer nor any of its
subsidiaries shall have sustained since the date of the latest
audited financial statements included or incorporated by
reference in the Prospectus as amended or supplemented prior to
the date of the Pricing Agreement relating to the Designated
Securities any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Prospectus as amended or supplemented prior
to the date of the Pricing Agreement relating to the Designated
Securities, and (ii) since the respective dates as of which
information is given in the Prospectus as amended or supplemented
prior to the date of the Pricing Agreement relating to the
Designated Securities there shall not have been any change in the
capital stock, short-term debt or long-term debt of the an Issuer
or any of such Issuer's respective subsidiaries or any change, or
any development involving a prospective change, in or affecting
the general affairs, management, financial position,
stockholders' equity or results of operations of an Issuer and
such Issuer's respective subsidiaries, otherwise than as set
forth or contemplated in the Prospectus as amended or
supplemented prior to the date of the Pricing Agreement relating
to the Designated Securities, the effect of which, in any
(PAGE) 16
such case described in Clause (i) or (ii), is in the judgment of
the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering
or the delivery of the Designated Securities on the terms and in
the manner contemplated in the Prospectus as first amended or
supplemented relating to the Designated Securities;
(g) On or after the date of the Pricing Agreement
relating to the Designated Securities (i) no downgrading shall
have occurred in the rating accorded the debt securities or
preferred stock of an Issuer by any nationally recognized
statistical rating organization," as that term is defined by the
Commission for purposes of Rule 436(g)(2) under the Act and (ii)
no such organization shall have publicly announced that it has
under surveillance or review, with possible negative
implications, its rating of any of the debt securities or
preferred stock of an Issuer;
(h) On or after the date of the Pricing Agreement
relating to the Designated Securities there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the New York
Stock Exchange or NASDAQ; (ii) a suspension or material
limitation in trading of the Company's securities on NASDAQ;
(iii) a general moratorium on commercial banking activities in
New York declared by either Federal or New York State
authorities; or (iv) the outbreak or escalation of hostilities
involving the United States or the declaration by the United
States of a National Emergency or war, if the effect of any such
event specified in this clause (iv) in the judgment of the
Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Designated
Securities on the terms and in the manner contemplated by the
Prospectus as amended and supplemented relating to the Designated
Securities; and
(i) Each Issuer shall have furnished or caused to be
furnished to the Representatives at the Time of Delivery for the
Designated Securities a certificate or certificates of officers
of such Issuer reasonably satisfactory to the Representatives as
to the accuracy of the representations and warranties of the
Issuers herein at and as of such Time of Delivery, as to the
performance by such Issuer of all of its obligations hereunder to
be performed at or prior to such Time of Delivery, as to the
matters set forth in subsections (a) and (f) of this Section and
as to such other matters as the Representatives may reasonably
request.
8. (a) Each Issuer, jointly and severally, will
indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such
Underwriter may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus
as amended or supplemented and any other prospectus relating to
the Securities, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will
reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Issuers shall
not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, any
preliminary prospectus supplement,
(PAGE) 17
the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities,
or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Issuers by
any Underwriter of Designated Securities through the
Representatives expressly for use in the Prospectus as amended
or supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold
harmless the Issuers against any losses, claims, damages or
liabilities to which the Issuers may become subject, under the
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement,
the Prospectus as amended or supplemented and any other
prospectus relating to the Securities, or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, any preliminary prospectus supplement,
the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities,
or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Issuers by
such Underwriter through the Representatives expressly for use
therein; and will reimburse the Issuers for any legal or other
expenses reasonably incurred by the Issuers in connection with
investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement
of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party
under such subsection, notify the indemnifying party in writing
of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act by or on
behalf of any indemnified party.
(d) If the indemnification provided for in this
Section 8 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above in respect
(PAGE) 18
of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the
Issuers on the one hand and the Underwriters of the Designated
Securities on the other from the offering of the Designated
Securities to which such loss, claim, damage or liability (or
action in respect thereof) relates. If, however, the allocation
provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of the Issuers on the one hand and the
Underwriters of the Designated Securities on the other in
connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on
the one hand and such Underwriters on the other shall be
deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the
Issuers bear to the total underwriting discounts and commissions
received by such Underwriters. 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
information supplied by the Issuers on the one hand or such
Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Issuers and the
Underwriters agree that it would not be just and equitable if
contribution pursuant to this subsection (d) were determined
by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at
which the applicable Designated Securities underwritten by it and
distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f)
of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The
obligations of the Underwriters of Designated Securities in this
subsection (d) to contribute are several in proportion to their
respective underwriting obligations with respect to such
Securities and not joint.
(e) The obligations of the Issuers under this
Section 8 shall be in addition to any liability which the Issuers
may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each
officer and director of each Issuer (including any person who
with his consent is named in the registration statement or is
about to become a director of an Issuer) and to each person, if
any, who controls an Issuer within the meaning of the Act.
(PAGE) 19
9. (a) If any Underwriter shall default in its
obligation to purchase the Designated Securities which it has
agreed to purchase under the Pricing Agreement relating to such
Designated Securities, the Representatives may in their
discretion arrange for themselves or another party or other
parties to purchase such Designated Securities on the terms
contained herein. If within thirty-six hours after such default
by any Underwriter the Representatives do not arrange for the
purchase of such Designated Securities, then the Issuers shall be
entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the
Representatives to purchase such Designated Securities on such
terms. In the event that, within the respective prescribed
period, the Representatives notify the Issuers that they have so
arranged for the purchase of such Designated Securities, or the
Issuers notify the Representatives that they have so arranged for
the purchase of such Designated Securities, the Representatives
or the Issuers shall have the right to postpone the Time of
Delivery for such Designated Securities for a period of not more
than seven days, in order to effect whatever changes may thereby
be made necessary in the Registration Statement or the Prospectus
as amended or supplemented, or in any other documents or
arrangements, and the Issuers agree to file promptly any
amendments or supplements to the Registration Statement or the
Prospectus which in the opinion of the Representatives may
thereby be made necessary. The term "Underwriter" as used in this
Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to
the Pricing Agreement with respect to such Designated Securities.
(b) If, after giving effect to any arrangements for
the purchase of the Designated Securities of a defaulting
Underwriter or Underwriters by the Representatives and the
Issuers as provided in subsection (a) above, the aggregate
principal amount of such Designated Securities which remains
unpurchased does not exceed one-eleventh of the aggregate
principal amount of the Designated Securities, then the Issuers
shall have the right to require each non-defaulting Underwriter
to purchase the principal amount of Designated Securities which
such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to
require each non-defaulting Underwriter to purchase its pro rata
share (based on the principal amount of Designated Securities
which such Underwriter agreed to purchase under such Pricing
Agreement) of the Designated Securities of such defaulting
Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for
the purchase of the Designated Securities of a defaulting
Underwriter or Underwriters by the Representatives and the
Issuers as provided in subsection (a) above, the aggregate
principal amount of Designated Securities which remains
unpurchased exceeds one-eleventh of the aggregate principal
amount of the Designated Securities, as referred to in
subsection (b) above, or if the Issuers shall not exercise the
right described in subsection (b) above to require non-defaulting
Underwriters to purchase Designated Securities of a defaulting
Underwriter or Underwriters, then the Pricing Agreement relating
to such Designated Securities shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the
Issuers, except for the expenses to be borne by the Issuers and
the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from
liability for its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Issuers
and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full
(PAGE) 20
force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or the
Issuers or any officer or director or controlling person of the
Issuers and shall survive delivery of and payment for the
Securities.
11. If any Pricing Agreement shall be terminated
pursuant to Section 9 hereof, the Issuers shall not then be under
any liability to any Underwriter with respect to the Designated
Securities covered by such Pricing Agreement except as provided
in Section 6 and Section 8 hereof; but, if for any other reason
Designated Securities are not delivered by or on behalf of the
Issuers as provided herein, the Issuers will reimburse the
Underwriters through the Representatives for all out-of-pocket
expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Issuers shall
then be under no further liability to any Underwriter with
respect to such Designated Securities except as provided in
Section 6 and Section 8 hereof.
12. In all dealings hereunder, the Representatives
of the Underwriters of Designated Securities shall act on behalf
of each of such Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if
any, as may be designated for such purpose in the Pricing
Agreement.
All statements, requests, notices and agreements
hereunder shall be in writing, and if to the Underwriters shall
be delivered or sent by mail, telex or facsimile transmission to
the address of the Representatives as set forth in the Pricing
Agreement; and if to an Issuer shall be delivered or sent by
mail, telex or facsimile transmission to the address of such
Issuer set forth in the Registration Statement: Attention:
Secretary; provided, however, that any notice to an Underwriter
pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied
to the Issuers by the Representatives upon request. Any such
statements, requests, notices or agreements shall take
effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall
be binding upon, and inure solely to the benefit of, the
Underwriters, the Issuers and, to the extent provided in Section
8 and Section 10 hereof, the officers and directors of each
Issuer and each person who controls an Issuer or any Underwriter,
and their respective heirs, executors, administrators, successors
and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement or any such Pricing
Agreement. No purchaser of any of the Securities from any
Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of each Pricing
Agreement. As used herein, "business day" shall mean any day when
the Commission's office in Washington, D.C. is open for business.
15. This Agreement and each Pricing Agreement shall
be governed by and construed in accordance with the laws of the
State of New York.
16. This Agreement and each Pricing Agreement may be
executed by any one or more of the parties hereto and thereto in
any number of counterparts, each of which shall
(PAGE) 21
be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
If the foregoing is in accordance with your
understanding, please sign and return to us seven counterparts
hereof.
Very truly yours,
The Scotts Company
By:__________________________________
Name:
Title:
The O.M. Scott & Sons Company
By:__________________________________
Name:
Title:
Accepted as of the date hereof:
[Names of Representatives]
By:_____________________________________
Name:
Title:
(PAGE) 22
ANNEX I
Pricing Agreement
[To the Representatives of the several
Underwriters named in Schedule I hereto]
........., 1994
Dear Sirs:
The Scotts Company, a Delaware corporation (the
"Company"), and the O.M. Scott & Sons Company, a Delaware
Corporation ("Scott" and, together with the Company, the
"Issuers") propose, subject to the terms and conditions stated
herein and in the Underwriting Agreement, dated ........, 1994
(the "Underwriting Agreement"), to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") the
Securities specified in Schedule II hereto (the "Designated
Securities"). Each of the provisions of the Underwriting
Agreement is incorporated herein by reference in its entirety,
and shall be deemed to be a part of this Agreement to the same
extent as if such provisions had been set forth in full herein;
and each of the representations and warranties set forth therein
shall be deemed to have been made at and as of the date of this
Pricing Agreement, except that each representation and warranty
which refers to the Prospectus in Section 2 of the Underwriting
Agreement shall be deemed to be a representation or warranty as
of the date of the Underwriting Agreement in relation to the
Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to
the Prospectus as amended or supplemented relating to the
Designated Securities which are the subject of this Pricing
Agreement. Each reference to the Representatives herein and in
the provisions of the Underwriting Agreement so incorporated
by reference shall be deemed to refer to you. Unless otherwise
defined herein, terms defined in the Underwriting Agreement are
used herein as therein defined. The Representatives designated to
act on behalf of the Representatives and on behalf of each of the
Underwriters of the Designated Securities pursuant to Section 12
of the Underwriting Agreement and the address of the
Representatives referred to in such Section 12 are set forth
at the end of Schedule II hereto.
An amendment to the Registration Statement, or a
supplement to the Prospectus, as the case may be, relating to the
Designated Securities, in the form heretofore delivered to you is
now proposed to be filed with the Commission.
Subject to the terms and conditions set forth herein
and in the Underwriting Agreement incorporated herein by
reference, the Issuers agree to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Issuers, at the time and place
and at the purchase price to the Underwriters set forth in
Schedule II hereto, the principal amount of Designated Securities
set forth opposite the name of such Underwriter in Schedule I
hereto.
If the foregoing is in accordance with your
understanding, please sign and return to us seven counterparts
hereof, and upon acceptance hereof by you, on behalf of each of
the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement
incorporated herein by reference, shall constitute a binding
agreement between each of the Underwriters and the Issuers. It is
understood that your acceptance of
(PAGE) 2
this letter on behalf of each of the Underwriters is or will be
pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Issuers
for examination upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
The Scotts Company
By:__________________________________
Name:
Title:
The O.M. Scott & Sons Company
By:__________________________________
Name:
Title:
Accepted as of the date hereof:
[Names of Representatives]
By:_________________________________________
Name:
Title:
On behalf of each of the Underwriters
(PAGE) 3
SCHEDULE I
<TABLE>
<CAPTION>
Principal
Amount of
Designated
Securities
to be
Purchased Underwriter
<S> <C> <C>
$
_____________
Total . . . . . . . $
</TABLE>
(PAGE) 4
SCHEDULE II
Title of Designated Securities:
[ %] [Floating Rate] [Zero Coupon] [Notes] [Debentures] due
Aggregate principal amount:
[$]
Price to Public:
__% of the principal amount of the Designated Securities, plus
accrued
interest from to [and accrued amortization, if
any, from
to ]
Purchase Price by Underwriters:
__% of the principal amount of the Designated Securities, plus
accrued
interest from to [and accrued amortization, if
any, from
to ]
Specified funds for payment of purchase price:
[New York] Clearing House funds
Indenture:
Indenture dated June 1, 1994, between the Issuers and Chemical
Bank, as
Trustee
Maturity:
Interest Rate:
[ %] [Zero Coupon] [See Floating Rate Provisions]
Interest Payment Dates:
[months and dates]
Redemption Provisions:
[No provisions for redemption]
[The Designated Securities may be redeemed, otherwise than
through the sinking fund, in whole or in part at the option of
the Issuers, in the amount of [$] or an integral multiple
thereof, [on or after , at the following
redemption prices (expressed in percentages of principal amount).
If [redeemed on or before , %, and if] redeemed
during the 12-month period beginning ,
(PAGE) 5
<TABLE>
<CAPTION>
Redemption Year Price
<S> <C> <C>
</TABLE>
and thereafter at 100% of their principal amount, together in
each case with accrued interest to the redemption date.] [on any
interest payment date falling in or after , ,
at the election of the Issuers, at a redemption price equal to
the principal amount thereof, plus accrued interest to the date
of redemption.]
[Other possible redemption provisions, such as mandatory
redemption upon occurrence of certain events or redemption for
changes in tax law]
[Restriction on refunding]
Sinking Fund Provisions:
[No sinking fund provisions]
[The Designated Securities are entitled to the benefit of a
sinking fund to retire [$] principal amount of
Designated Securities on in each of the years
through at 100% of their principal amount plus accrued
interest][,together with [cumulative] [noncumulative] redemptions
at the option of the Issuers to retire an additional [$]
principal amount of Designated Securities in the years
through at 100% of their principal amount plus
accrued interest].
[If Securities are extendable debt Securities, insert--
Extendable provisions:
Securities are repayable on , [insert date and
years], at the option of the holder, at their principal amount
with accrued interest. Initial annual interest rate will be
%, and thereafter annual interest rate will be adjusted on
, and to a rate not less than % of the effective
annual interest rate on U.S. Treasury obligations with
- -year maturities as of the [insert date 15 days prior to maturity
date] prior to such [insert maturity date].]
[If Securities are Floating Rate debt Securities, insert--
Floating rate provisions:
Initial annual interest rate will be % through and
thereafter will be adjusted [monthly] [on each ,
,
________________ and ] [to an annual rate of %
above the average rate for -year [month] [securities]
[certificates of deposit] issued
(PAGE) 6
by and [insert names of banks].] [and
the annual interest rate [thereafter] [from through
] will be the interest yield equivalent of the weekly average
per annum market discount rate for -month Treasury bills
plus % of Interest Differential (the excess, if any, of (i) then
current weekly average per annum secondary market yield for
- -month certificates of deposit over (ii) then current interest
yield equivalent of the weekly average per annum market discount
rate for -month Treasury bills); [from
and thereafter the rate will be the then current interest yield
equivalent plus % of Interest Differential].]
Defeasance provisions:
Time of Delivery:
Closing Location:
Names and addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
(PAGE) 7
ANNEX II
Pursuant to Section 7(d) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the
effect that:
(i) They are independent certified public accountants
with respect to the Issuers and their subsidiaries within the
meaning of the Act and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules audited (and,
if applicable, prospective financial statements and/or pro forma
financial information examined) by them and included or
incorporated by reference in the Registration Statement or the
Prospectus comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and
regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American
Institute of Certified Public Accountants of the consolidated
interim financial statements, selected financial data, pro forma
financial information, prospective financial statements and/or
condensed financial statements derived from audited financial
statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which
have been furnished to the representatives of the Underwriters
(the "Representatives") such term to include an Underwriter or
Underwriters who act without any firm being designated as its or
their representatives;
(iii) They have made a review in accordance with
standards established by the American Institute of Certified
Public Accountants of the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus
and/or included in the Company's quarterly report on Form 10-Q or
in the Company's Current Reports on Forms 8-K and 8-K/A
incorporated by reference into the Prospectus as indicated in
their reports thereon copies of which have been furnished to the
Representatives; and on the basis of specified procedures
including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding
whether the unaudited condensed consolidated financial statements
referred to in paragraph (vi)(A)(i) below comply as to form in
all material respects with the applicable accounting requirements
of the Act and the Exchange Act and the related published rules
and regulations, nothing came to their attention that caused them
to believe that the unaudited condensed consolidated financial
statements do not comply as to form in all material respects with
the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations;
(iv) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years
included in the Prospectus and included or incorporated by
reference in Item 6 of the Company's Annual Report on Form 10-K
for the most recent fiscal year agrees with the corresponding
amounts (after restatement where applicable) in the audited
consolidated financial statements for five such fiscal years
which were included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the
Prospectus under selected captions with the disclosure
requirements of Regulation S-K and on the basis of limited
procedures specified in such letter nothing came to their
attention as a result of the
(PAGE) 2
foregoing procedures that caused them to believe that this
information does not conform in all material respects with the
disclosure requirements of Items 301, 302, 402 and 503(d)
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not
constituting an audit in accordance with generally accepted
auditing standards, consisting of a reading of the unaudited
financial statements and other information referred to below, a
reading of the latest available interim financial statements of
the Company and its subsidiaries, inspection of the minute books
of the Company and its subsidiaries since the date of the latest
audited financial statements included or incorporated by
reference in the Prospectus, inquiries of officials of the
Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention that
caused them to believe that:
(A) (i) the unaudited condensed consolidated
statements of cash flows included or incorporated by reference in
the Company's Quarterly Reports on Forms 10-Q or in the Company's
Current Reports on Forms 8-K or 8-K/A incorporated by reference
in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus or included in the Company's
Quarterly Reports on Form 10-Q or in the Company's Current
Reports on Forms 8-K or 8-K/A incorporated by reference in the
Prospectus for them to be in conformity with generally accepted
accounting principles;
(B) any other unaudited income statement data
and balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were derived,
and any such unaudited data and items were not determined on a
basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial
statements included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal year;
(C) the unaudited financial statements which
were not included in the Prospectus but from which were derived
the unaudited condensed financial statements referred to in
clause (A) and any unaudited income statement data and balance
sheet items included in the Prospectus and referred to in Clause
(B) were not determined on a basis substantially consistent with
the basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated
condensed financial statements included or incorporated by
reference in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of
the Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(PAGE) 3
(E) as of a specified date not more than five
days prior to the date of such letter, there have been any
changes in the consolidated capital stock (other than issuances
of capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon conversions
of convertible securities, in each case which were outstanding on
the date of latest balance sheet included or incorporated by
reference in the Prospectus) or any increase in the consolidated
long-term debt of an Issuer and its subsidiaries, or any
decreases in consolidated net current assets or stockholders'
equity or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with amounts shown in the latest balance sheet
included or incorporated by reference in the Prospectus, except
in each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or which are
described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in the
Prospectus to the specified date referred to in Clause (E) there
were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net
income or other items specified by the Representatives, or any
increases in any items specified by the Representatives, in each
case as compared with the comparable period of the preceding year
and with any other period of corresponding length specified by
the Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the audit referred to in their
report(s)included or incorporated by reference in the Prospectus
and the limited procedures, inspection of minute books, inquiries
and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts, percentages
and financial information specified by the Representatives which
are derived from the general accounting records of the Company
and its subsidiaries, which appear in the Prospectus (excluding
documents incorporated by reference), or in Part II of, or in
exhibits and schedules to, the Registration Statement specified
by the Representatives or in documents incorporated by reference
in the Prospectus specified by the Representatives, and have
compared certain of such amounts, percentages and financial
information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
All references in this Annex II to the Prospectus shall be
deemed to refer to the Prospectus (including the documents
incorporated by reference therein) as defined in the Underwriting
Agreement as of the date of the letter delivered on the date of
the Pricing Agreement for purposes of such letter and to the
Prospectus as amended or supplemented (including the documents
incorporated by reference therein) in relation to the applicable
Designated Securities for purposes of the letter delivered at the
Time of Delivery for such Designated Securities.
<EX-4a>
(PAGE) 1
Draft of June 16, 1994
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
Issuers
TO
CHEMICAL BANK
Trustee
______________
Indenture
Dated as of June 1, 1994
______________
(PAGE) 2
The Scotts Company
The O.M. Scotts & Sons Company
Certain Sections of this Indenture relating to Sections 310
through 318, inclusive, of the Trust Indenture Act of 1939:
Trust Indenture
Act Section Indenture Section
sec. 310 (a) (1) . . . . . . . . . 609
(a) (2) . . . . . . . . . 609
(a) (3) . . . . . . . . . Not Applicable
(a) (4) . . . . . . . . . Not Applicable
(b) . . . . . . . . . 608
610
sec. 311 (a) . . . . . . . . . 613
(b) . . . . . . . . . 613
sec. 312 (a) . . . . . . . . . 701
702
(b) . . . . . . . . . 702
(c) . . . . . . . . . 702
sec. 313 (a) . . . . . . . . . 703
(b) . . . . . . . . . 703
(c) . . . . . . . . . 703
(d) . . . . . . . . . 703
sec. 314 (a) . . . . . . . . . 704
(a) (4) . . . . . . . . . 101
1004
(b) . . . . . . . . . Not Applicable
(c) (1) . . . . . . . . . 102
(c) (2) . . . . . . . . . 102
(c) (3) . . . . . . . . . Not Applicable
(d) . . . . . . . . . Not Applicable
(e) . . . . . . . . . 102
sec. 315 (a) . . . . . . . . . 601
(b) . . . . . . . . . 602
(c) . . . . . . . . . 601
(d) . . . . . . . . . 601
(e) . . . . . . . . . 514
sec. 316 (a) . . . . . . . . . 101
(a) (1) (A) . . . . . . . . . 502
512
(a) (1) (B) . . . . . . . . . 513
(a) (2) . . . . . . . . . Not Applicable
(b) . . . . . . . . . 508
(c) . . . . . . . . . 104
sec. 317 (a) (1) . . . . . . . . . 503
(a) (2) . . . . . . . . . 504
(b) . . . . . . . . . 1003
sec. 318 (a) . . . . . . . . . 107
___________________
NOTE: This reconciliation and tie shall not, for any purpose,
be deemed to be a part of the Indenture.
(PAGE) 3
INDENTURE, dated as of June 1, 1994, between The Scotts
Company, a corporation duly organized and existing under the
laws of the State of Delaware (herein called "Scotts"), and
The O.M. Scott & Sons Company, a corporation duly organized
and existing under the laws of the State of Delaware (herein
called "OMS"), as joint and several obligors (collectively,
herein called the "Issuers" ), each having its principal
office at 14111 Scottslawn Road, Marysville, Ohio 43043, and
Chemical Bank, a banking corporation duly organized and
existing under the laws of the State of New York, as Trustee
(herein called the "Trustee").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to
time of their unsecured senior debentures, notes or other
evidences of indebtedness (herein called the "Securities"), to
be issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid
agreement of the Issuers, in accordance with its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase
of the Securities by the Holders thereof, it is mutually
agreed, for the equal and proportionate benefit of all Holders
of the Securities or of series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as
well as the singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference
therein, have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with
generally accepted accounting principles, and, except as
otherwise herein expressly provided, the term "generally
accepted accounting principles" with respect to any
computation required or permitted hereunder shall mean such
accounting principles as are generally accepted at the date
of this instrument;
(PAGE) 2
(4) unless the context otherwise requires, any reference
to an "Article" or a "Section" refers to an Article or a
Section, as the case may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a
whole and not to any particular Article, Section or other
subdivision.
"Act", when used with respect to any Holder, has the
meaning specified in Section 104.
"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 the purposes of this definition, "control" when used with
respect to any specified Person means the power to direct the
management and policies of such Person, directly or
indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 614 to act on behalf of the
Trustee to authenticate Securities of one or more series.
"Bank Agreement" means the Third Amended and Restated
Credit Agreement, dated as of April 7, 1992, among the
Issuers, the lenders identified therein (the "Banks"), and
Chemical Bank (as successor to Manufacturers Hanover Trust
Company), as Agent for the Banks, as amended by the First
Amendment thereto, dated as of November 19, 1992, the Second
Amendment thereto, dated as of February 23, 1993, and the
Third Amendment thereto, dated as of December 15, 1993, as
such agreement may be amended, extended, restated or otherwise
modified.
"Board of Directors" means, when used with respect to
Scotts or OMS, the board of directors of Scotts or OMS,
respectively, or any duly authorized committee of that board.
"Board Resolution" means, when used with respect to Scotts
or OMS, a copy of a resolution certified by the Secretary or
an Assistant Secretary of Scotts or OMS, as the case may be,
to have been duly adopted by such Board of Directors and to be
in full force and effect on the date of such certification,
and delivered to the Trustee.
"Business Day", when used with respect to any Place of
Payment, means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in
that Place of Payment are authorized or obligated by law or
executive order to close, and when otherwise used, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to close.
(PAGE) 3
"Capital Stock" of any Person means any and all shares,
interests, participation or other equivalents (however
designated) of corporate stock of such Person.
"Commission" means the Securities and Exchange Commission,
as from time to time constituted, created under the Exchange
Act, or, if at any time after the execution of this instrument
such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Corporate Trust Office" means the principal office of the
Trustee in The City of New York at which at any particular
time its corporate trust business shall be administered, which
office at the date hereof is located at 450 West 33rd Street,
15th Floor, New York, New York 10001.
"corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in
Section 1303.
"Defaulted Interest" has the meaning specified in
Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any
series issuable in whole or in part in the form of one or more
Global Securities, a clearing agency registered under the
Exchange Act that is designated to act as Depositary for such
Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in
Section 501.
"Exchange Act" means the Securities Exchange Act of 1934
and any statute successor thereto, in each case as amended
from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or
part of the Securities of any series and bears the legend set
forth in Section 204 (or such legend as may be specified as
contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed
and as it may from time to time be supplemented or amended by
one or more indentures supplemental hereto entered into
pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such
(PAGE) 4
supplemental indenture, respectively. The term "Indenture"
shall also include the terms of particular series of Secu-
rities established as contemplated by Section 301.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after
Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an instalment of
interest on such Security.
"Investment Company Act" means the Investment Company Act
of 1940 and any statute successor thereto, in each case as
amended from time to time.
"Issuer Board Resolutions" means a Board Resolution of each
of the Issuers.
"Issuer Request" or "Issuer Order" means a written request
or order signed in the name of each of the Issuers by its
respective Chairman of the Board, its Vice Chairman of the
Board, its President or a Vice President, and by its
Treasurer, its Assistant Treasurer, Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Maturity", when used with respect to any Security, means
the date on which the principal of such Security or an
instalment of principal becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind
specified in Section 501(4) or 501(5).
"Offer" shall have the meaning specified in the definition
of Offer to Purchase.
"Offer to Purchase" means a written offer (the "Offer")
sent by the Issuers by first class mail, postage prepaid, to
each Holder at its address appearing in the Security Register
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 the Applicable 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, subject to any contrary requirements of applicable law,
not less than 30 days or more than 60 days after the date of
such Offer and a settlement date (the "Purchase Date") for
purchase of Securities within five Business Days after the
Expiration Date. The Issuers 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 Issuers' obligation to make an Offer to Purchase, and
the Offer shall be mailed by the Issuers or, at the Issuers'
request, by the Trustee in the name and at the expense of the
Issuers. The Offer shall contain information concerning the
business of the Issuers and their Subsidiaries which the
Issuers in good faith believe 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
Opera-
(PAGE) 5
tions" 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
Issuers' 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 Issuers to make the
Offer to Purchase), (iii) if applicable, appropriate pro forma
financial information concerning the Offer to Purchase and the
events requiring the Issuers 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
Securities pursuant to the Offer to Purchase. The Offer shall
also state:
(1) the Section of this Indenture or Indentures pursuant
to which the Offer to Purchase is being made;
(2) the Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding
Securities offered to be purchased by the Issuers pursuant
to the Offer to Purchase (including, if less than 100%, the
manner by which such 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 Issuers 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 Issuers 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 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 Offer
Expiration Date (such Security being, if the Issuers or the
Trustee so requires, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to
Scotts and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing);
(PAGE) 6
(10) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Issuers (or their
Paying Agent) receive, not later than the close of business
on the Offer Expiration Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder,
the principal amount of the Securities 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 its 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 Issuers 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 Issuers 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 by the Issuers and
the Trustee so that only Securities in denominations of
$1,000 or integral multiples thereof shall be purchased);
and
(12) that in the case of any Holder whose Security is
purchased only in part, the Issuers 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.
Any Offer to Purchase shall be governed by and effected in
accordance with the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary
of each of the Issuers, and delivered to the Trustee. One of
the officers of each of the Issuers signing an Officers'
Certificate given pursuant to Section 1004 shall be the
principal executive, financial or accounting officer of such
Issuer.
"OMS" means the Person named as "OMS" in the first
paragraph of this instrument until a successor Person shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "OMS" shall mean such successor
Person.
"Opinion of Counsel" means a written opinion of counsel,
who may be counsel for the Issuers, and who shall be
acceptable to the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 502.
(PAGE) 7
"Outstanding", when used with respect to Securities, means,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than an Issuer) in trust
or set aside and segregated in trust by the Issuers (if an
Issuer shall act as Paying Agent) for the Holders of such
Securities; provided that, if such Securities are to be
redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision therefor satis-
factory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 1302; and
(4) Securities which have been paid pursuant to
Section 306 or in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to
this Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Issuers;
provided, however, that in determining whether the Holders of
the requisite principal amount of the Outstanding Securities
have given, made or taken any request, demand, authorization,
direction, notice, consent, waiver or other action hereunder
as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding
shall be the amount of the principal thereof which would be
due and payable as of such date upon acceleration of the
Maturity thereof to such date pursuant to Section 502, (B) if,
as of such date, the principal amount payable at the Stated
Maturity of a Security is not determinable, the principal
amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a
Security denominated in one or more foreign currencies or
currency units which shall be deemed to be Outstanding shall
be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the
principal amount of such Security (or, in the case of a
Security described in Clause (A) or (B) above, of the amount
determined as provided in such Clause), and (D) Securities
owned by either of the Issuers or any other obligor upon the
Securities or any Affiliate of either of the Issuers or of
such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned
shall be so disregarded. Securities so owned which have been
pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Securities and
that the pledgee is not either of the Issuers or any other
obligor upon the Securities or any Affiliate of either of the
Issuers or of such other obligor.
(PAGE) 8
"Paying Agent" means any Person authorized by the Issuers
to pay the principal of or any premium or interest on any
Securities on behalf of the Issuers.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, trust,
unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the
Securities of any series, means the place or places where the
principal of and any premium and interest on the Securities of
that series are payable as specified as contemplated by
Section 301.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the
same debt as that evidenced by such particular Security; and,
for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for
or in lieu of a mutilated, destroyed, lost or stolen Security
shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Purchase Amount" shall have the meaning specified in the
definition of Offer to Purchase.
"Purchase Date" shall have the meaning specified in the
definition of Offer to Purchase.
"Purchase Price" shall have the meaning specified in the
definition of Offer to Purchase.
"Redeemable Stock" of any Person means any equity security
of such Person that by its terms or otherwise is required to
be redeemed prior to the final Stated Maturity of the
Securities or is redeemable at the option of the holder
thereof at any time prior to the final Stated Maturity of the
Securities.
"Redemption Date", when used with respect to any Security
to be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security
to be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means
the date specified for that purpose as contemplated by
Section 301.
"Responsible Officer", when used with respect to the
Trustee, means any officer of the Trustee with direct
responsibility for the administration of this Indenture and
also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the
particular subject.
(PAGE) 9
"Scotts" means the Person named as "Scotts" in the first
paragraph of this instrument until a successor Person shall
have become such pursuant to the applicable provisions of this
Indenture, and thereafter "Scotts" shall mean such successor
Person.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time
to time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to
Section 307.
"Stated Maturity", when used with respect to any Security
or any instalment of principal thereof or interest thereon,
means the date specified in such Security as the fixed date on
which the principal of such Security or such instalment of
principal or interest is due and payable.
"Subsidiary" of any Person means a corporation more than
50% of the outstanding voting stock of which is owned,
directly or indirectly, by such Person or by one or more other
Subsidiaries, or by such Person and one or more other Sub-
sidiaries. For the purposes of this definition, "voting stock"
means stock which ordinarily has voting power for the election
of directors, whether at all times or only so long as no
senior class of stock has such voting power by reason of any
contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was
executed; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions
of this Indenture, and thereafter "Trustee" shall mean or
include each Person who is then a Trustee hereunder, and if at
any time there is more than one such Person, "Trustee" as used
with respect to the Securities of any series shall mean the
Trustee with respect to Securities of that series.
"U.S. Government Obligation" has the meaning specified in
Section 1304.
"Vice President", when used with respect to either of the
Issuers or the Trustee, means any vice president, whether or
not designated by a number or a word or words added before or
after the title "vice president".
(PAGE) 10
"Wholly Owned Subsidiary" of any Person means a Subsidiary
of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or
more Wholly Owned Subsidiaries of such Person or by such
Person and one or more Wholly Owned Subsidiaries of such
Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Issuers to the
Trustee to take any action under any provision of this
Indenture, the Issuers shall furnish to the Trustee such
certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given
in the form of an Officers' Certificate, if to be given by
officers of the Issuers, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirements set forth
in this Indenture.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture
shall include,
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, such individual has made such examination or
investigation as is necessary to enable such individual 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, in the opinion of each
such individual, such condition or covenant has been
complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified
Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or
that they be so certified or covered by only one document, but
one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other
matters, and any such Person may certify or give an opinion as
to such matters in one or several documents.
(PAGE) 11
Any certificate or opinion of officers of the Issuers may
be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel,
unless such officers know, or in the exercise of reasonable
care should know, that the certificate or opinion or
representations with respect to the matters upon which such
certificate or opinion is based are erroneous. Any such
certificate or opinion of counsel may be based, insofar as it
relates to factual matters, upon a certificate or opinion of,
or representations by, an officer or officers of an Issuer or
of each of the Issuers, as the case may be, stating that the
information with respect to such factual matters is in the
possession of such Issuer or Issuers, unless such counsel
knows, or in the exercise of reasonable care should know, that
the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates,
statements, opinions or other instruments under this
Indenture, they may, but need not, be consolidated and form
one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this
Indenture to be given, made or taken by Holders may be embo-
died in and evidenced by one or more instruments of sub-
stantially similar tenor signed by such Holders in person or
by an agent or agents duly appointed in writing; and, except
as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are
delivered to the Trustee and, where it is hereby expressly
required, to the Issuers. Such instrument or instruments (and
the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such
instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and (subject to
Section 601) conclusive in favor of the Trustee and the
Issuers, if made in the manner provided in this Section.
The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a
witness of such execution or by a certificate of a notary
public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual
signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting
in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient
proof of his authority. The fact and date of the execution of
any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner
which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security
shall bind every future Holder of the same Security and the
Holder of every Security issued upon the registration of
transfer thereof or in exchange
(PAGE) 12
therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or an Issuer in
reliance thereon, whether or not notation of such action is
made upon such Security.
The Issuers may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities
of any series entitled to give, make or take any request,
demand, authorization, direction, notice, consent, waiver or
other action provided or permitted by this Indenture to be
given, made or taken by Holders of Securities of such series,
provided that the Issuers may not set a record date for, and
the provisions of this paragraph shall not apply with respect
to, the giving or making of (i) any Notice of Default,
(ii) any declaration of acceleration referred to in Section
502, (iii) any request to institute proceedings referred to in
Section 507(2) or (iv) any direction referred to in Section
512. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities of the relevant series on
such record date, and no other Holders, shall be entitled to
take the relevant action, whether or not such Holders remain
Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on
such record date. Nothing in this paragraph shall be construed
to prevent the Issuers from setting a new record date for any
action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any
Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of
Outstanding Securities of the relevant series on the date such
action is taken. Promptly after any record date is set
pursuant to this paragraph, the Issuers, at their own expense,
shall cause notice of such record date, the proposed action by
Holders and the applicable Expiration Date to be given to the
Trustee in writing and to each Holder of Securities of the
relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the
purpose of determining the Holders of Outstanding Securities
of any series entitled to join in the giving or making of
(i) any Notice of Default, (ii) any declaration of
acceleration referred to in Section 502, (iii) any request to
institute proceedings referred to in Section 507(2) or
(iv) any direction referred to in Section 512, in each case
with respect to Securities of such series. If any record date
is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other
Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior
to the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on
such record date. Nothing in this paragraph shall be construed
to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date
previously set shall automatically and with no action by any
Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of
Outstanding Securities of the relevant series on the date such
action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Issuers'
(PAGE) 13
expense, shall cause notice of such record date, the proposed
action by Holders and the applicable Expiration Date to be
given to the Issuers in writing and to each Holder of
Securities of the relevant series in the manner set forth in
Section 106.
With respect to any record date set pursuant to this
Section, the party or parties hereto which set such record
dates may designate any day as the "Expiration Date" and from
time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective
unless notice of the proposed new Expiration Date is given to
the other parties hereto in writing, and to each Holder of
Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If
an Expiration Date is not designated with respect to any
record date set pursuant to this Section, the party or parties
hereto which set such record date shall be deemed to have
initially designated the 180th day after such record date as
the Expiration Date with respect thereto, subject to its right
to change the Expiration Date as provided in this paragraph.
Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder
to take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the
principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal
amount.
SECTION 105. Notices, Etc., to Trustee and Issuers.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided
or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder or by the Issuers shall be
sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust
Department, or
(2) the Issuers by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-
class postage prepaid, to the Issuers addressed to each of
them at the address of their principal office specified in
the first paragraph of this instrument or at any other
address or addresses previously furnished in writing to the
Trustee by an Issuer or the Issuers.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such
event, at his address
<PAGE>
(PAGE) 14
as it appears in the Security Register, not later than the
latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency
of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may
be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Holders shall be filed with the Trustee, but such filing shall
not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to
give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a
sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with
a provision of the Trust Indenture Act which is required under
the Trust Indenture Act to be a part of and govern this
Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision
of the Trust Indenture Act which may be so modified or
excluded, the latter provision shall be deemed to apply to
this Indenture as so modified or to be excluded, as the case
may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the
construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by an Issuer
shall bind its successors and assigns, whether so expressed or
not.
SECTION 110. Separability Clause.
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 pro-
visions shall not in any way be affected or impaired thereby.
(PAGE) 15
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties
hereto and their successors hereunder and the Holders, any
benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security shall not be a
Business Day at any Place of Payment, then (notwithstanding
any other provision of this Indenture or of the Securities
(other than a provision of any Security which specifically
states that such provision shall apply in lieu of this
Section)) payment of interest or principal (and premium, if
any) need not be made at such Place of Payment on such date,
but may be made on the next succeeding Business Day at such
Place of Payment with the same force and effect as if made on
the Interest Payment Date or Redemption Date, or at the Stated
Maturity.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the
form set forth in this Article, or in such other form as shall
be established by or pursuant to a Board Resolution or in one
or more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon
as may be required to comply with the rules of any securities
exchange or Depositary therefor or as may, consistently
herewith, be determined by the officers executing such
Securities, as evidenced by their execution thereof. If the
form of Securities of any series is established by action
taken pursuant to Issuer Board Resolutions, a copy of an
appropriate record of such action shall be certified by the
Secretary or an Assistant Secretary of each Issuer and
delivered to the Trustee at or prior to the delivery of the
Issuer Order contemplated by Section 303 for the
authentication and delivery of such Securities.
(PAGE) 16
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such
Securities, as evidenced by their execution of such
Securities.
SECTION 202. Form of Face of Security.
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
.................................................
No. ......... $ ........
The Scotts Company, a corporation duly organized and
existing under the laws of the State of Delaware (herein
called "Scotts", which term includes any successor Person
under the Indenture hereinafter referred to), and The O.M.
Scott & Sons Company, a corporation duly organized and
existing under the laws of the State of Delaware (herein
called "OMS", which term includes any successor Person under
the Indenture hereinafter referred to), as joint and several
obligors (collectively, herein called the "Issuers" ), for
value received, hereby promise to pay to
..............................................., or registered
assigns, the principal sum of
...................................... Dollars on
........................................................ [if
the Security is to bear interest prior to Maturity, insert --
, and to pay interest thereon from ............. or from the
most recent Interest Payment Date to which interest has been
paid or duly provided for, semi-annually on ............ and
............ in each year, commencing ........., at the rate
of ....% per annum, until the principal hereof is paid or made
available for payment [if applicable, insert -- , provided
that any principal and premium, and any such instalment of
interest, which is overdue shall bear interest at the rate of
...% per annum (to the extent that the payment of such
interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. The
interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such
interest, which shall be the ....... or ....... (whether or
not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually
paid or duly provided for will forthwith cease to be payable
to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted
Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than
10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice
as may be required by such exchange, all as more fully
provided in said Indenture].
(PAGE) 17
[If the Security is not to bear interest prior to Maturity,
insert -- The principal of this Security shall not bear
interest except in the case of a default in payment of
principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any
overdue premium shall bear interest at the rate of ....% per
annum (to the extent that the payment of such interest shall
be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on
any overdue principal or premium shall be payable on demand.
Any such interest on overdue principal or premium which is not
paid on demand shall bear interest at the rate of ......% per
annum (to the extent that the payment of such interest on
interest shall be legally enforceable), from the date of such
demand until the amount so demanded is paid or made available
for payment. Interest on any overdue interest shall be payable
on demand.]
Payment of the principal of (and premium, if any) and [if
applicable, insert -- any such] interest on this Security will
be made at the office or agency of the Issuers in the Borough
of Manhattan, the City of New York, the State of New York
maintained for such purpose or at any other office or agency
maintained by the Issuers for such purpose, in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private
debts; provided, however, that at the option of the Issuers
payment of interest may be made by check mailed to the address
of the Person entitled thereto as such address shall appear in
the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if
set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, each of the Issuers has caused this
instrument to be duly executed under its corporate seal.
Dated:
THE SCOTTS COMPANY
By______________________________
Title:
Attest:
___________________________
(PAGE) 18
Title:
THE O.M. SCOTT & SONS COMPANY
By_______________________________
Title:
Attest:
___________________________
Title:
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of
securities of the Issuers (herein called the "Securities"),
issued and to be issued in one or more series under an
Indenture, dated as of June 1, 1994 (herein called the
"Indenture", which term shall have the meaning assigned to it
in such instrument), between the Issuers and Chemical Bank, as
Trustee (herein called the "Trustee", which term includes any
successor trustee under the Indenture), and reference is
hereby made to the Indenture for a statement of the respective
rights, limitations of rights, duties and immunities
thereunder of the Issuers, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof.
[If applicable, insert -- The Securities of this series are
subject to redemption upon not less than 30 days' notice by
mail, [if applicable, insert -- (1) on ........... in any year
commencing with the year ...... and ending with the year
...... through operation of the sinking fund for this series
at a Redemption Price equal to 100% of the principal amount,
and (2)] at any time [if applicable, insert -- on or after
.........., 19..], as a whole or in part, at the election of
the Issuers, at the following Redemption Prices (expressed as
percentages of the principal amount): If redeemed [if
applicable, insert -- on or before ..............., ...%, and
if redeemed] during the 12-month period beginning
............. of the years indicated,
(PAGE) 19
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such redemption
[if applicable, insert -- (whether through operation of the
sinking fund or otherwise)] with accrued interest to the
Redemption Date, but interest installments whose Stated
Maturity is on or prior to such Redemption Date will be
payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on
the relevant Record Dates referred to on the face hereof, all
as provided in the Indenture.]
[If applicable, insert -- The Securities of this series are
subject to redemption upon not less than 30 days' notice by
mail, (1) on ............ in any year commencing with the year
.... and ending with the year .... through operation of the
sinking fund for this series at the Redemption Prices for
redemption through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table
below, and (2) at any time [if applicable, insert -- on or
after ............], as a whole or in part, at the election of
the Issuers, at the Redemption Prices for redemption otherwise
than through operation of the sinking fund (expressed as
percentages of the principal amount) set forth in the table
below: If redeemed during the 12-month period beginning
............ of the years indicated,
<TABLE>
<CAPTION>
Redemption Price for
Redemption Price Redemption Otherwise
for Redemption Than Through
Through Operation Operation
of the of the Sinking
Year Sinking Fund Fund
<S> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the
principal amount, together in the case of any such redemption
(whether through operation of the sinking fund or otherwise)
with accrued interest to the Redemption Date, but interest
installments whose Stated
(PAGE) 20
Maturity is on or prior to such Redemption Date will be
payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on
the relevant Record Dates referred to on the face hereof, all
as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing,
the Issuers may not, prior to ............., redeem any
Securities of this series as contemplated by [if applicable,
insert -- Clause (2) of] the preceding paragraph as a part of,
or in anticipation of, any refunding operation by the
application, directly or indirectly, of moneys borrowed having
an interest cost to the Issuers (calculated in accordance with
generally accepted financial practice) of less than .....% per
annum.]
[If applicable, insert -- The sinking fund for this series
provides for the redemption on ............ in each year
beginning with the year ....... and ending with the year
...... of [if applicable, insert -- not less than $..........
("mandatory sinking fund") and not more than] $.........
aggregate principal amount of Securities of this series.
Securities of this series acquired or redeemed by the Issuers
otherwise than through [if applicable, insert -- mandatory]
sinking fund payments may be credited against subsequent [if
applicable, insert -- mandatory] sinking fund payments
otherwise required to be made [if applicable, insert -- , in
the inverse order in which they become due].]
[If the Security is subject to redemption of any kind,
insert -- In the event of redemption of this Security in part
only, a new Security or Securities of this series and of like
tenor for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.]
[If applicable, insert -- The Indenture contains provisions
for defeasance at any time of [the entire indebtedness of this
Security] [or] [certain restrictive covenants and Events of
Default with respect to this Security] [, in each case] upon
compliance with certain conditions set forth in the
Indenture.]
[If the Security is not an Original Issue Discount
Security, insert -- If an Event of Default with respect to
Securities of this series shall occur and be continuing, the
principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the
Indenture.]
[If the Security is an Original Issue Discount Security,
insert -- If an Event of Default with respect to Securities of
this series shall occur and be continuing, an amount of
principal of the Securities of this series may be declared due
and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to -- insert formula for
determining the amount. Upon payment (i) of the amount of
principal so declared due and payable and (ii) of interest on
any overdue principal, premium and interest (in each case to
the extent that the payment of such interest shall be legally
enforceable), all of the Issuers' obligations in respect of
the payment of the principal of and premium and interest, if
any, on the Securities of this series shall terminate.]
(PAGE) 21
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Issuers and the rights of the
Holders of the Securities of each series to be affected under
the Indenture at any time by the Issuers and the Trustee with
the consent of the Holders of a majority in principal amount
of the Securities at the time Outstanding of each series to be
affected. The Indenture also contains provisions permitting
the Holders of specified percentages in principal amount of
the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to
waive compliance by the Issuers with certain provisions of the
Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of
such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the
Indenture, the Holder of this Security shall not have the
right to institute any proceeding with respect to the
Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have
previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities of this
series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall
have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and
offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time
Outstanding a direction inconsistent with such request, and
shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit
instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or any premium or interest
hereon on or after the respective due dates expressed herein.
No reference herein to the Indenture and no provision of
this Security or of the Indenture shall alter or impair the
obligation of the Issuers, which is absolute and
unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in
the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security
is registrable in the Security Register, upon surrender of
this Security for registration of transfer at the office or
agency of the Issuers in any place where the principal of and
any premium and interest on this Security are payable, duly
endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Issuers and the Security
Registrar duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new
Securities of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount,
will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in
registered form without coupons in denominations of $.......
and any integral multiple thereof. As provided in the
(PAGE) 22
Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like
aggregate principal amount of Securities of this series and of
like tenor of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration
of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
Prior to due presentment of this Security for registration
of transfer, the Issuers, the Trustee and any agent of the
Issuers or the Trustee may treat the Person in whose name this
Security is registered as the owner hereof for all purposes,
whether or not this Security be overdue, and neither the
Issuers, the Trustee nor any such agent shall be affected by
notice to the contrary.
All terms used in this Security which are defined in the
Indenture shall have the meanings assigned to them in the
Indenture.
SECTION 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301
for the Securities evidenced thereby, every Global Security
authenticated and delivered hereunder shall bear a legend 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 DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN
PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN
SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
(PAGE) 23
SECTION 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in
substantially the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
CHEMICAL BANK,
As Trustee
By_________________________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be established in or pursuant to Issuer Board
Resolutions and, subject to Section 303, set forth, or
determined in the manner provided, in an Officers' Certifi-
cate, or established in one or more indentures supplemental
hereto, prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of
any other series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and
delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities of
the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to
Section 303, are deemed never to have been authenticated and
delivered hereunder);
(3) the Person to whom any interest on a Security of the
series shall be payable, if other than the Person in whose
name that Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record
Date for such interest;
(PAGE) 24
(4) the date or dates on which the principal of any
Securities of the series is payable;
(5) the rate or rates at which any Securities of the
series shall bear interest, if any, the date or dates from
which any such interest shall accrue, the Interest Payment
Dates on which any such interest shall be payable and the
Regular Record Date for any such interest payable on any
Interest Payment Date;
(6) the place or places where the principal of and any
premium and interest on any Securities of the series shall
be payable;
(7) the period or periods within which, the price or
prices at which and the terms and conditions upon which any
Securities of the series may be redeemed, in whole or in
part, at the option of the Issuers and, if other than by
Issuer Board Resolutions, the manner in which any election
by the Issuers to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Issuers to redeem or
purchase any Securities of the series pursuant to any
sinking fund or analogous provisions or at the option of the
Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon
which any Securities of the series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities
of the series shall be issuable;
(10) if the amount of principal of or any premium or
interest on any Securities of the series may be determined
with reference to an index or pursuant to a formula, the
manner in which such amounts shall be determined;
(11) if other than the currency of the United States of
America, the currency, currencies or currency units in which
the principal of or any premium or interest on any
Securities of the series shall be payable and the manner of
determining the equivalent thereof in the currency of the
United States of America for any purpose, including for
purposes of the definition of "Outstanding" in Section 101;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election
of the Issuers or the Holder thereof, in one or more
currencies or currency units other than that or those in
which such Securities are stated to be payable, the
currency, currencies or currency units in which the prin-
cipal of or any premium or interest on such Securities as to
which such election is made shall be payable, the periods
within which and the terms and conditions upon which such
election is to be made and the amount so payable (or the
manner in which such amount shall be determined);
(PAGE) 25
(13) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the
series which shall be payable upon declaration of
acceleration of the Maturity thereof pursuant to
Section 502;
(14) if the principal amount payable at the Stated Maturity
of any Securities of the series will not be determinable as
of any one or more dates prior to the Stated Maturity, the
amount which shall be deemed to be the principal amount of
such Securities as of any such date for any purpose
thereunder or hereunder, including the principal amount
thereof which shall be due and payable upon any Maturity
other than the Stated Maturity or which shall be deemed to
be Outstanding as of any date prior to the Stated Maturity
(or, in any such case, the manner in which such amount
deemed to be the principal amount shall be determined);
(15) if applicable, that the Securities of the series, in
whole or any specified part, shall be defeasible pursuant to
Section 1302 or Section 1303 or both such Sections and, if
other than by Issuer Board Resolutions, the manner in which
any election by the Issuers to defease such Securities shall
be evidenced;
(16) if applicable, that any Securities of the series shall
be issuable in whole or in part in the form of one or more
Global Securities and, in such case, the respective
Depositaries for such Global Securities, the form of any
legend or legends which shall be borne by any such Global
Security in addition to or in lieu of that set forth in
Section 204 and any circumstances in addition to or in lieu
of those set forth in Clause (2) of the last paragraph of
Section 305 in which any such Global Security may be
exchanged in whole or in part for Securities registered, and
any transfer of such Global Security in whole or in part may
be registered, in the name or names of Persons other than
the Depositary for such Global Security or a nominee
thereof;
(17) any addition to or change in the Events of Default
which applies to any Securities of the series and any change
in the right of the Trustee or the requisite Holders of such
Securities to declare the principal amount thereof due and
payable pursuant to Section 502;
(18) any addition to or change in the covenants set forth
in Article Ten which applies to Securities of the series;
(19) if applicable, that the Securities of the series shall
be subject to certain restrictions on transfer and, in such
case, the terms and conditions of such restrictions and the
form of any legend or legends which shall be borne by any
such Security in respect of such restrictions;
(20) if applicable, that the Securities of the series shall
be convertible or exchangeable into other securities or
property of either or both of the Issuers or otherwise and,
in such case, the terms and conditions of such rights so to
convert or exchange (including without limitation the
conversion or exchange rate or conversion or exchange price)
and descriptions of the securities or property into which
such Securities may be converted or exchanged; and
(PAGE) 26
(21) any other terms of the series (which terms shall not
be inconsistent with the provisions of this Indenture,
except as permitted by Section 901(5)).
All Securities of any one series shall be substantially
identical except as to denomination and except as may
otherwise be provided in or pursuant to the Issuer Board
Resolutions referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers'
Certificate referred to above or in any such indenture
supplemental hereto.
If any of the terms of the series are established by action
taken pursuant to Issuer Board Resolutions, a copy of an
appropriate record of such action shall be certified by the
Secretary or an Assistant Secretary of each of the Issuers and
delivered to the Trustee at or prior to the delivery of the
Officers' Certificate setting forth the terms of the series.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in
registered form without coupons and only in such denominations
as shall be specified as contemplated by Section 301. In the
absence of any such specified denomination with respect to the
Securities of any series, the Securities of such series shall
be issuable in denominations of $1,000 and any integral mul-
tiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of each of the
Issuers by its Chairman of the Board, its Vice Chairman of
the Board, its President or one of its Vice Presidents, under
its corporate seal reproduced thereon and attested by its
Secretary or one of its Assistant Secretaries. The signature
of any of these officers on the Securities may be manual or
facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of such
Issuer shall bind such Issuer, notwithstanding that such
individuals or any of them have ceased to hold such offices
prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Issuers may deliver Securities
of any series executed by the Issuers to the Trustee for
authentication, together with an Issuer Order for the
authentication and delivery of such Securities, and the
Trustee in accordance with the Issuer Order shall authenticate
and deliver such Securities. If the form or terms of the
Securities of the series have been established by or pursuant
to one or more Issuer Board Resolutions as permitted by
Sections 201 and 301, in authenticating such Securities, and
accepting the additional
(PAGE) 27
responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by
or pursuant to Issuer Board Resolutions as permitted by
Section 201, that such form has been established in
conformity with the provisions of this Indenture;
(2) if the terms of such Securities have been established
by or pursuant to Issuer Board Resolutions as permitted by
Section 301, that such terms have been established in
conformity with the provisions of this Indenture; and
(3) that such Securities, when authenticated and delivered
by the Trustee and issued by the Issuers in the manner and
subject to any conditions specified in such Opinion of
Counsel, will constitute valid and legally binding
obligations of the Issuers enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors'
rights and to general equity principles.
If such form or terms have been so established, the Trustee
shall not be required to authenticate such Securities if the
issue of such Securities pursuant to this Indenture will
affect the Trustee's own rights, duties or immunities under
the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the
preceding paragraph, if all Securities of a series are not to
be originally issued at one time, it shall not be necessary to
deliver the Officers' Certificate otherwise required pursuant
to Section 301 or the Issuer Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or
prior to the authentication of each Security of such series if
such documents are delivered at or prior to the authentication
upon original issuance of the first Security of such series to
be issued.
Each Security shall be dated the date of its
authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless
there appears on such Security a certificate of authentication
substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence,
that such Security has been duly authenticated and delivered
hereunder. Notwithstanding the foregoing, if any Security
shall have been authenticated and delivered hereunder but
never issued and sold by the Issuers, and the Issuers shall
deliver such Security to the Trustee for cancellation as
provided in Section 309, for all purposes of this Indenture
such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
(PAGE) 28
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any
series, the Issuers may execute, and upon an Issuer Order and
receipt by the Trustee of the other documents required by
Sections 102 and 303 the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and
with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the
Issuers will cause definitive Securities of that series to be
prepared without unreasonable delay. After the preparation of
definitive Securities of such series, the temporary Securities
of such series shall be exchangeable for definitive Securities
of such series upon surrender of the temporary Securities of
such series at the office or agency of the Issuers in a Place
of Payment for that series, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary
Securities of any series, the Issuers shall execute and the
Trustee shall authenticate and deliver in exchange therefor
one or more definitive Securities of the same series, of any
authorized denominations and of like tenor and aggregate
principal amount. Until so exchanged, the temporary Securities
of any series shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities of such
series and tenor.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Issuers shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in
such office and in any other office or agency of the Issuers
in a Place of Payment being herein sometimes collectively
referred to as the "Security Register") in which, subject to
such reasonable regulations as they may prescribe, the Issuers
shall provide for the registration of Securities and of
transfers of Securities. The Trustee is hereby appointed
"Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security
of a series at the office or agency of the Issuers in a Place
of Payment for that series, the Issuers shall execute, and the
Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Secur-
ities of the same series, of any authorized denominations and
of like tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may
be exchanged for other Securities of the same series, of any
authorized denominations and of like tenor and aggregate
principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities
are so surrendered for exchange, the Issuers shall execute,
and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
(PAGE) 29
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the
Issuers, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered
upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Issuers
or the Trustee) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the
Issuers and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Issuers may
require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving
any transfer.
If the Securities of any series (or of any series and
specified tenor) are to be redeemed in part, the Issuers shall
not be required (A) to issue, register the transfer of or
exchange any Securities of that series (or of that series and
specified tenor, as the case may be) during a period beginning
at the opening of business 15 days before the day of the
mailing of a notice of redemption of any such Securities
selected for redemption under Section 1103 and ending at the
close of business on the day of such mailing, or (B) to
register the transfer of or exchange any Security so selected
for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall
apply only to Global Securities:
(1) Each Global Security authenticated under this
Indenture shall be registered in the name of the Depositary
designated for such Global Security or a nominee thereof and
delivered to such Depositary or a nominee thereof or
custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this
Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security
in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security or
a nominee thereof unless (A) such Depositary (i) has
notified the Issuers that it is unwilling or unable to
continue as Depositary for such Global Security or (ii) has
ceased to be a clearing agency registered under the Exchange
Act, (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security or (C)
there shall exist such circumstances, if any, in addition to
or in lieu of the foregoing as have been specified for this
purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in
part, and all Securities issued in exchange for
(PAGE) 30
a Global Security or any portion thereof shall be registered
in such names as the Depositary for such Global Security
shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu
of, a Global Security or any portion thereof, whether
pursuant to this Section, Section 304, 306, 906 or 1107 or
otherwise, shall be authenticated and delivered in the form
of, and shall be, a Global Security, unless such Security is
registered in the name of a Person other than the Depositary
for such Global Security or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities.
If any mutilated Security is surrendered to the Trustee,
the Issuers shall execute and the Trustee shall authenticate
and deliver in exchange therefor a new Security of the same
series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Issuers and the Trustee
(i) evidence to their satisfaction of the destruction, loss or
theft of any Security and (ii) such security or indemnity as
may be required by them to save each of them and any agent of
either of them harmless, then, in the absence of notice to the
Issuers or the Trustee that such Security has been acquired by
a bona fide purchaser, the Issuers shall execute and the
Trustee shall authenticate and deliver, in lieu of any such
destroyed, lost or stolen Security, a new Security of the same
series and of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Issuers in their discretion may, instead of issuing a new
Security, pay such Security.
Upon the issuance of any new Security under this Section,
the Issuers may require the payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses (including the fees
and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this
Section in lieu of any destroyed, lost or stolen Security
shall constitute an original additional contractual obligation
of the Issuers, whether or not the destroyed, lost or stolen
Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Securities of that
series duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Securities.
(PAGE) 31
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301
with respect to any series of Securities, interest on any
Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to
the Person in whose name that Security (or one or more
Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Any interest on any Security of any series which is
payable, but is not punctually paid or duly provided for, on
any Interest Payment Date (herein called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of having been such
Holder, and such Defaulted Interest may be paid by the
Issuers, at their election in each case, as provided in
Clause (1) or (2) below:
(1) The Issuers may elect to make payment of any
Defaulted Interest to the Persons in whose names the
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The
Issuers shall notify the Trustee in writing of the amount
of Defaulted Interest proposed to be paid on each Security
of such series and the date of the proposed payment, and at
the same time the Issuers shall deposit with the Trustee an
amount of money equal to the aggregate amount proposed to
be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this
Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the
notice of the proposed payment. The Trustee shall promptly
notify the Issuers of such Special Record Date and, in the
name and at the expense of the Issuers, shall cause notice
of the proposed payment of such Defaulted Interest and the
Special Record Date therefor to be given to each Holder of
Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor
having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are
registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the
following Clause (2).
(2) The Issuers may make payment of any Defaulted
Interest on the Securities of any series in any other
lawful manner not inconsistent with the requirements of any
securities exchange on which such Securities may be listed,
and upon such notice as may be required by such exchange,
if, after notice given by the Issuers to the Trustee of the
proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
(PAGE) 32
Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other
Security shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other
Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer, the Issuers, the Trustee and any agent of the
Issuers or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the
purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and
for all other purposes whatsoever, whether or not such
Security be overdue, and neither the Issuers, the Trustee nor
any agent of the Issuers or the Trustee shall be affected by
notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or for credit against any
sinking fund payment shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by it. The Issuers may at any time deliver
to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Issuers may
have acquired in any manner whatsoever, and may deliver to the
Trustee (or to any other Person for delivery to the Trustee)
for cancellation any Securities previously authenticated
hereunder which the Issuers have not issued and sold, and all
Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this
Section, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of
as directed by an Issuer Order. In the absence of such an
Issuer Order, the Trustee shall dispose of all cancelled
Securities in accordance with its standard procedures and
shall deliver a certificate of such disposition to the
Issuers.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by
Section 301 for Securities of any series, interest on the
Securities of each series shall be computed on the basis of a
360-day year of twelve 30-day months.
(PAGE) 33
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon an Issuer Request cease to be of
further effect (except as to any surviving rights of registra-
tion of transfer or exchange of Securities herein expressly
provided for), and the Trustee, at the expense of the Issuers,
shall execute proper instruments acknowledging satisfaction
and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other than (i) Securities which have been
destroyed, lost or stolen and which have been replaced or
paid as provided in Section 306 and (ii) Securities for
whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Issuers and there-
after repaid to the Issuers or discharged from such trust,
as provided in Section 1003) have been delivered to the
Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) 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 Issuers,
and the Issuers, in the case of (i), (ii) or (iii) above,
have deposited or caused to be deposited with the Trustee
as trust funds in trust for the purpose, money in an amount
sufficient to pay and discharge the entire indebtedness on
such Securities not theretofore delivered to the Trustee
for cancellation, for principal and any premium and
interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the
Stated Maturity or Redemption Date, as the case may be;
(2) the Issuers have paid or caused to be paid all other
sums payable hereunder by the Issuers; and
(3) the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Issuers to the Trustee under
Section 607, the obligations of the Trustee to any
(PAGE) 34
Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B)
of Clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to
Section 401 shall be held in trust and applied by it, in
accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any
Paying Agent (including an Issuer acting as Paying Agent) as
the Trustee may determine, to the Persons entitled thereto, of
the principal and any premium and interest for whose payment
such money has been deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to
Securities of any series, means any one of the following
events (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of any interest upon any
Security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; or
(2) default in the payment of the principal of or any
premium on any Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment,
when and as due by the terms of a Security of that series;
or
(4) default in the performance, or breach, of any covenant
or warranty of an Issuer in this Indenture (other than a
covenant or warranty a default in whose performance or whose
breach is elsewhere in this Section specifically dealt with
or which has expressly been included in this Indenture
solely for the benefit of series of Securities other than
that series), and continuance of such default or breach for
a period of 60 days after there has been given, by regis-
tered or certified mail, to the Issuers by the Trustee or to
the Issuers and the Trustee by the Holders of at least 25%
in principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach
and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(PAGE) 35
(5) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by an Issuer
(including a default with respect to Securities of any
series other than that series) having an aggregate principal
amount outstanding of at least $5,000,000, or under any
mortgage, indenture or instrument (including this Indenture)
under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by
an Issuer having an aggregate principal amount outstanding
of at least $5,000,000, whether such indebtedness now exists
or shall hereafter be created, which default (A) shall
constitute a failure to pay any portion of the principal of
such indebtedness when due and payable after the expiration
of any applicable grace period with respect thereto or
(B) shall have resulted in such indebtedness becoming or
being declared due and payable prior to the date on which it
would otherwise have become due and payable, without, in the
case of Clause (A), such indebtedness having been discharged
or without, in the case of Clause (B), such indebtedness
having been discharged or such acceleration having been
rescinded or annulled, in each such case within a period of
10 days after there shall have been given, by registered or
certified mail, to the Issuers by the Trustee or to the
Issuers and the Trustee by the Holders of at least 10% in
principal amount of the Outstanding Securities of that
series a written notice specifying such default and
requiring the Issuers to cause such indebtedness to be
discharged or cause such acceleration to be rescinded or
annulled, as the case may be, and stating that such notice
is a "Notice of Default" hereunder; provided, however, that,
subject to the provisions of Sections 601 and 602, the
Trustee shall not be deemed to have knowledge of such
default unless either (A) a Responsible Officer of the
Trustee shall have actual knowledge of such default or
(B) the Trustee shall have received written notice thereof
from the Issuers, from any Holder, from the holder of any
such indebtedness or from the trustee under any such
mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of
an Issuer or any Subsidiary in an involuntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (B) a
decree or order adjudging an Issuer a bankrupt or insolvent,
or approving as properly filed a petition seeking reorgani-
zation, arrangement, adjustment or composition of or in
respect of such Issuer under any applicable Federal or State
law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of
such Issuer or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and
the continuance of any such decree or order for relief or
any such other decree or order unstayed and in effect for a
period of 60 consecutive days; or
(7) the commencement by an Issuer of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or
order for relief in respect of such Issuer or any Subsidiary
in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking
reorganization or relief under
(PAGE) 36
any applicable Federal or State law, or the consent by it to
the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of
such Issuer or of any substantial part of its property, or
the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or
the taking of corporate action by such Issuer in furtherance
of any such action; or
(8) the entry of a final judgment or final judgments for
the payment of money against an Issuer or any Subsidiary in
an aggregate amount (not otherwise covered by insurance) in
excess of $5,000,000 by a court or courts of competent
jurisdiction, which judgments remain undischarged or
unbonded for a period (during which execution shall not be
effectively stayed) of 60 days after the right to appeal all
such judgments has expired; provided, however, that, subject
to the provisions of Sections 601 and 602, the Trustee shall
not be deemed to have knowledge of such judgment or
judgments unless either (A) a Responsible Officer of the
Trustee shall have actual knowledge of such judgment or
judgments or (B) the Trustee shall have received written
notice thereof from the Issuers, from any Holder or from the
holder of any such judgment or judgments; or
(9) default, on the applicable Purchase Date, in the
purchase of Securities required to be purchased by the
Issuers pursuant to an Offer to Purchase as to which an
Offer has been mailed to Holders; or
(10) default in the performance, or breach, of
Section 801; or
(11) any other Event of Default provided with respect to
Securities of that series.
SECTION 502. Acceleration of Maturity; Rescission and
Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(6) or 501(7)) with respect to
Securities of any series at the time Outstanding occurs and is
continuing, then in every such case the Trustee or the Holders
of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount of
all the Securities of that series (or, if any Securities of
that series are Original Issue Discount Securities, such
portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable
immediately, by a notice in writing to the Issuers (and to the
Trustee if given by Holders), and upon any such declaration
such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified
in Section 501(6) or 501 (7) with respect to Securities of any
series at the time Outstanding occurs, the principal amount of
all the Securities of that series (or, if any Securities of
that series are Original Issue Discount Securities, such
portion of the principal amount of such Securities as may be
specified by the terms thereof) shall automatically, and
without any declaration or other action on the part of the
Trustee or any Holder, become immediately due and payable.
(PAGE) 37
At any time after such a declaration of acceleration with
respect to Securities of any series has been made and before a
judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to
the Issuers and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Issuers have paid or deposited with the Trustee a
sum sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of that series which have become due otherwise
than by such declaration of acceleration and any interest
thereon at the rate or rates prescribed therefor in such
Securities,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate or rates
prescribed therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of
that series, other than the non-payment of the principal of
Securities of that series which have become due solely by
such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or
impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee.
The Issuers covenant that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such
default continues for a period of 30 days, or
(2) default is made in the payment of the principal of
(or premium, if any, on) any Security at the Maturity
thereof,
the Issuers will, upon demand of the Trustee, pay to the
Trustee, for the benefit of the Holders of such Securities,
the whole amount then due and payable on such Securities for
principal and any premium and interest and, to the extent that
payment of such
(PAGE) 38
interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate
or rates prescribed therefor in such Securities, and, in
addition thereto, 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.
If an Event of Default with respect to Securities of any
series occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the
rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any such rights, whether
for the specific enforcement of any covenant or agreement in
this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to an Issuer
(or any other obligor upon the Securities), its property or
its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and
all actions authorized under the Trust Indenture Act in order
to have claims of the Holders and the Trustee allowed in any
such proceeding. In particular, the Trustee shall be
authorized to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute
the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 607.
No provision of this Indenture 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 be a member of a creditors'
or other similar committee.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the
production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery
of judgment shall, after provision for the payment of the
reasonable
(PAGE) 39
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates
fixed by the Trustee and, in case of the distribution of such
money on account of principal or any premium or interest, upon
presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid
for principal of and any premium and interest on the Securi-
ties in respect of which or for the benefit of which such
money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and pay-
able on such Securities for principal and any premium and
interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any
right to institute any proceeding, judicial or otherwise, with
respect to this Indenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities of that series;
(2) the Holders of not less than 25% in principal amount
of the Outstanding Securities of that series shall have made
written request to the Trustee to institute proceedings in
respect of such Event of Default in its own name as Trustee
hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such proceeding; and
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day period by
the Holders of a majority in principal amount of the
Outstanding Securities of that series;
(PAGE) 40
it being understood and intended that no one or more of such
Holders shall have any right in any manner whatever by vir-
tue of, or by availing of, any provision of this Indenture
to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or
preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all of
such Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of and
any premium and (subject to Section 307) interest on such
Security on the respective Stated Maturities expressed in such
Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the
consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding
to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such
Holder, then and in every such case, subject to any
determination in such proceeding, the Issuers, the Trustee and
the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and
remedies of the Trustee and the Holders shall continue as
though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to
the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing
at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Securities to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an
acquiescence therein.
(PAGE) 41
Every right and remedy given by this Article or by law to the
Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding Securities of any series shall 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 the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount
of the Outstanding Securities of any series may on behalf of
the Holders of all the Securities of such series waive any
past default hereunder with respect to such series and its
consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which
under Article Nine cannot be modified or amended without the
consent of the Holder of each Outstanding Security of such
series affected.
Upon any such waiver, such default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. 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, suffered or omitted by it as Trustee, a
court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to
the extent provided in the Trust Indenture Act; provided that
the provisions of this Section shall not apply to any suit
instituted by the Trustee and neither this Section nor
(PAGE) 42
the Trust Indenture Act shall be deemed to authorize any court
to require such an undertaking or to make such an assessment
in any suit instituted by the Issuers.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Issuers covenant (to the extent that they may lawfully
do so) that they will not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or
advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and
the Issuers (to the extent that they may lawfully do so)
hereby expressly waive all benefit or advantage of any such
law and covenant that they will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by the Trust Indenture Act. Notwithstanding the
foregoing, 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 in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repay-
ment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it. Whether or not
therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to
the provisions of this Section.
SECTION 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of
any series, the Trustee shall give the Holders of Securities
of such series notice of such default as and to the extent
provided by the Trust Indenture Act; provided, however, that
in the case of any default of the character specified in
Section 501(4) with respect to Securities of such series, no
such notice to Holders shall be given until at least 30 days
after the occurrence thereof. For the purpose of this Section,
the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default
with respect to Securities of such series.
(PAGE) 43
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting
or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed or presented by
the proper party or parties;
(2) any request or direction of the Issuers mentioned
herein shall be sufficiently evidenced by an Issuer Request
or an Issuer Order, and any resolution of the Board of
Directors of an Issuer shall be sufficiently evidenced by a
Board Resolution of such Issuer;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(5) 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;
(6) 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 Issuers, personally or by agent or attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or
by or through agents or attorneys and the Trustee shall not
be responsible for any misconduct or negligence on the part
of any agent or attorney appointed with due care by it
hereunder; and
(PAGE) 44
(8) the Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except
the Trustee's certificates of authentication, shall be taken
as the statements of the Issuers, and neither the Trustee nor
any Authenticating Agent assumes any responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the
Securities. Neither the Trustee nor any Authenticating Agent
shall be accountable for the use or application by the Issuers
of Securities or the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent,
any Security Registrar or any other agent of the Issuers, in
its individual or any other capacity, may become the owner or
pledgee of Securities and, subject to Sections 608 and 613,
may otherwise deal with the Issuers with the same rights it
would have if it were not Trustee, Authenticating Agent,
Paying Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on
any money received by it hereunder except as otherwise agreed
with the Issuers.
SECTION 607. Compensation and Reimbursement.
The Issuers agree
(1) to pay to the Trustee from time to time reasonable
compensation for all services rendered by it hereunder
(which compensation shall not be limited by any provision of
law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence or bad faith;
(PAGE) 45
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses
of defending itself against any claim or liability in
connection with the exercise or performance of any of its
powers or duties hereunder and
As security for the performance of the obligations of the
Company under this Section the Trustee shall have a lien prior
to the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust
for the payment of principal of (and premium, if any) or
interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section
501(6) or (7), the expenses and the compensation for the
services are intended to constitute expenses of administration
under any bankruptcy law.
The Company's obligations under this Section 607 and any
lien arising hereunder shall survive the resignation or
removal of any Trustee, the discharge of the Company's
obligations pursuant to Article Four of this Indenture and/or
the termination of this Indenture.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee
shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions
of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have
a conflicting interest by virtue of being a trustee under this
Indenture with respect to Securities of more than one series.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee
hereunder with respect to the Securities of each series, which
may be Trustee hereunder for Securities of one or more other
series. Each Trustee shall be a Person that is eligible
pursuant to the Trust Indenture Act to act as such and has a
combined capital and surplus of at least $50,000,000. If any
such Person publishes reports of condition at least annually,
pursuant to law or to the requirements of its supervising or
examining authority, then for the purposes of this Section and
to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time the
Trustee with respect to the Securities of any series shall
cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
(PAGE) 46
SECTION 610. Resignation and Removal; Appointment of
Successor.
No resignation or removal of the Trustee and no appointment
of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor
Trustee in accordance with the applicable requirements of
Section 611.
The Trustee may resign at any time with respect to the
Securities of one or more series by giving written notice
thereof to the Issuers. If the instrument of acceptance by a
successor Trustee required by Section 611 shall not have been
delivered to the Trustee within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such
series.
The Trustee may be removed at any time with respect to the
Securities of any series by Act of the Holders of a majority
in principal amount of the Outstanding Securities of such
series, delivered to the Trustee and to the Issuers.
If at any time:
(1) the Trustee shall fail to comply with Section 608
after written request therefor by the Issuers or by any
Holder who has been a bona fide Holder of a Security for at
least six months, or
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written request
therefor by the Issuers or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of
its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case, (A) the Issuers by Issuer Board
Resolutions may remove the Trustee with respect to all
Securities, or (B) subject to Section 514, any Holder who has
been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the removal
of the Trustee with respect to all Securities and the
appointment of a successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable
of acting, or if a vacancy shall occur in the office of
Trustee for any cause, with respect to the Securities of one
or more series, the Issuers, by Issuer Board Resolutions,
shall promptly appoint a successor Trustee or Trustees with
respect to the Securities of that or those series (it being
understood that any such successor Trustee may be appointed
with respect to the Securities of one or more or all of such
series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and
shall comply with the applicable requirements of Section 611.
If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor
Trustee with
(PAGE) 47
respect to the Securities of any series shall be appointed by
Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Issuers
and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment in
accordance with the applicable requirements of Section 611,
become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee
appointed by the Issuers. If no successor Trustee with respect
to the Securities of any series shall have been so appointed
by the Issuers or the Holders and accepted appointment in the
manner required by Section 611, any Holder who has been a bona
fide Holder of a Security of such series for at least six
months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the
Securities of such series.
The Issuers shall give notice of each resignation and each
removal of the Trustee with respect to the Securities of any
series and each appointment of a successor Trustee with
respect to the Securities of any series to all Holders of
Securities of such series in the manner provided in
Section 106. Each notice shall include the name of the succes-
sor Trustee with respect to the Securities of such series and
the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee
with respect to all Securities, every such successor Trustee
so appointed shall execute, acknowledge and deliver to the
Issuers and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of
the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Issuers or
the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument
transferring to such successor Trustee all the rights, powers
and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee
with respect to the Securities of one or more (but not all)
series, the Issuers, the retiring Trustee and each successor
Trustee with respect to the Securities of one or more series
shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment
and which (1) shall contain such provisions as shall be
necessary or desirable to transfer and confirm to, and to vest
in, each successor Trustee all the rights, powers, trusts and
duties of the retiring Trustee with respect to the Securities
of that or those series to which the appointment of such
successor Trustee relates, (2) if the retiring Trustee is not
retiring with respect to all Securities, shall contain such
provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or
those series as to which the retiring Trustee is not retiring
shall continue to be vested in the retiring Trustee, and
(PAGE) 48
(3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-
trustees of the same trust and that each such Trustee shall be
trustee of a trust or trusts hereunder separate and apart from
any trust or trusts hereunder administered by any other such
Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent provided
therein and each such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series to which the
appointment of such successor Trustee relates; but, on request
of the Issuers or any successor Trustee, such retiring Trustee
shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee
hereunder with respect to the Securities of that or those
series to which the appointment of such successor Trustee
relates.
Upon request of any such successor Trustee, the Issuers
shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee
all such rights, powers and trusts referred to in the first or
second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be
qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corpo-
rate trust business of the Trustee, shall be the successor of
the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article, without
the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities
shall have been authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated
with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against the
Issuers.
If and when the Trustee shall be or become a creditor of
the Issuers (or any other obligor upon the Securities), the
Trustee shall be subject to the provisions of the Trust
Indenture Act regarding the collection of claims against the
Issuers (or any such other obligor).
(PAGE) 49
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
with respect to one or more series of Securities which shall
be authorized to act on behalf of the Trustee to authenticate
Securities of such series issued upon original issue and upon
exchange, registration of transfer or partial redemption
thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes
as if authenticated by the Trustee hereunder. Wherever
reference is made in this Indenture to the authentication and
delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed
to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Issuers and shall at all times be a
corporation organized and doing business under the laws of the
United States of America, any State thereof or the District of
Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than
$50,000,000 and subject to supervision or examination by
Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to
law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined
capital and surplus of such Authenticating Agent shall be
deemed to be its combined capital and surplus as set forth in
its most recent report of condition so published. If at any
time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner
and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency
or corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such
corporation shall be otherwise eligible under this Section,
without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Issuers. The
Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Issuers. Upon receiving such a
notice of resignation or upon such a termination, or in case
at any time such Authenticating Agent shall cease to be
eligible in accordance with the provisions of this Section,
the Trustee may appoint a successor Authenticating Agent which
shall be acceptable to the Issuers and shall give notice of
such appointment in the manner provided in Section 106 to all
Holders of Securities of the series with respect to which such
Authenticating Agent will serve. Any successor Authenticating
Agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named
as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of
this Section.
(PAGE) 50
The Trustee agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under
this Section, and the Trustee shall be entitled to be
reimbursed for such payments, subject to the provisions of
Section 607.
If an appointment with respect to one or more series is
made pursuant to this Section, the Securities of such series
may have endorsed thereon, in addition to the Trustee's
certificate of authentication, an alternative certificate of
authentication in the following form:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
CHEMICAL BANK
As Trustee
By......................................,
As Authenticating Agent
By.......................................
As Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS
SECTION 701. Issuers to Furnish Trustee Names and Addresses
of Holders.
The Issuers will furnish or cause to be furnished to the
Trustee
(1) semi-annually, not later than _______________ and
___________________ in each year, a list, in such form as
the Trustee may reasonably require, of the names and
addresses of the Holders of Securities of each series as of
the preceding ______________ or ______________, as the case
may be, and
(2) at such other times as the Trustee may request in
writing, within 30 days after the receipt by the Issuers of
any such request, a list of similar form and content as of
a date not more than 15 days prior to the time such list is
furnished;
(PAGE) 51
provided, however, that if and so long as the Trustee shall
be the Security Registrar for Securities of a series, no
such list need be furnished with respect to such series of
Securities.
SECTION 702. Preservation of Information; Communications to
Holders.
The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided
in Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the
Securities, and the corresponding rights and privileges of the
Trustee, shall be as provided by the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the
same, agrees with the Issuers and the Trustee that neither the
Issuers nor the Trustee nor any agent of either of them shall
be held accountable by reason of any disclosure of information
as to names and addresses of Holders made pursuant to the
Trust Indenture Act.
SECTION 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as
may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant thereto.
A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each
stock exchange upon which any Securities are listed, with the
Commission and with the Issuers. The Issuers will notify the
Trustee when any Securities are listed on any stock exchange.
SECTION 704. Reports by Issuers.
The Issuers shall file with the Trustee and the Commission,
and transmit to Holders, such information, documents and other
reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with
the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be filed with the Trustee within 15 days after the
same is so required to be filed with the Commission.
(PAGE) 52
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, Etc., Only on Certain
Terms.
Neither Issuer shall, in a single transaction or a series
of related transactions, consolidate with or merge into any
other Person or convey, transfer or lease its properties and
assets substantially as an entirety to any Person, and neither
Issuer shall permit any Person to consolidate with or merge
into such Issuer or convey, transfer or lease its properties
and assets substantially as an entirety to such Issuer,
unless:
(1) in case an Issuer shall consolidate with or merge into
another Person or convey, transfer or lease its properties
and assets substantially as an entirety to any Person, such
Issuer is the resulting or surviving Person or the Person
formed by such consolidation or into which such Issuer is
merged or the Person which acquires by conveyance or
transfer, or which leases, the properties and assets of such
Issuer substantially as an entirety shall be a corporation,
partnership or trust, shall be organized and validly
existing under the laws of the United States of America, any
State thereof or the District of Columbia and shall
expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory
to the Trustee, the due and punctual payment of the
principal of and any premium and interest on all the
Securities and the performance or observance of every
covenant of this Indenture on the part of such Issuer to be
performed or observed;
(2) immediately after giving effect to such transaction
and treating any indebtedness which becomes an obligation of
an Issuer or any Subsidiary as a result of such transaction
as having been incurred by such Issuer or such Subsidiary at
the time of such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would
become an Event of Default, shall have happened and be
continuing;
(3) if, as a result of any such consolidation or merger or
such conveyance, transfer or lease, properties or assets of
an Issuer would become subject to a mortgage, pledge, lien,
security interest or other encumbrance which would not be
permitted by this Indenture, such Issuer or such successor
Person, as the case may be, shall take such steps as shall
be necessary effectively to secure the Securities equally
and ratably with (or prior to) all indebtedness secured
thereby; and
(4) the Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that
such consolidation, merger, conveyance, transfer or lease
and, if a supplemental indenture is required in connection
with such transaction, such supplemental indenture comply
with this Article and that all conditions precedent herein
provided for relating to such transaction have been complied
with.
(PAGE) 53
SECTION 802. Successor Substituted.
Upon any consolidation of an Issuer with, or merger of an
Issuer into, any other Person or any conveyance, transfer or
lease of the properties and assets of substantially as an
entirety in accordance with Section 801, the successor Person
formed by such consolidation or into which an Issuer is merged
or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every
right and power of, an Issuer under this Indenture with the
same effect as if such successor Person had been named as an
Issuer herein, and thereafter, except in the case of a lease,
the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of
Holders.
Without the consent of any Holders, the Issuers, when
authorized by Issuer Board Resolutions, and the Trustee, at
any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to an
Issuer and the assumption by any such successor of the cove-
nants of such Issuer herein and in the Securities; or
(2) to add to the covenants of the Issuers for the benefit
of the Holders of all or any series of Securities (and if
such covenants are to be for the benefit of less than all
series of Securities, stating that such covenants are
expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred
upon the Issuers; or
(3) to add any additional Events of Default for the
benefit of the Holders of all or any series of Securities
(and if such additional Events of Default are to be for the
benefit of less than all series of Securities, stating that
such additional Events of Default are expressly being
included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or
facilitate the issuance of Securities in bearer form,
registrable or not registrable as to principal, and with or
without interest coupons, or to permit or facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions
of this Indenture in respect of one or more series of
Securities, provided that any such addition, change or
elimination (A) shall neither (i) apply to any Security of
any series created prior to the
<PAGE>
(PAGE) 54
execution of such supplemental indenture and entitled to the
benefit of such provision nor (ii) modify the rights of the
Holder of any such Security with respect to such provision
or (B) shall become effective only when there is no such
Security Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any
series as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee with respect to
the Securities of one or more series and to add to or change
any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of
the trusts hereunder by more than one Trustee, pursuant to
the requirements of Section 611; or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with
any other provision herein, or to make any other provisions
with respect to matters or questions arising under this
Indenture, provided that such action pursuant to this
Clause (9) shall not adversely affect the interests of the
Holders of Securities of any series in any material respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority
in principal amount of the Outstanding Securities of each
series affected by such supplemental indenture, by Act of said
Holders delivered to the Issuers and the Trustee, the Issuers,
when authorized by Issuer Board Resolutions, and the Trustee
may enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Indenture
or of modifying in any manner the rights of the Holders of
Securities of such series under this Indenture; provided,
however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, or
reduce the principal amount thereof or the rate of interest
thereon or any premium payable upon the redemption thereof,
or reduce the amount of the principal of an Original Issue
Discount Security or any other Security which would be due
and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502, or change any
Place of Payment where, or the coin or currency in which,
any Security or any premium or interest thereon is payable,
or impair the right to institute suit for the enforcement of
any such payment on or after the Stated Maturity thereof
(or, in the case of redemption, on or after the Redemption
Date), or
<PAGE>
(PAGE) 55
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose
Holders is required for any such supplemental indenture, or
the consent of whose Holders is required for any waiver (of
compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided
for in this Indenture, or
(3) modify any of the provisions of this Section,
Section 513 or Section 1010, except to increase any such
percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security affected
thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to
changes in the references to "the Trustee" and concomitant
changes in this Section and Section 1010, or the deletion of
this proviso, in accordance with the requirements of
Sections 611 and 901(8), or
(4) following the mailing of an Offer with respect to an
Offer to Purchase pursuant to Section 1008, modify the
provisions of this Indenture with respect to such Offer to
Purchase in a manner adverse to such Holder, or
(5) reduce the amount of or postpone the date fixed for,
the payment of any sinking fund or analogous obligation, or
(6) modify any provisions of the Securities of such series
relating to rights to convert or exchange such Securities
for other securities or property of either or both of the
Issuers or otherwise in a manner adverse to the Holders,
including decreasing the conversion or exchange rate or
increasing the conversion or exchange price thereof.
A supplemental indenture which changes or eliminates any
covenant or other provision of this Indenture which has
expressly been included solely for the benefit of one or more
particular series of Securities, or which modifies the rights
of the Holders of Securities of such series with respect to
such covenant or other provision, shall be deemed not to
affect the rights under this Indenture of the Holders of
Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created
by, any supplemental indenture permitted by this Article or
the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and
(subject to Section 601) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental indenture is authorized or permitted by this
Indenture. The Trustee
<PAGE>
(PAGE) 56
may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part
of this Indenture for all purposes; and every Holder of
Securities theretofore or thereafter authenticated and
delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust
Indenture Act.
SECTION 906. Reference in Securities to Supplemental
Indentures.
Securities of any series authenticated and delivered after
the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Issuers
shall so determine, new Securities of any series so modified
as to conform, in the opinion of the Trustee and the Issuers,
to any such supplemental indenture may be prepared and
executed by the Issuers and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Issuers covenant and agree for the benefit of each
series of Securities that they will duly and punctually pay
the principal of and any premium and interest on the
Securities of that series in accordance with the terms of the
Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Issuers will maintain in each Place of Payment for any
series of Securities an office or agency where Securities of
that series may be presented or surrendered for payment, where
Securities of that series may be surrendered for registration
of transfer or exchange and where notices and demands to or
upon the Issuers in respect of the Securi
<PAGE>
(PAGE) 57
ties of that series and this Indenture may be served. The
Issuers will 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 Issuers shall fail to maintain any
such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, sur-
renders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Issuers hereby
appoint the Trustee as their agent to receive all such
presentations, surrenders, notices and demands.
The Issuers may also from time to time designate one or
more other offices or agencies where the Securities of one or
more series may be presented or surrendered for any or all
such purposes and may from time to time rescind such
designations; provided, however, that no such designation or
rescission shall in any manner relieve the Issuers of its
obligation to maintain an office or agency in each Place of
Payment for Securities of any series for such purposes. The
Issuers will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in
Trust.
If an Issuer shall at any time act as Paying Agent with
respect to any series of Securities, it will, on or before
each due date of the principal of or any premium or interest
on any of the Securities of that series, segregate and hold in
trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the principal and any premium and 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.
Whenever the Issuers shall have one or more Paying Agents
for any series of Securities, it will, prior to each due date
of the principal of or any premium or interest on any
Securities of that series, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as provided
by the Trust Indenture Act, and (unless such Paying Agent is
the Trustee) the Issuers will promptly notify the Trustee of
its action or failure so to act.
The Issuers will cause each Paying Agent for any series of
Securities other than the Trustee to execute and deliver to
the Trustee an instrument in which such Paying Agent shall
agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will (1) comply with the
provisions of the Trust Indenture Act applicable to it as a
Paying Agent and (2) during the continuance of any default by
an Issuer (or any other obligor upon the Securities of that
series) in the making of any payment in respect of the
Securities of that series, upon the written request of the
Trustee, forthwith pay to the Trustee all sums held in trust
by such Paying Agent for payment in respect of the Securities
of that series.
The Issuers may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any
other purpose, pay, or by Issuer Order direct any
<PAGE>
(PAGE) 58
Paying Agent to pay, to the Trustee all sums held in trust by
the Issuers or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums
were held by the Issuers or such Paying Agent; and, upon such
payment by any Paying Agent to the Trustee, such Paying Agent
shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent,
or then held by the Issuers, in trust for the payment of the
principal of or any premium or interest on any Security of any
series and remaining unclaimed for two years after such
principal, premium or interest has become due and payable
shall be paid to the Issuers on an Issuer Request, or (if then
held by the Issuers) shall be discharged from such trust; and
the Holder of such Security shall thereafter, as an unsecured
general creditor, look only to the Issuers for payment
thereof, and all liability of the Trustee or such Paying Agent
with respect to such trust money, and all liability of the
Issuers as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the
Issuers cause to be published once, in a newspaper published
in the English language, customarily published on each
Business Day and of general circulation in the City of New
York, notice that such money remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of
such money then remaining will be repaid to the Issuers.
SECTION 1004. Statement by Officers as to Default.
The Issuers will deliver to the Trustee, within 120 days
after the end of each fiscal year of the Issuers ending after
the date hereof, an Officers' Certificate, stating whether or
not to the best knowledge of the signers thereof an Issuer is
in default in the performance and observance of any of the
terms, provisions and conditions of this Indenture (without
regard to any period of grace or requirement of notice
provided hereunder) and, if an Issuer shall be in default,
specifying all such defaults and the nature and status thereof
of which they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Issuers will do or cause to
be done all things necessary to preserve and keep in full
force and effect their existence, rights (charter and
statutory) and franchises; provided, however, that the Issuers
shall not be required to preserve any such right or franchise
if the Board of Directors of such Issuer shall determine that
the preservation thereof is no longer desirable in the conduct
of the business of such Issuer and that the loss thereof is
not disadvantageous in any material respect to the Holders.
<PAGE>
(PAGE) 59
SECTION 1006. Maintenance of Properties.
The Issuers will cause all properties used or useful in the
conduct of their business or the business of any Subsidiary to
be maintained and kept in good condition, repair and working
order and supplied with all necessary equipment and will cause
to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment
of the Issuers may be necessary so that the business carried
on in connection therewith may be properly and advantageously
conducted at all times; provided, however, that nothing in
this Section shall prevent an Issuer from discontinuing the
operation or maintenance of any of such properties if such
discontinuance is, in the judgment of such Issuer, desirable
in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to
the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Issuers will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all
taxes, assessments and governmental charges levied or imposed
upon any Issuer or any Subsidiary of an Issuer or upon the
income, profits or property of any Issuer or any Subsidiary of
an Issuer, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the
property of any Issuer or any Subsidiary of an Issuer;
provided, however, that the Issuers shall not be required to
pay or discharge or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. Change of Control.
(a) Upon the occurrence of a Change in Control, each
Holder of a Security shall have the right to have such
Security repurchased by the Issuers on the terms and condi-
tions precedent set forth in this Section 1008 and this
Indenture. The Issuers shall, within 30 days following the
date of the consummation of a transaction resulting in a
Change of Control, mail an Offer with respect to an Offer to
Purchase all Outstanding Securities at a purchase price equal
to 101% of their aggregate principal amount plus accrued
interest to the Purchase Date; (provided, however, that
installments of interest whose Stated Maturity is on or prior
to the Purchase Date shall be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered
as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307).
Prior to the mailing of the notice to Holders provided for in
the preceding sentence, but in any event within 30 days
following any Change of Control, the Issuers hereby covenant
to use their best efforts to obtain the requisite consent
under the Bank Agreement to permit the repurchase of the
Securities as provided for in this Section 1008 without
violating the terms of such Bank Agreement; provided, that,
the failure to receive such consent shall in no way affect the
right of each Holder to have such Security repurchased or the
obligations of the Issuers to commence the Offer to Purchase
and to repurchase the Securities pursuant to this Section
1008. Each Holder shall be entitled to
<PAGE>
(PAGE) 60
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) The Issuers and the Trustee shall perform their
respective obligations specified in the Offer for the Offer to
Purchase. Prior to the Purchase Date, the Issuers shall
(i) accept for payment Securities or portions thereof tendered
pursuant to the Offer, (ii) deposit with the Paying Agent (or,
if an Issuer is acting as Paying Agent, segregate and hold in
trust as provided in Section 1003) 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 all Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof
accepted for payment by the Issuers. The Paying Agent shall
promptly mail or deliver to Holders of Securities so accepted
payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail or deliver to
such Holders 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 Issuers
to the Holder thereof. The Issuers shall publicly announce
the results of the Offer on or as soon as practicable after
the Purchase Date.
(c) A "Change of Control" shall be deemed to have occurred
at such time, after the date of this Indenture, as any of the
following occur:
(i) any Person or any Persons acting together that would
constitute a group (for purposes of Section 13(d) of the
Securities Exchange Act of 1934, or any successor provision
thereto) (a "Group"), together with any Affiliates or
Related Persons thereof shall beneficially own (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, or
any successor provision thereto) at least 30% of the
aggregate voting power of all classes of Capital Stock of
either Issuer entitled to vote generally in the election of
directors; or
(ii) any Person or Group, together with any Affiliates or
Related Persons thereof, shall succeed in having a
sufficient number of its nominees elected to the Board of
Directors of either Issuer such that such nominees, when
added to any existing director remaining on the Board of
Directors of such Issuer after such election who is an
Affiliated or Related Person of such Group, will constitute
a majority of the Board of Directors of such Issuer.
Notwithstanding the foregoing, with respect to OMS, Scotts
shall be deemed not to constitute such a Person or Group for
the purposes of clauses (i) and (ii) above.
SECTION 1009. Provision of Financial Information.
Whether or not the Issuers are subject to Section 13(a) or
15(d) of the Exchange Act, or any successor provision thereto,
the Issuers shall file with the Commission, to the extent
permitted by the Commission or the Exchange Act, the annual
reports,
<PAGE>
(PAGE) 61
quarterly reports and other documents which the Issuers would
have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) or any successor provision thereto
if the Issuers were so required, such documents to be filed
with the Commission on or prior to the respective dates (the
"Required Filing Dates") by which the Issuers would have been
required so to file such documents if the Issuers were so
required. The Issuers shall also in any event (a) within
15 days of each Required Filing Date (i) transmit 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 Issuers would have been
required to file with the Commission pursuant to Section 13(a)
or 15(d) of the Exchange Act or any successor provisions
thereto if the Issuers were required to be subject to such
Sections and (b) if filing such documents by the Issuers with
the Commission is not permitted under the Exchange Act,
promptly upon written request, supply, in lieu of filing with
the Commission as otherwise required by the first sentence of
this Section 1009, copies of such documents to any prospective
Holder.
SECTION 1010. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by
Section 301 for Securities of such series, the Issuers may,
with respect to the Securities of any series, omit in any
particular instance to comply with any term, provision or
condition set forth in any covenant provided pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the
Holders of such series or in any of Sections 1006 to 1009,
inclusive, if before the time for such compliance the Holders
of at least a majority in principal amount of the Outstanding
Securities of such series shall, by Act of such Holders,
either waive such compliance in such instance or generally
waive compliance with such term, provision or condition, but
no such waiver shall extend to or affect such term, provision
or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of
the Issuers and the duties of the Trustee in respect of any
such term, provision or condition shall remain in full force
and effect; provided, however, with respect to an Offer to
Purchase as to which an Offer has been mailed, no such waiver
may be made or shall be effective against any Holder tendering
Securities pursuant to such Offer, and the Issuers may not
omit to comply with the terms of such Offer as to such Holder.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their
Stated Maturity shall be redeemable in accordance with their
terms and (except as otherwise specified as contemplated by
Section 301 for such Securities) in accordance with this
Article.
<PAGE>
(PAGE) 62
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Issuers to redeem any Securities shall
be evidenced by Issuer Board Resolutions or in another manner
specified as contemplated by Section 301 for such Securities.
In case of any redemption at the election of the Issuers of
less than all the Securities of any series (including any such
redemption affecting only a single Security), the Issuers
shall, at least 60 days prior to the Redemption Date fixed by
the Issuers (unless a shorter notice shall be satisfactory to
the Trustee), notify the Trustee of such Redemption Date, of
the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to
be redeemed. In the case of any redemption of Securities prior
to the expiration of any restriction on such redemption
provided in the terms of such Securities or elsewhere in this
Indenture, the Issuers shall furnish the Trustee with an
Officers' Certificate evidencing compliance with such
restriction.
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed.
If less than all the Securities of any series are to be
redeemed (unless all the Securities of such series and of a
specified tenor are to be redeemed or unless such redemption
affects only a single Security), the particular Securities to
be redeemed shall be selected not more than 60 days prior to
the Redemption Date by the Trustee, from the Outstanding
Securities of such series not previously called for
redemption, by such method as the Trustee shall deem fair and
appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any
Security of such series, provided that the unredeemed portion
of the principal amount of any Security shall be in an
authorized denomination (which shall not be less than the
minimum authorized denomination) for such Security. If less
than all the Securities of such series and of a specified
tenor are to be redeemed (unless such redemption affects only
a single Security), the particular Securities to be redeemed
shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously
called for redemption in accordance with the preceding
sentence.
The Trustee shall promptly notify the Issuers in writing of
the Securities selected for redemption as aforesaid and, in
case of any Securities selected for partial redemption as
aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not
apply with respect to any redemption affecting only a single
Security, whether such Security is to be redeemed in whole or
in part. In the case of any such redemption in part, the
unredeemed portion of the principal amount of the Security
shall be in an authorized denomination (which shall not be
less than the minimum authorized denomination) for such
Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption
of Securities shall relate, in the case of any
<PAGE>
(PAGE) 63
Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has
been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days
prior to the Redemption Date, to each Holder of Securities to
be redeemed, at his address appearing in the Security
Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any
series consisting of more than a single Security are to be
redeemed, the identification (and, in the case of partial
redemption of any such Securities, the principal amounts) of
the particular Securities to be redeemed and, if less than
all the Outstanding Securities of any series consisting of a
single Security are to be redeemed, the principal amount of
the particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon each such Security to be
redeemed and, if applicable, that interest thereon will
cease to accrue on and after said date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is
the case.
Notice of redemption of Securities to be redeemed at the
election of the Issuers shall be given by the Issuers or, at
the Issuers' request, by the Trustee in the name and at the
expense of the Issuers and shall be irrevocable.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Issuers shall
deposit with the Trustee or with a Paying Agent (or, if an
Issuer is acting as Paying Agent, segregate and hold in trust
as provided in Section 1003) an amount of money sufficient to
pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on,
all the Securities which are to be redeemed on that date.
<PAGE>
(PAGE) 64
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein
specified, and from and after such date (unless the Issuers
shall default in the payment of the Redemption Price and
accrued interest) such Securities shall cease to bear
interest. Upon surrender of any such Security for redemption
in accordance with said notice, such Security shall be paid by
the Issuers at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that,
unless otherwise specified as contemplated by Section 301,
installments of interest whose Stated Maturity is on or prior
to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered
as such at the close of business on the relevant Record Dates
according to their terms and the provisions of Section 307.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal and any
premium shall, until paid, bear interest from the Redemption
Date at the rate prescribed therefor in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at a Place of Payment therefor (with, if the
Issuers or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Issuers and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Issuers
shall execute, and the Trustee shall authenticate and deliver
to the Holder of such Security without service charge, a new
Security or Securities of the same series and of like tenor,
of any authorized denomination as requested by such Holder, in
aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so
surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any
sinking fund for the retirement of Securities of any series
except as otherwise specified as contemplated by Section 301
for such Securities.
The minimum amount of any sinking fund payment provided for
by the terms of any Securities is herein referred to as a
"mandatory sinking fund payment", and any payment in excess of
such minimum amount provided for by the terms of such
Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any
<PAGE>
(PAGE) 65
Securities, the cash amount of any sinking fund payment may be
subject to reduction as provided in Section 1202. Each sinking
fund payment shall be applied to the redemption of Securities
as provided for by the terms of such Securities.
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities.
The Issuers (1) may deliver Outstanding Securities of a
series (other than any previously called for redemption) and
(2) may apply as a credit Securities of a series which have
been redeemed either at the election of the Issuers pursuant
to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms
of such Securities, in each case in satisfaction of all or any
part of any sinking fund payment with respect to any
Securities of such series required to be made pursuant to the
terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to
be so credited have not been previously so credited. The
Securities to be so credited shall be received and credited
for such purpose by the Trustee at the Redemption Price, as
specified in the Securities so to be redeemed, for redemption
through operation of the sinking fund and the amount of such
sinking fund payment shall be reduced accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 15 days prior to each sinking fund payment
date for any Securities, the Issuers will deliver to the
Trustee an Officers' Certificate specifying the amount of the
next ensuing sinking fund payment for such Securities pursuant
to the terms of such Securities, the portion thereof, if any,
which is to be satisfied by payment of cash and the portion
thereof, if any, which is to be satisfied by delivering and
crediting Securities pursuant to Section 1202 and will also
deliver to the Trustee any Securities to be so delivered. Not
less than 45 days prior to each such sinking fund payment
date, the Trustee shall select the Securities to be redeemed
upon such sinking fund payment date in the manner specified in
Section 1103 and cause notice of the redemption thereof to be
given in the name of and at the expense of the Issuers in the
manner provided in Section 1104. Such notice having been duly
given, the redemption of such Securities shall be made upon
the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Issuers' Option to Effect Defeasance or
Covenant Defeasance.
The Issuers may elect, at their option at any time, to have
Section 1302 or Section 1303 applied to any Securities or any
series of Securities, as the case may be, designated pursuant
to Section 301 as being defeasible pursuant to such
Section 1302 or
<PAGE>
(PAGE) 66
1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the
conditions set forth below in this Article. Any such election
shall be evidenced by Issuer Board Resolutions or in another
manner specified as contemplated by Section 301 for such
Securities.
SECTION 1302. Defeasance and Discharge.
Upon the Issuers' exercise of their option (if any) to have
this Section applied to any Securities or any series of
Securities, as the case may be, the Issuers shall be deemed to
have been discharged from their obligations with respect to
such Securities as provided in this Section on and after the
date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Defeasance"). For this purpose, such
Defeasance means that the Issuers shall be deemed to have paid
and discharged the entire indebtedness represented by such
Securities and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of
the Issuers, shall execute proper instruments acknowledging
the same), subject to the following which shall survive until
otherwise terminated or discharged hereunder: (1) the rights
of Holders of such Securities to receive, solely from the
trust fund described in Section 1304 and as more fully set
forth in such Section, payments in respect of the principal of
and any premium and interest on such Securities when payments
are due, (2) the Issuers' obligations with respect to such
Securities under Sections 304, 305, 306, 1002 and 1003,
(3) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (4) this Article. Subject to compliance
with this Article, the Issuers may exercise their option (if
any) to have this Section applied to any Securities
notwithstanding the prior exercise of its option (if any) to
have Section 1303 applied to such Securities.
SECTION 1303. Covenant Defeasance.
Upon the Issuers' exercise of their option (if any) to have
this Section applied to any Securities or any series of
Securities, as the case may be, (1) the Issuers shall be
released from their obligations under Section 801(3),
Sections 1006 through 1010, inclusive, and any covenants
provided pursuant to Section 301(18), 901(2) or 901(7) for the
benefit of the Holders of such Securities and (2) the
occurrence of any event specified in Sections 501(4) (with
respect to any of Section 801(3), Sections 1006 through 1010,
inclusive, and any such covenants provided pursuant to
Section 301(18), 901(2) or 901(7)), 501(5) and 501(11) shall
be deemed not to be or result in an Event of Default, in each
case with respect to such Securities as provided in this
Section on and after the date the conditions set forth in
Section 1304 are satisfied (hereinafter called "Covenant
Defeasance"). For this purpose, such Covenant Defeasance means
that, with respect to such Securities, the Issuers may omit to
comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such specified
Section (to the extent so specified in the case of
Section 501(4)), whether directly or indirectly by reason of
any reference elsewhere herein to any such Section or by
reason of any reference in any such
<PAGE>
(PAGE) 67
Section to any other provision herein or in any other
document, but the remainder of this Indenture and such
Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to the application of
Section 1302 or Section 1303 to any Securities or any series
of Securities, as the case may be:
(1) The Issuers shall irrevocably have deposited or caused
to be deposited with the Trustee (or another trustee which
satisfies the requirements contemplated by Section 609 and
agrees to comply with the provisions of this Article
applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as
security for, and dedicated solely to, the benefits of the
Holders of such Securities, (A) money in an amount, or
(B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount,
or (C) a combination thereof, in each case sufficient, in
the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and
which shall be applied by the Trustee (or any such other
qualifying trustee) to pay and discharge, the principal of
and any premium and interest on such Securities on the
respective Stated Maturities, in accordance with the terms
of this Indenture and such Securities. As used herein, "U.S.
Government Obligation" means (x) any security which is (i) a
direct obligation of the United States of America for the
payment of which the full faith and credit of the United
States of America is pledged or (ii) an obligation of a
Person controlled or supervised by and acting as an agency
or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America,
which, in either case (i) or (ii), is not callable or
redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with
respect to any U.S. Government Obligation which is specified
in Clause (x) above and held by such bank for the account of
the holder of such depositary receipt, or with respect to
any specific payment of principal of or interest on any U.S.
Government Obligation which is so specified and held,
provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable
to the holder of such depositary receipt from any amount
received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal or interest
evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply
to any Securities or any series of Securities, as the case
may be, the Issuers shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Issuers have
received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this
instrument, there has been a change in the applicable
Federal income tax law, in either case (A) or (B) to the
effect that, and based thereon such opinion shall confirm
that,
<PAGE>
(PAGE) 68
the Holders of such Securities will not recognize gain or
loss for Federal income tax purposes as a result of the
deposit, Defeasance and discharge to be effected with
respect to such Securities and will be subject to Federal
income tax on the same amount, in the same manner and at the
same times as would be the case if such deposit, Defeasance
and discharge were not to occur.
(3) In the event of an election to have Section 1303 apply
to any Securities or any series of Securities, as the case
may be, the Issuers shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such
Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit and Covenant
Defeasance to be effected with respect to such Securities
and will be subject to Federal income tax on the same
amount, in the same manner and at the same times as would be
the case if such deposit and Covenant Defeasance were not to
occur.
(4) The Issuers shall have delivered to the Trustee an
Officer's Certificate to the effect that neither such
Securities nor any other Securities of the same series, if
then listed on any securities exchange, will be delisted as
a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such
Securities or any other Securities shall have occurred and
be continuing at the time of such deposit or, with regard to
any such event specified in Sections 501(6) and (7), at any
time on or prior to the 90th day after the date of such
deposit (it being understood that this condition shall not
be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause
the Trustee to have a conflicting interest within the
meaning of the Trust Indenture Act (assuming all Securities
are in default within the meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which an Issuer
is a party or by which it is bound.
(8) Such Defeasance or Covenant Defeasance shall not
result in the trust arising from such deposit constituting
an investment company within the meaning of the Investment
Company Act unless such trust shall be registered under such
Act or exempt from registration thereunder.
(9) The Issuers shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel, each
stating that all conditions precedent with respect to such
Defeasance or Covenant Defeasance have been complied with.
<PAGE>
(PAGE) 69
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of
Section 1003, all money and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee or
other qualifying trustee (solely for purposes of this Section
and Section 1306, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to
Section 1304 in respect of any Securities shall be held in
trust and applied by the Trustee, in accordance with the
provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent
(including an Issuer acting as Paying Agent) as the Trustee
may determine, to the Holders of such Securities, of all sums
due and to become due thereon in respect of principal and any
premium and interest, but money so held in trust need not be
segregated from other funds except to the extent required by
law.
The Issuers shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 1304
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.
Anything in this Article to the contrary notwithstanding,
the Trustee shall deliver or pay to the Issuers from time to
time upon an Issuer Request any money or U.S. Government
Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a
nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the
Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or
Covenant Defeasance, as the case may be, with respect to such
Securities.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with this Article with respect to any
Securities by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise
prohibiting such application, then the obligations under this
Indenture and such Securities from which the Issuers has been
discharged or released pursuant to Section 1302 or 1303 shall
be revived and reinstated as though no deposit had occurred
pursuant to this Article with respect to such Securities,
until such time as the Trustee or Paying Agent is permitted to
apply all money held in trust pursuant to Section 1305 with
respect to such Securities in accordance with this Article;
provided, however, that if the Issuers make any payment of
principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Issuers
shall be subrogated to the rights (if any) of the Holders of
such Securities to receive such payment from the money so held
in trust.
<PAGE>
(PAGE) 70
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be
an original, but all such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day
and year first above written.
THE SCOTTS COMPANY
By ____________________________
Title:
Attest:
____________________________
Title:
THE O.M. SCOTT & SONS COMPANY
By _____________________________
Title:
Attest:
____________________________
Title:
CHEMICAL BANK
By _____________________________
Title:
Attest:
____________________________
Title:
<PAGE>
(PAGE) 71
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came ..........................., to me known, who, being by
me duly sworn, did depose and say that he is
.................... of ................................., one
of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corpo-
ration; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his
name thereto by like authority.
...............................................
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came ..........................., to me known, who, being by
me duly sworn, did depose and say that he is
.................... of ................................., one
of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corpo-
ration; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his
name thereto by like authority.
...............................................
<PAGE>
(PAGE) 72
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came ..........................., to me known, who, being by
me duly sworn, did depose and say that he is
.................... of ................................., one
of the corporations described in and which executed the
foregoing instrument; that he knows the seal of said corpo-
ration; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his
name thereto by like authority.
...............................................
<PAGE>
(PAGE) 73
TABLE OF CONTENTS
__________
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE ISSUERS . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act . . . . . . . . . . . . . . . . . 2
Affiliate; control . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . 2
Bank Agreement . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . 2
Capital Stock . . . . . . . . . . . . 3
Commission . . . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . . . 3
corporation . . . . . . . . . . . . . 3
Covenant Defeasance . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . 3
Defeasance . . . . . . . . . . . . . . 3
Depositary . . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . 3
Exchange Act . . . . . . . . . . . . . 3
Expiration Date . . . . . . . . . . . 3
Global Security . . . . . . . . . . . 3
Holder . . . . . . . . . . . . . . . . 3
Indenture . . . . . . . . . . . . . . 3
interest . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . 4
Investment Company Act . . . . . . . . 4
Issuer Board Resolutions . . . . . . . 4
Issuer Request; Issuer Order . . . . . 4
Maturity . . . . . . . . . . . . . . . 4
Notice of Default . . . . . . . . . . 4
Offer . . . . . . . . . . . . . . . . 4
Offer to Purchase . . . . . . . . . . 4
Officers' Certificate . . . . . . . . 6
<PAGE>
(PAGE) 2
OMS . . . . . . . . . . . . . . . . . 6
Opinion of Counsel . . . . . . . . . . 6
Original Issue Discount Security . . . 6
Outstanding . . . . . . . . . . . . . 7
Paying Agent . . . . . . . . . . . . . 8
Person . . . . . . . . . . . . . . . . 8
Place of Payment . . . . . . . . . . . 8
Predecessor Security . . . . . . . . . 8
Purchase Amount . . . . . . . . . . . 8
Purchase Date . . . . . . . . . . . . 8
Purchase Price . . . . . . . . . . . . 8
Redeemable Stock . . . . . . . . . . . 8
Redemption Date . . . . . . . . . . . 8
Redemption Price . . . . . . . . . . . 8
Regular Record Date . . . . . . . . . 8
Responsible Officer . . . . . . . . . 8
Scotts . . . . . . . . . . . . . . . . 9
Securities . . . . . . . . . . . . . . 9
Securities Act . . . . . . . . . . . . 9
Security Register and Security Registrar 9
Special Record Date . . . . . . . . . 9
Stated Maturity . . . . . . . . . . . 9
Subsidiary . . . . . . . . . . . . . . 9
Trust Indenture Act . . . . . . . . . 9
Trustee . . . . . . . . . . . . . . . 9
U.S. Government Obligation . . . . . . 9
Vice President . . . . . . . . . . . . 9
Wholly Owned Subsidiary . . . . . . . 10
SECTION 102. Compliance Certificates and Opinions 10
SECTION 103. Form of Documents Delivered
to Trustee . . . . . . . . . . . 10
SECTION 104. Acts of Holders; Record Dates . . . 11
SECTION 105. Notices, Etc., to Trustee
and Issuers . . . . . . . . . . . 13
SECTION 106. Notice to Holders; Waiver . . . . . 13
SECTION 107. Conflict with Trust Indenture Act . 14
SECTION 108. Effect of Headings and
Table of Contents . . . . . . . . 14
SECTION 109. Successors and Assigns . . . . . . 14
SECTION 110. Separability Clause . . . . . . . . 14
SECTION 111. Benefits of Indenture . . . . . . . 15
SECTION 112. Governing Law . . . . . . . . . . . 15
SECTION 113. Legal Holidays . . . . . . . . . . 15
<PAGE>
(PAGE) 3
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally . . . . . . . . . . 15
SECTION 202. Form of Face of Security . . . . . 16
SECTION 203. Form of Reverse of Security . . . . 18
SECTION 204. Form of Legend for Global Securities 22
SECTION 205. Form of Trustee's Certificate of
Authentication . . . . . . . . . 23
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series 23
SECTION 302. Denominations . . . . . . . . . . . 26
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . 26
SECTION 304. Temporary Securities . . . . . . . 28
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . 28
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . 30
SECTION 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . 31
SECTION 308. Persons Deemed Owners . . . . . . . 32
SECTION 309. Cancellation . . . . . . . . . . . 32
SECTION 310. Computation of Interest . . . . . . 32
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge
of Indenture . . . . . . . . . . 33
SECTION 402. Application of Trust Money . . . . 34
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default . . . . . . . . . 34
SECTION 502. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . 36
<PAGE>
(PAGE) 4
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . 37
SECTION 504. Trustee May File Proofs of Claim . 38
SECTION 505. Trustee May Enforce Claims
Without Possession of Securities 38
SECTION 506. Application of Money Collected . . 39
SECTION 507. Limitation on Suits . . . . . . . . 39
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest . 40
SECTION 509. Restoration of Rights and Remedies 40
SECTION 510. Rights and Remedies Cumulative . . 40
SECTION 511. Delay or Omission Not Waiver . . . 40
SECTION 512. Control by Holders . . . . . . . . 41
SECTION 513. Waiver of Past Defaults . . . . . . 41
SECTION 514. Undertaking for Costs . . . . . . . 41
SECTION 515. Waiver of Usury, Stay or
Extension Laws . . . . . . . . . 42
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities 42
SECTION 602. Notice of Defaults . . . . . . . . 42
SECTION 603. Certain Rights of Trustee . . . . . 43
SECTION 604. Not Responsible for Recitals or
Issuance of Securities . . . . . 44
SECTION 605. May Hold Securities . . . . . . . . 44
SECTION 606. Money Held in Trust . . . . . . . . 44
SECTION 607. Compensation and Reimbursement . . 44
SECTION 608. Conflicting Interests . . . . . . . 45
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . 45
SECTION 610. Resignation and Removal; Appointment
of Successor . . . . . . . . . . 46
SECTION 611. Acceptance of Appointment by
Successor . . . . . . . . . . . . 47
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business . . . . 48
SECTION 613. Preferential Collection of Claims
Against the Issuers . . . . . . . 48
SECTION 614. Appointment of Authenticating Agent 49
<PAGE>
(PAGE) 5
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS
SECTION 701. Issuers to Furnish Trustee Names
and Addresses of Holders . . . . 50
SECTION 702. Preservation of Information; Communications
to Holders . . . . . . . . . . . . 51
SECTION 703. Reports by Trustee . . . . . . . . 51
SECTION 704. Reports by Issuers . . . . . . . . 51
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . 52
SECTION 802. Successor Substituted . . . . . . . 53
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . 53
SECTION 902. Supplemental Indentures with Consent
of Holders . . . . . . . . . . . 54
SECTION 903. Execution of Supplemental Indentures 55
SECTION 904. Effect of Supplemental Indentures . 56
SECTION 905. Conformity with Trust Indenture Act 56
SECTION 906. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . 56
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and
Interest . . . . . . . . . . . . 56
SECTION 1002. Maintenance of Office or Agency . 56
SECTION 1003. Money for Securities Payments to Be Held
in Trust . . . . . . . . . . . . 57
SECTION 1004. Statement by Officers as to Default 58
<PAGE>
(PAGE) 6
SECTION 1005. Existence . . . . . . . . . . . . 58
SECTION 1006. Maintenance of Properties . . . . 59
SECTION 1007. Payment of Taxes and Other Claims 59
SECTION 1008. Change of Control . . . . . . . . 59
SECTION 1009. Provision of Financial Information 60
SECTION 1010. Waiver of Certain Covenants . . . 61
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article . . . . . 61
SECTION 1102. Election to Redeem; Notice to
Trustee . . . . . . . . . . . . 62
SECTION 1103. Selection by Trustee of Securities to Be
Redeemed . . . . . . . . . . . . 62
SECTION 1104. Notice of Redemption . . . . . . . 63
SECTION 1105. Deposit of Redemption Price . . . 63
SECTION 1106. Securities Payable on
Redemption Date . . . . . . . . 64
SECTION 1107. Securities Redeemed in Part . . . 64
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article . . . . . 64
SECTION 1202. Satisfaction of Sinking Fund Payments
with Securities . . . . . . . . 65
SECTION 1203. Redemption of Securities for
Sinking Fund . . . . . . . . . . 65
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Issuers' Option to Effect Defeasance or
Covenant Defeasance . . . . . . 65
SECTION 1302. Defeasance and Discharge . . . . . 66
SECTION 1303. Covenant Defeasance . . . . . . . 66
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance . . . . . . 67
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous
Provisions . . . . . . . . . . . 69
<PAGE>
(PAGE) 7
SECTION 1306. Reinstatement . . . . . . . . . . 69
TESTIMONIUM . . . . . . . . . . . . . . . . . . . 70
SIGNATURES AND SEALS . . . . . . . . . . . . . . 70
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . 71
<EX-4b>
(PAGE) 1
Draft of June 16, 1994
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
Issuers
TO
CHEMICAL BANK
Trustee
______________
Indenture
Dated as of June 1, 1994
______________
<PAGE>
(PAGE) 2
The Scotts Company
The O.M. Scott & Sons Company
Certain Sections of this Indenture relating to Sections 310
through 318,
inclusive, of the Trust Indenture Act of 1939:
Trust Indenture
Act Section
Indenture Section
sec. 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . 608
610
sec. 311(a) . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . 613
sec. 312(a) . . . . . . . . . . . . . . . 701
702
(b) . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . 702
sec. 313(a) . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . 703
sec. 314(a) . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . 101
1004
(b) . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . 102
sec. 315(a) . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . 514
sec. 316(a) . . . . . . . . . . . . . . . 101
(a)(1)(A). . . . . . . . . . . . . . . 502
512
(a)(1)(B). . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . 104
sec. 317(a)(1) . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . 1003
sec. 318(a) . . . . . . . . . . . . . . . 107
___________________
NOTE: This reconciliation and tie shall not, for any purpose, be
deemed to
be a part of the Indenture.
<PAGE>
(PAGE) 1
INDENTURE, dated as of June 1, 1994, between The Scotts
Company, a corporation duly organized and existing under the laws
of the State of Delaware (herein called "Scotts"), and The O.M.
Scott & Sons Company, a corporation duly organized and existing
under the laws of the State of Delaware (herein called "OMS"), as
joint and several obligors (collectively, herein called the
"Issuers"), each having its principal office at 14111 Scottslawn
Road, Marysville, Ohio 43043, and Chemical Bank, a banking
corporation duly organized and existing under the laws of the
State of New York, as Trustee (herein called the "Trustee").
RECITALS OF THE ISSUERS
The Issuers have duly authorized the execution and delivery
of this Indenture to provide for the issuance from time to time
of their unsecured subordinated debentures, notes or other
evidences of indebtedness (herein called the "Securities"), to be
issued in one or more series as in this Indenture provided.
All things necessary to make this Indenture a valid agreement
of the Issuers, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually agreed, for
the equal and proportionate benefit of all Holders of the
Securities or of series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well
as the singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein,
have the meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally
accepted accounting principles, and, except as otherwise herein
expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or
permitted hereunder shall mean such accounting principles as
are generally accepted at the date of such computation;
<PAGE>
(PAGE) 2
(4) unless the context otherwise requires, any reference
to an "Article" or a "Section" refers to an Article or a
Section, as the case may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"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
the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management
and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or other-
wise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized by the
Trustee pursuant to Section 614 to act on behalf of the Trustee
to authenticate Securities of one or more series.
"Bank Agreement" means the Third Amended and Restated Credit
Agreement, dated as of April 7, 1992, among the Issuers, the
lenders identified therein (the "Banks"), and Chemical Bank (as
successor to Manufacturers Hanover Trust Company), as Agent for
the Banks, as amended by the First Amendment thereto, dated as of
November 19, 1992, the Second Amendment thereto, dated as of
February 23, 1993, and the Third Amendment thereto, dated as of
December 15, 1993, as such agreement may be amended, extended,
restated or otherwise modified.
"Bank Hedging Agreement" means, with respect to an Issuer, any
agreement between such Issuer and any Bank that is a lender under
the Bank Agreement consisting of (a) any interest rate protection
agreement, interest rate future, interest rate option, interest
rate swap, interest rate cap or other interest rate hedge or
arrangement and (b) any agreement or arrangement designed to
limit or eliminate the risk and/or exposure of such Issuer to
fluctuations in currency exchange rates.
"Board of Directors" means, when used with respect to Scotts
or OMS, the board of directors of Scotts or OMS, respectively, or
any duly authorized committee of that board.
"Board Resolution" means, when used with respect to Scotts or
OMS, a copy of a resolution certified by the Secretary or an
Assistant Secretary of Scotts or OMS, as the case may be, to have
been duly adopted by such Board of Directors and to be in full
force and effect on the date of such certification, and delivered
to the Trustee.
<PAGE>
(PAGE) 3
"Business Day", when used with respect to any Place of
Payment, means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in that
Place of Payment are authorized or obligated by law or executive
order to close, and when otherwise used, means each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in The City of New York are authorized
or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation
to pay rent or other payment amounts under a lease of (or other
Debt arrangement conveying the right to use) real or personal
property of such Person which is required to be classified and
accounted for as a capital lease or a liability on the fact of a
balance sheet of such Person in accordance with generally
accepted accounting principles. The stated maturity of such
obligation shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon
which such lease may be terminated by the lessee without payment
of a penalty.
"Capital Stock" of any Person means any and all shares,
interests, participation or other equivalents (however
designated) of corporate stock of such Person.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act,
or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body performing
such duties at such time.
"Corporate Trust Office" means the principal office of the
Trustee in The City of New York at which at any particular time
its corporate trust business shall be administered, which office
at the date hereof is located at 450 West 33rd Street, 15th
Floor, New York, New York 10001.
"corporation" means a corporation, association, company,
joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section
1303.
"Debt" means (without duplication and without regard to any
portion of principal amount that has not accrued and to any
interest component thereof (whether accrued or imputed) that is
not due and payable) with respect to any Person, whether recourse
is to all or a portion of the assets of such Person and whether
or not contingent, (i) every obligation of such Person for money
borrowed; (ii) 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; (iii) every reimbursement
obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account
of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services
(but excluding trade accounts payable or accrued liabilities
arising in the ordinary course of business); (v) every Capital
Lease Obligation of such Person; (vi) the maximum fixed
<PAGE>
(PAGE) 4
redemption or repurchase price of Redeemable Stock of such Person
at the time of determination; (vii) every obligation under
Interest Rate or Currency Protection Agreements of such Person;
and (viii) every obligation of the type referred to in clauses
(i) through (vii) 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, directly or indirectly,
as obligor, Guarantor or otherwise.
"Defaulted Interest" has the meaning specified in Section
307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series
issuable in whole or in part in the form of one or more Global
Securities, a clearing agency registered under the Exchange Act
that is designated to act as Depositary for such Securities as
contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and
any statute successor thereto, in each case as amended from time
to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part
of the Securities of any series and bears the legend set forth in
Section 204 (or such legend as may be specified as contemplated
by Section 301 for such Securities).
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic
effect of guaranteeing, and Debt of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
and including, without limitation, any obligation of such Person,
(i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or to purchase (or to advance
or supply funds for the purchase of) any security for the payment
of such Debt, (ii) to purchase property, securities or services
for the purpose of assuring the holder of such Debt of the
payment of such Debt, or (iii) to maintain working capital,
equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary
obligor to pay such Debt (and "Guaranteed", "Guaranteeing" and
"Guarantor" shall have meanings correlative to the foregoing);
provided, however, that the Guaranty by any Person shall not
include endorsements by such Person for collection or deposit, in
either case, in the ordinary course of business.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the
applicable provisions hereof, including, for all purposes of
<PAGE>
(PAGE) 5
this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental
indenture, respectively. The term "Indenture" shall also include
the terms of particular series of Securities established as
contemplated by Section 301.
"interest", when used with respect to an Original Issue
Discount Security which by its terms bears interest only after
Maturity, means interest payable after Maturity.
"Interest Payment Date", when used with respect to any
Security, means the Stated Maturity of an instalment of interest
on such Security.
"Investment Company Act" means the Investment Company Act of
1940 and any statute successor thereto, in each case as amended
from time to time.
"Issuer Board Resolutions" means a Board Resolution of each
of the Issuers.
"Issuer Request" or "Issuer Order" means a written request or
order signed in the name of each of the Issuers by its respective
Chairman of the Board, its Vice Chairman of the Board, its
President or a Vice President, and by its Treasurer, its
Assistant Treasurer, Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security or an instalment of
principal becomes due and payable as therein or herein provided,
whether at the Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Notice of Default" means a written notice of the kind
specified in Section 501(4) or 501(5).
"Offer" shall have the meaning specified in the definition of
Offer to Purchase.
"Offer to Purchase" means a written offer (the "Offer") sent
by the Issuers by first class mail, postage prepaid, to each
Holder at its address appearing in the Security Register 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 "Offer Expiration
Date") of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or
more than 60 days after the date of such Offer and a settlement
date (the "Purchase Date") for purchase of Securities within five
Business Days after the Offer Expiration Date. The Issuers 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 Issuers' obligation to make an Offer to
Purchase, and the Offer shall be mailed by the Issuers or, at the
Issuers' request, by the Trustee in the name and at the expense
of the Issuers. The Offer shall contain information concerning
the business of the Issuers and their Subsidiaries which the
Issuers in good faith believe will enable such Holders to make an
informed decision with respect to the Offer to Purchase (which at
a minimum
<PAGE>
(PAGE) 6
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 Issuers' 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
Issuers to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer
to Purchase and the events requiring the Issuers 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 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 Offer Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding
Securities offered to be purchased by the Issuers pursuant to the
Offer to Purchase (including, if less than 100%, the manner by
which such 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 Issuers 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 Issuers 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 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 Offer Expiration Date (such
Security being, if the Issuers or the Trustee so requires, duly
endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to Scotts and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in
writing);
<PAGE>
(PAGE) 7
(10) that Holders will be entitled to withdraw all or any
portion of Securities tendered if the Issuers (or their Paying
Agent) receive, not later than the close of business on the
Offer Expiration Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal
amount of the Securities 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 its 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 Issuers
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 Issuers 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 by
the Issuers and the Trustee so that only Securities in
denominations of $1,000 or integral multiples thereof shall be
purchased); and
(12) that in the case of any Holder whose Security is
purchased only in part, the Issuers 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.
Any Offer to Purchase shall be governed by and effected in
accordance with the Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, a Vice Chairman of the Board, the
President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of each of the
Issuers, and delivered to the Trustee. One of the officers of
each of the Issuers signing an Officers' Certificate given
pursuant to Section 1004 shall be the principal executive,
financial or accounting officer of such Issuer.
"OMS" means the Person named as "OMS" in the first paragraph
of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "OMS" shall mean such successor Person.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Issuers, and who shall be acceptable to
the Trustee.
"Original Issue Discount Security" means any Security which
provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the
Maturity thereof pursuant to Section 502.
<PAGE>
(PAGE) 8
"Outstanding", when used with respect to Securities, means,
as of the date of determination, all Securities theretofore
authenticated and delivered under this Indenture, except:
(1) Securities theretofore cancelled by the Trustee or
delivered to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in
the necessary amount has been theretofore deposited with the
Trustee or any Paying Agent (other than an Issuer) in trust or
set aside and segregated in trust by the Issuers (if an Issuer
shall act as Paying Agent) for the Holders of such Securities;
provided that, if such Securities are to be redeemed, notice
of such redemption has been duly given pursuant to this
Indenture or provision therefor satisfactory to the Trustee has
been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 1302; and
(4) Securities which have been paid pursuant to Section
306 or in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture,
other than any such Securities in respect of which there shall
have been presented to the Trustee proof satisfactory to it that
such Securities are held by a bona fide purchaser in whose hands
such Securities are valid obligations of the Issuers; provided,
however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made
or taken any request, demand, authorization, direction, notice,
consent, waiver or other action hereunder as of any date, (A) the
principal amount of an Original Issue Discount Security which
shall be deemed to be Outstanding shall be the amount of the
principal thereof which would be due and payable as of such date
upon acceleration of the Maturity thereof to such date pursuant
to Section 502, (B) if, as of such date, the principal amount
payable at the Stated Maturity of a Security is not determinable,
the principal amount of such Security which shall be deemed to be
Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a
Security denominated in one or more foreign currencies or
currency units which shall be deemed to be Outstanding shall be
the U.S. dollar equivalent, determined as of such date in the
manner provided as contemplated by Section 301, of the principal
amount of such Security (or, in the case of a Security described
in Clause (A) or (B) above, of the amount determined as provided
in such Clause), and (D) Securities owned by either of the
Issuers or any other obligor upon the Securities or any Affiliate
of either of the Issuers or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice,
consent, waiver or other action, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities
so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such
Securities and that the pledgee is not either of the Issuers or
any other obligor upon the Securities or any Affiliate of either
of the Issuers or of such other obligor.
<PAGE>
(PAGE) 9
"Paying Agent" means any Person authorized by the Issuers to
pay the principal of or any premium or interest on any Securities
on behalf of the Issuers.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, trust, unincorporated
organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Securities
of any series, means the place or places where the principal of
and any premium and interest on the Securities of that series are
payable as specified as contemplated by Section 301.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as
that evidenced by such particular Security; and, for the purposes
of this definition, any Security authenticated and delivered
under Section 306 in exchange for or in lieu of a mutilated,
destroyed, lost or stolen Security shall be deemed to evidence
the same debt as the mutilated, destroyed, lost or stolen
Security.
"Purchase Amount" shall have the meaning specified in the
definition of Offer to Purchase.
"Purchase Date" shall have the meaning specified in the
definition of Offer to Purchase.
"Purchase Price" shall have the meaning specified in the
definition of Offer to Purchase.
"Redeemable Stock" of any Person means any equity security of
such Person that by its terms or otherwise is required to be
redeemed prior to the final Stated Maturity of the Securities or
is redeemable at the option of the holder thereof at any time
prior to the final Stated Maturity of then-outstanding
Securities.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed
pursuant to this Indenture.
"Regular Record Date" for the interest payable on any
Interest Payment Date on the Securities of any series means the
date specified for that purpose as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee,
means any officer of the Trustee with direct responsibility for
the administration of this Indenture and also means, with respect
to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and
familiarity with the particular subject.
<PAGE>
(PAGE) 10
"Scotts" means the Person named as "Scotts" in the first
paragraph of this instrument until a successor Person shall have
become such pursuant to the applicable provisions of this
Indenture, and thereafter "Scotts" shall mean such successor
Person.
"Securities" has the meaning stated in the first recital of
this Indenture and more particularly means any Securities
authenticated and delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 and any
statute successor thereto, in each case as amended from time to
time.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Debt" means (a) all obligations of the Issuers under
the Bank Agreement and under any Bank Hedging Agreement, (b) the
principal of (and premium, if any) and interest, if any
(including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to an
Issuer to the extent that such claim for post-petition interest
is allowed in such proceeding), on Debt of an Issuer, whether
incurred on or prior to the date of this Indenture or thereafter
created, assumed or incurred, unless, in the instrument creating
or evidencing the same or pursuant to which the same is
outstanding, it is provided that such obligations are not
superior in right of payment to the Securities or to other Debt
of an Issuer which is pari passu with, or subordinated to the
Securities and (c) any deferrals, renewals or extensions of such
Senior Debt; provided, however, that the following shall not
constitute Senior Debt: (A) any Debt owed to a Person when such
Person is a Subsidiary of an Issuer or (B) Debt of an Issuer of
the type referred to in clause (vi) of the definition of Debt.
"Senior Indenture" means the Indenture from the Issuers to
Chemical Bank, as trustee, dated as of June 1, 1994.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to Section
307.
"Stated Maturity", when used with respect to any Security or
any instalment of principal thereof or interest thereon, means
the date specified in such Security as the fixed date on which
the principal of such Security or such instalment of principal or
interest is due and payable.
"Subsidiary" of any Person means a corporation more than 50%
of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more other Subsidiaries,
or by such Person and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock which
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"Trust Indenture Act" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed;
provided, however, that in the event the Trust
<PAGE>
(PAGE) 11
Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the
first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time
there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee
with respect to Securities of that series.
"U.S. Government Obligation" has the meaning specified in
Section 1304.
"Vice President", when used with respect to either of the
Issuers or the Trustee, means any vice president, whether or not
designated by a number or a word or words added before or after
the title "vice president".
"Wholly Owned Subsidiary" of any Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by such Person or by one or
more Wholly Owned Subsidiaries of such Person or by such Person
and one or more Wholly Owned Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Issuers to the Trustee
to take any action under any provision of this Indenture, the
Issuers shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act. Each
such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by officers of the Issuers,
or an Opinion of Counsel, if to be given by counsel, and shall
comply with the requirements of the Trust Indenture Act and any
other requirements set forth in this Indenture.
Every certificate or opinion with respect to compliance with
a condition or covenant provided for in this Indenture shall
include,
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and
the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such
individual, such individual has made such examination or
investigation as is necessary to enable such individual to
express an informed opinion as to whether or not such covenant
or condition has been complied with; and
<PAGE>
(PAGE) 12
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in
one or several documents.
Any certificate or opinion of officers of the Issuers may be
based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such
officers know, or in the exercise of reasonable care should know,
that the certificate or opinion or representations with respect
to the matters upon which such certificate or opinion is based
are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or
officers of an Issuer or of each of the Issuers, as the case may
be, stating that the information with respect to such factual
matters is in the possession of such Issuer or Issuers, unless
such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this
Indenture to be given, made or taken by Holders may be embodied
in and evidenced by one or more instruments of substantially
similar tenor signed by such Holders in person or by an agent or
agents duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where
it is hereby expressly required, to the Issuers. Such instrument
or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee
and the Issuers, if made in the manner provided in this Section.
<PAGE>
(PAGE) 13
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness
of such execution or by a certificate of a notary public or other
officer authorized by law to take acknowledgments of deeds,
certifying that the individual signing such instrument or writing
acknowledged to him the execution thereof. Where such execution
is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of
the Person executing the same, may also be proved in any other
manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security
Register.
Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall
bind every future Holder of the same Security and the Holder of
every Security issued upon the registration of transfer thereof
or in exchange therefor or in lieu thereof in respect of anything
done, omitted or suffered to be done by the Trustee or an Issuer
in reliance thereon, whether or not notation of such action is
made upon such Security.
The Issuers may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any
series entitled to give, make or take any request, demand,
authorization, direction, notice, consent, waiver or other action
provided or permitted by this Indenture to be given, made or
taken by Holders of Securities of such series, provided
that the Issuers may not set a record date for, and the
provisions of this paragraph shall not apply with respect to, the
giving or making of (i) any Notice of Default, (ii) any
declaration of acceleration referred to in Section 502, (iii) any
request to institute proceedings referred to in Section 507(2) or
(iv) any direction referred to in Section 512. If any record date
is set pursuant to this paragraph, the Holders of Outstanding
Securities of the relevant series on such record date, and no
other Holders, shall be entitled to take the relevant action,
whether or not such Holders remain Holders after such record
date; provided that no such action shall be effective hereunder
unless taken on or prior to the applicable Expiration Date by
Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Issuers from setting
a new record date for any action for which a record date has
previously been set pursuant to this paragraph (whereupon the
record date previously set shall automatically and with no action
by any Person be cancelled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is
taken. Promptly after any record date is set pursuant to this
paragraph, the Issuers, at their own expense, shall cause notice
of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Trustee in writing
and to each Holder of Securities of the relevant series in the
manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose
of determining the Holders of Outstanding Securities of any
series entitled to join in the giving or making of (i) any Notice
of Default, (ii) any declaration of acceleration referred to in
Sec-
<PAGE>
(PAGE) 14
tion 502, (iii) any request to institute proceedings referred to
in Section 507(2) or (iv) any direction referred to in Section
512, in each case with respect to Securities of such series. If
any record date is set pursuant to this paragraph, the Holders of
Outstanding Securities of such series on such record date, and no
other Holders, shall be entitled to join in such notice,
declaration, request or direction, whether or not such Holders
remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to
the applicable Expiration Date by Holders of the requisite
principal amount of Outstanding Securities of such series on such
record date. Nothing in this paragraph shall be construed to
prevent the Trustee from setting a new record date
for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously
set shall automatically and with no action by any Person be
cancelled and of no effect), and nothing in this paragraph shall
be construed to render ineffective any action taken by Holders of
the requisite principal amount of Outstanding Securities of the
relevant series on the date such action is taken. Promptly after
any record date is set pursuant to this paragraph, the Trustee,
at the Issuers' expense, shall cause notice of such record
date, the proposed action by Holders and the applicable
Expiration Date to be given to the Issuers in writing and to each
Holder of Securities of the relevant series in the manner set
forth in Section 106.
With respect to any record date set pursuant to this Section,
the party or parties hereto which set such record dates may
designate any day as the "Expiration Date" and from time to time
may change the Expiration Date to any earlier or later day;
provided that no such change shall be effective unless notice of
the proposed new Expiration Date is given to the other parties
hereto in writing, and to each Holder of Securities of the
relevant series in the manner set forth in Section 106, on or
prior to the existing Expiration Date. If an Expiration Date is
not designated with respect to any record date set pursuant to
this Section, the party or parties hereto which set such record
date shall be deemed to have initially designated the 180th day
after such record date as the Expiration Date with respect
thereto, subject to its right to change the Expiration Date as
provided in this paragraph. Notwithstanding the foregoing, no
Expiration Date shall be later than the 180th day after the
applicable record date.
Without limiting the foregoing, a Holder entitled hereunder
to take any action hereunder with regard to any particular
Security may do so with regard to all or any part of the
principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such
appointment with regard to all or any part of such principal
amount.
SECTION 105. Notices, Etc., to Trustee and Issuers.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with,
<PAGE>
(PAGE) 15
(1) the Trustee by any Holder or by the Issuers shall be
sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Trustee at its
Corporate Trust Office, Attention: Corporate Trust Department,
or
(2) the Issuers by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class
postage prepaid, to the Issuers addressed to each of them at
the address of their principal office specified in the first
paragraph of this instrument or at any other address or
addresses previously furnished in writing to the Trustee by an
Issuer or the Issuers.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise
herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than
the latest date (if any), and not earlier than the earliest date
(if any), prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be
filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon
such waiver.
In case by reason of the suspension of regular mail service
or by reason of any other cause it shall be impracticable to give
such notice by mail, then such notification as shall be made with
the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act which is required under the
Trust Indenture Act to be a part of and govern this Indenture,
the latter provision shall control. If any provision of this
Indenture modifies or excludes any provision of the Trust
Indenture Act which may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be.
<PAGE>
(PAGE) 16
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the
construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by an Issuer
shall bind its successors and assigns, whether so expressed or
not.
SECTION 110. Separability Clause.
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.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or
implied, shall give to any Person, other than the parties hereto
and their successors hereunder, the holders of Senior Debt and
the Holders, any benefit or any legal or equitable right, remedy
or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Securities shall be governed by and
construed in accordance with the law of the State of New York.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date
or Stated Maturity of any Security shall not be a Business Day at
any Place of Payment, then (notwithstanding any other provision
of this Indenture or of the Securities (other than a provision of
any Security which specifically states that such provision shall
apply in lieu of this Section)) payment of interest or principal
(and premium, if any) need not be made at such Place of Payment
on such date, but may be made on the next succeeding Business
Day at such Place of Payment with the same force and effect as if
made on the Interest Payment Date or Redemption Date, or at the
Stated Maturity.
<PAGE>
(PAGE) 17
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities of each series shall be in substantially the
form set forth in this Article, or in such other form as shall be
established by or pursuant to a Board Resolution or in one or
more indentures supplemental hereto, in each case with such
appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and
may have such letters, numbers or other marks of identification
and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or
Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as
evidenced by their execution thereof. If the form of Securities
of any series is established by action taken pursuant to Issuer
Board Resolutions, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of
each Issuer and delivered to the Trustee at or prior to the
delivery of the Issuer Order contemplated by Section 303 for the
authentication and delivery of such Securities.
The definitive Securities shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any
other manner, all as determined by the officers executing such
Securities, as evidenced by their execution of such Securities.
SECTION 202. Form of Face of Security.
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
.................................................
No. .........
$ ........
The Scotts Company, a corporation duly organized and existing
under the laws of the State of Delaware (herein called "Scotts",
which term includes any successor Person under the Indenture
hereinafter referred to), and The O.M. Scott & Sons Company, a
corporation duly organized and existing under the laws of the
State of Delaware (herein called "OMS", which term includes
any successor Person under the Indenture hereinafter referred
to), as joint and several obligors (collectively, herein called
the "Issuers" ), for value received, hereby promise to pay to
..............................................., or registered
assigns, the principal sum of
............................................... Dollars on
........................................................ [if the
Security is to bear interest prior to Maturity, insert -- , and
to pay interest thereon from ............. or from the most
recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually
<PAGE>
(PAGE) 18
on ............ and ............ in each year, commencing
........., at the rate of ....% per annum, until the principal
hereof is paid or made available for payment [if applicable,
insert -- , provided that any principal and premium, and any such
instalment of interest, which is overdue shall bear interest at
the rate of ...% per annum (to the extent that the payment of
such interest shall be legally enforceable), from the dates such
amounts are due until they are paid or made available for
payment, and such interest shall be payable on demand]. The
interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in such Indenture, be
paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the
....... or ....... (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date. Any such
interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record
Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully
provided in said Indenture].
[If the Security is not to bear interest prior to Maturity,
insert -- The principal of this Security shall not bear interest
except in the case of a default in payment of principal upon
acceleration, upon redemption or at Stated Maturity and in such
case the overdue principal and any overdue premium shall bear
interest at the rate of ....% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the
dates such amounts are due until they are paid or made available
for payment. Interest on any overdue principal or premium shall
be payable on demand. Any such interest on overdue principal or
premium which is not paid on demand shall bear interest at the
rate of ......% per annum (to the extent that the payment of such
interest on interest shall be legally enforceable), from the date
of such demand until the amount so demanded is paid or made
available for payment. Interest on any overdue interest shall
be payable on demand.]
Payment of the principal of (and premium, if any) and [if
applicable, insert -- any such] interest on this Security will be
made at the office or agency of the Issuers in the Borough of
Manhattan, the City of New York, the State of New York maintained
for such purpose or at any other office or agency maintained by
the Issuers for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal
tender for payment of public and private debts; provided,
however, that at the option of the Issuers payment of interest
may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
<PAGE>
(PAGE) 19
Unless the certificate of authentication hereon has been
executed by
the Trustee referred to on the reverse hereof by manual
signature, this
Security shall not be entitled to any benefit under the Indenture
or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, each of the Issuers has caused this
instrument to
be duly executed under its corporate seal.
Dated:
THE SCOTTS COMPANY
By______________________________
Title:
Attest:
___________________________
Title:
THE O.M. SCOTT & SONS COMPANY
By_______________________________
Title:
Attest:
___________________________
Title:
SECTION 203. Form of Reverse of Security.
This Security is one of a duly authorized issue of securities
of the
Issuers (herein called the "Securities"), issued and to be issued
in one or
more series under an Indenture, dated as of June 1, 1994 (herein
called the
"Indenture", which term shall have the meaning assigned to it in
such
instrument), between the Issuers and Chemical Bank, as Trustee
(herein
called the "Trustee", which term includes any successor trustee
under the
Indenture), and reference is hereby made to the Indenture for a
statement
of the respective rights, limitations of rights, duties and
immunities
thereunder of the Issuers, the Trustee
<PAGE>
(PAGE) 20
and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This
Security
is one of the series designated on the face hereof.
[If applicable, insert -- The Securities of this series are
subject to
redemption upon not less than 30 days' notice by mail, [if
applicable,
insert -- (1) on ........... in any year commencing with the year
......
and ending with the year ...... through operation of the sinking
fund for
this series at a Redemption Price equal to 100% of the principal
amount,
and (2)] at any time [if applicable, insert -- on or after
..........,
19..], as a whole or in part, at the election of the Issuers, at
the
following Redemption Prices (expressed as percentages of the
principal
amount): If redeemed [if applicable, insert -- on or before
..............., ...%, and if redeemed] during the 12-month
period begin-
ning ............. of the years indicated,
<TABLE>
<CAPTION>
Year Redemption Price Year Redemption Price
<C> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the
principal
amount, together in the case of any such redemption [if
applicable,
insert -- (whether through operation of the sinking fund or
otherwise)]
with accrued interest to the Redemption Date, but interest
installments
whose Stated Maturity is on or prior to such Redemption Date will
be
payable to the Holders of such Securities, or one or more
Predecessor
Securities, of record at the close of business on the relevant
Record Dates
referred to on the face hereof, all as provided in the
Indenture.]
[If applicable, insert -- The Securities of this series are
subject to
redemption upon not less than 30 days' notice by mail, (1) on
............
in any year commencing with the year .... and ending with the
year ....
through operation of the sinking fund for this series at the
Redemption
Prices for redemption through operation of the sinking fund
(expressed as
percentages of the principal amount) set forth in the table
below, and
(2) at any time [if applicable, insert -- on or after
............], as a
whole or in part, at the election of the Issuers, at the
Redemption Prices
for redemption otherwise than through operation of the sinking
fund
(expressed as percentages of the principal amount) set forth in
the table
below: If redeemed during the 12-month period beginning
............ of the
years indicated,
<PAGE>
(PAGE) 21
<TABLE>
<CAPTION>
Redemption Price for
Redemption Price Redemption Otherwise
for Redemption Than Through
Through Operation Operation
of the of the Sinking
Year Sinking Fund Fund
<C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to .....% of the
principal
amount, together in the case of any such redemption (whether
through
operation of the sinking fund or otherwise) with accrued interest
to the
Redemption Date, but interest installments whose Stated Maturity
is on or
prior to such Redemption Date will be payable to the Holders of
such
Securities, or one or more Predecessor Securities, of record at
the close
of business on the relevant Record Dates referred to on the face
hereof,
all as provided in the Indenture.]
[If applicable, insert -- Notwithstanding the foregoing, the
Issuers
may not, prior to ............., redeem any Securities of this
series as
contemplated by [if applicable, insert -- Clause (2) of] the
preceding
paragraph as a part of, or in anticipation of, any refunding
operation by
the application, directly or indirectly, of moneys borrowed
having an
interest cost to the Issuers (calculated in accordance with
generally
accepted financial practice) of less than .....% per annum.]
[If applicable, insert -- The sinking fund for this series
provides for
the redemption on ............ in each year beginning with the
year .......
and ending with the year ...... of [if applicable, insert -- not
less than
$.......... ("mandatory sinking fund") and not more than]
$.........
aggregate principal amount of Securities of this series.
Securities of this
series acquired or redeemed by the Issuers otherwise than through
[if
applicable, insert -- mandatory] sinking fund payments may be
credited
against subsequent [if applicable, insert -- mandatory] sinking
fund
payments otherwise required to be made [if applicable, insert --
, in the
inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert
- -- In the
event of redemption of this Security in part only, a new Security
or
Securities of this series and of like tenor for the unredeemed
portion
hereof will be issued in the name of the Holder hereof upon the
cancella-
tion hereof.]
The indebtedness evidenced by this Security is, to the extent
provided
in the Indenture, subordinate and subject in right of payment to
the prior
payment in full of all Senior Debt, and this Security is issued
subject to
the provisions of the Indenture with respect
<PAGE>
(PAGE) 22
thereto. Each Holder of this Security, by accepting the same, (a)
agrees to
and shall be bound by such provisions, (b) authorizes and directs
the
Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and (c)
appoints
the Trustee his attorney-in-fact for any and all such purposes.
[If applicable, insert -- The Indenture contains provisions
for
defeasance at any time of [the entire indebtedness of this
Security] [or]
[certain restrictive covenants and Events of Default with respect
to this
Security] [, in each case] upon compliance with certain
conditions set
forth in the Indenture.]
[If the Security is not an Original Issue Discount Security,
insert --
If an Event of Default with respect to Securities of this series
shall
occur and be continuing, the principal of the Securities of this
series may
be declared due and payable in the manner and with the effect
provided in
the Indenture.]
[If the Security is an Original Issue Discount Security,
insert -- If
an Event of Default with respect to Securities of this series
shall occur
and be continuing, an amount of principal of the Securities of
this series
may be declared due and payable in the manner and with the effect
provided
in the Indenture. Such amount shall be equal to -- insert formula
for
determining the amount. Upon payment (i) of the amount of
principal so
declared due and payable and (ii) of interest on any overdue
principal,
premium and interest (in each case to the extent that the payment
of such
interest shall be legally enforceable), all of the Issuers'
obligations in
respect of the payment of the principal of and premium and
interest, if
any, on the Securities of this series shall terminate.]
The Indenture permits, with certain exceptions as therein
provided, the
amendment thereof and the modification of the rights and
obligations of the
Issuers and the rights of the Holders of the Securities of each
series to
be affected under the Indenture at any time by the Issuers and
the Trustee
with the consent of the Holders of a majority in principal amount
of the
Securities at the time Outstanding of each series to be affected.
The
Indenture also contains provisions permitting the Holders of
specified
percentages in principal amount of the Securities of each series
at the
time Outstanding, on behalf of the Holders of all Securities of
such
series, to waive compliance by the Issuers with certain
provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this
Security
shall be conclusive and binding upon such Holder and upon all
future
Holders of this Security and of any Security issued upon the
registration
of transfer hereof or in exchange herefor or in lieu hereof,
whether or not
notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the
Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment
of a
receiver or trustee or for any other remedy thereunder, unless
such Holder
shall have previously given the Trustee written notice of a
continuing
Event of Default with respect to the Securities of this series,
the Holders
of not less than 25% in principal amount of the Securities of
this series
at the time Outstanding shall have made written request to the
Trustee to
institute proceedings in respect of such Event of Default as
Trustee and
offered the Trustee reasonable indemnity, and the Trustee shall
<PAGE>
(PAGE) 23
not have received from the Holders of a majority in principal
amount of
Securities of this series at the time Outstanding a direction
inconsistent
with such request, and shall have failed to institute any such
proceeding,
for 60 days after receipt of such notice, request and offer of
indemnity.
The foregoing shall not apply to any suit instituted by the
Holder of this
Security for the enforcement of any payment of principal hereof
or any
premium or interest hereon on or after the respective due dates
expressed
herein.
No reference herein to the Indenture and no provision of this
Security
or of the Indenture shall alter or impair the obligation of the
Issuers,
which is absolute and unconditional, to pay the principal of and
any
premium and interest on this Security at the times, place and
rate, and in
the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein
set forth, the transfer of this Security is registrable in the
Security
Register, upon surrender of this Security for registration of
transfer at
the office or agency of the Issuers in any place where the
principal of and
any premium and interest on this Security are payable, duly
endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the
Issuers and the Security Registrar duly executed by, the Holder
hereof or
his attorney duly authorized in writing, and thereupon one or
more new
Securities of this series and of like tenor, of authorized
denominations
and for the same aggregate principal amount, will be issued to
the
designated transferee or transferees.
The Securities of this series are issuable only in registered
form
without coupons in denominations of $....... and any integral
multiple
thereof. As provided in the Indenture and subject to certain
limitations
therein set forth, Securities of this series are exchangeable for
a like
aggregate principal amount of Securities of this series and of
like tenor
of a different authorized denomination, as requested by the
Holder
surrendering the same.
No service charge shall be made for any such registration of
transfer
or exchange, but the Issuers may require payment of a sum
sufficient to
cover any tax or other governmental charge payable in connection
therewith.
Prior to due presentment of this Security for registration of
transfer,
the Issuers, the Trustee and any agent of the Issuers or the
Trustee may
treat the Person in whose name this Security is registered as the
owner
hereof for all purposes, whether or not this Security be overdue,
and
neither the Issuers, the Trustee nor any such agent shall be
affected by
notice to the contrary.
All terms used in this Security which are defined in the
Indenture
shall have the meanings assigned to them in the Indenture.
<PAGE>
(PAGE) 24
SECTION 204. Form of Legend for Global Securities.
Unless otherwise specified as contemplated by Section 301 for
the
Securities evidenced thereby, every Global Security authenticated
and
delivered hereunder shall bear a legend 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
DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR
IN PART FOR
A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE
OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH
DEPOSITARY OR
A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE
INDENTURE.
SECTION 205. Form of Trustee's Certificate of Authentication.
The Trustee's certificates of authentication shall be in
substantially
the following form:
This is one of the Securities of the series designated
therein referred
to in the within-mentioned Indenture.
CHEMICAL BANK,
As Trustee
By_______________________________
Authorized Officer
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be
authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There
shall be
established in or pursuant to Issuer Board Resolutions and,
subject to
Section 303, set forth, or determined in the manner provided, in
an
Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any
series,
<PAGE>
(PAGE) 25
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any
other
series);
(2) any limit upon the aggregate principal amount of the
Securities
of the series which may be authenticated and delivered under
this
Indenture (except for Securities authenticated and delivered
upon
registration of transfer of, or in exchange for, or in lieu of,
other
Securities of the series pursuant to Section 304, 305, 306, 906
or 1107
and except for any Securities which, pursuant to Section 303,
are deemed
never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the
series
shall be payable, if other than the Person in whose name that
Security
(or one or more Predecessor Securities) is registered at the
close of
business on the Regular Record Date for such interest;
(4) the date or dates on which the principal of any
Securities of
the series is payable;
(5) the rate or rates at which any Securities of the
series shall
bear interest, if any, the date or dates from which any such
interest
shall accrue, the Interest Payment Dates on which any such
interest shall
be payable and the Regular Record Date for any such interest
payable on
any Interest Payment Date;
(6) the place or places where the principal of and any
premium and
interest on any Securities of the series shall be payable;
(7) the period or periods within which, the price or
prices at which
and the terms and conditions upon which any Securities of the
series may
be redeemed, in whole or in part, at the option of the Issuers
and, if
other than by Issuer Board Resolutions, the manner in which any
election
by the Issuers to redeem the Securities shall be evidenced;
(8) the obligation, if any, of the Issuers to redeem or
purchase any
Securities of the series pursuant to any sinking fund or
analogous
provisions or at the option of the Holder thereof and the
period or
periods within which, the price or prices at which and the
terms and
conditions upon which any Securities of the series shall be
redeemed or
purchased, in whole or in part, pursuant to such obligation;
(9) if other than denominations of $1,000 and any integral
multiple
thereof, the denominations in which any Securities of the
series shall be
issuable;
(10) if the amount of principal of or any premium or
interest on any
Securities of the series may be determined with reference to an
index or
pursuant to a formula, the manner in which such amounts shall
be
determined;
(11) if other than the currency of the United States of
America, the
currency, currencies or currency units in which the principal
of or any
premium or interest on
<PAGE>
(PAGE) 26
any Securities of the series shall be payable and the manner of
determining
the equivalent thereof in the currency of the United States of
America for
any purpose, including for purposes of the definition of
"Outstanding" in
Section 101;
(12) if the principal of or any premium or interest on any
Securities
of the series is to be payable, at the election of the Issuers
or the
Holder thereof, in one or more currencies or currency units
other than
that or those in which such Securities are stated to be
payable, the
currency, currencies or currency units in which the principal
of or any
premium or interest on such Securities as to which such
election is made
shall be payable, the periods within which and the terms and
conditions
upon which such election is to be made and the amount so
payable (or the
manner in which such amount shall be determined);
(13) if other than the entire principal amount thereof, the
portion
of the principal amount of any Securities of the series which
shall be
payable upon declaration of acceleration of the Maturity
thereof pursuant
to Section 502;
(14) if the principal amount payable at the Stated Maturity
of any
Securities of the series will not be determinable as of any one
or more
dates prior to the Stated Maturity, the amount which shall be
deemed to
be the principal amount of such Securities as of any such date
for any
purpose thereunder or hereunder, including the principal amount
thereof
which shall be due and payable upon any Maturity other than the
Stated
Maturity or which shall be deemed to be Outstanding as of any
date prior
to the Stated Maturity (or, in any such case, the manner in
which such
amount deemed to be the principal amount shall be determined);
(15) if applicable, that the Securities of the series, in
whole or
any specified part, shall be defeasible pursuant to Section
1302 or
Section 1303 or both such Sections and, if other than by Issuer
Board
Resolutions, the manner in which any election by the Issuers to
defease
such Securities shall be evidenced;
(16) if applicable, that any Securities of the series shall
be
issuable in whole or in part in the form of one or more Global
Securities
and, in such case, the respective Depositaries for such Global
Securities, the form of any legend or legends which shall be
borne by any
such Global Security in addition to or in lieu of that set
forth in Sec-
tion 204 and any circumstances in addition to or in lieu of
those set
forth in Clause (2) of the last paragraph of Section 305 in
which any
such Global Security may be exchanged in whole or in part for
Securities
registered, and any transfer of such Global Security in whole
or in part
may be registered, in the name or names of Persons other than
the
Depositary for such Global Security or a nominee thereof;
(17) any addition to or change in the Events of Default
which applies
to any Securities of the series and any change in the right of
the
Trustee or the requisite Holders of such Securities to declare
the
principal amount thereof due and payable pursuant to Section
502;
<PAGE>
(PAGE) 27
(18) any addition to or change in the covenants set forth
in Article
Ten which applies to Securities of the series;
(19) if applicable, that the Securities of the series shall
be
subject to certain restrictions on transfer and, in such case,
the terms
and conditions of such restrictions and the form of any legend
or legends
which shall be borne by any such Security in respect of such
restrictions;
(20) if applicable, that the Securities of the series shall
be
convertible or exchangeable into other securities or property
of either
or both of the Issuers or otherwise and, in such case, the
terms and
conditions of such rights so to convert or exchange (including
without
limitation the conversion or exchange rate or conversion or
exchange
price) and descriptions of the securities or property into
which such
Securities may be converted or exchanged; and
(21) any other terms of the series (which terms shall not
be
inconsistent with the provisions of this Indenture, except as
permitted
by Section 901(5)).
All Securities of any one series shall be substantially
identical
except as to denomination and except as may otherwise be provided
in or
pursuant to the Issuer Board Resolutions referred to above and
(subject to
Section 303) set forth, or determined in the manner provided, in
the
Officers' Certificate referred to above or in any such indenture
supple-
mental hereto.
If any of the terms of the series are established by action
taken
pursuant to Issuer Board Resolutions, a copy of an appropriate
record of
such action shall be certified by the Secretary or an Assistant
Secretary
of each of the Issuers and delivered to the Trustee at or prior
to the
delivery of the Officers' Certificate setting forth the terms of
the
series.
The Securities shall be subordinated in right of payment to
Senior Debt
as provided in Article Fourteen.
SECTION 302. Denominations.
The Securities of each series shall be issuable only in
registered form
without coupons and only in such denominations as shall be
specified as
contemplated by Section 301. In the absence of any such specified
denomination with respect to the Securities of any series, the
Securities
of such series shall be issuable in denominations of $1,000 and
any
integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of each of the
Issuers
by its Chairman of the Board, its Vice Chairman of the Board, its
President
or one of its Vice Presidents, under its corporate seal
reproduced thereon
and attested by its Secretary or one of its
<PAGE>
(PAGE) 28
Assistant Secretaries. The signature of any of these officers on
the
Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals
who were at any time the proper officers of such Issuer shall
bind such
Issuer, notwithstanding that such individuals or any of them have
ceased to
hold such offices prior to the authentication and delivery of
such
Securities or did not hold such offices at the date of such
Securities.
At any time and from time to time after the execution and
delivery of
this Indenture, the Issuers may deliver Securities of any series
executed
by the Issuers to the Trustee for authentication, together with
an Issuer
Order for the authentication and delivery of such Securities, and
the
Trustee in accordance with the Issuer Order shall authenticate
and deliver
such Securities. If the form or terms of the Securities of the
series have
been established by or pursuant to one or more Issuer Board
Resolutions as
permitted by Sections 201 and 301, in authenticating such
Securities, and
accepting the additional responsibilities under this Indenture in
relation
to such Securities, the Trustee shall be entitled to receive, and
(subject
to Section 601) shall be fully protected in relying upon, an
Opinion of
Counsel stating,
(1) if the form of such Securities has been established by
or
pursuant to Issuer Board Resolutions as permitted by Section
201, that
such form has been established in conformity with the
provisions of this
Indenture;
(2) if the terms of such Securities have been established
by or
pursuant to Issuer Board Resolutions as permitted by Section
301, that
such terms have been established in conformity with the
provisions of
this Indenture; and
(3) that such Securities, when authenticated and delivered
by the
Trustee and issued by the Issuers in the manner and subject to
any
conditions specified in such Opinion of Counsel, will
constitute valid
and legally binding obligations of the Issuers enforceable in
accordance
with their terms, subject to bankruptcy, insolvency, fraudulent
transfer,
reorganization, moratorium and similar laws of general
applicability
relating to or affecting creditors' rights and to general
equity
principles.
If such form or terms have been so established, the Trustee shall
not be
required to authenticate such Securities if the issue of such
Securities
pursuant to this Indenture will affect the Trustee's own rights,
duties or
immunities under the Securities and this Indenture or otherwise
in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301 and of the
preceding
paragraph, if all Securities of a series are not to be originally
issued at
one time, it shall not be necessary to deliver the Officers'
Certificate
otherwise required pursuant to Section 301 or the Issuer Order
and Opinion
of Counsel otherwise required pursuant to such preceding
paragraph at or
prior to the authentication of each Security of such series if
such
documents are delivered at or prior to the authentication upon
original
issuance of the first Security of such series to be issued.
<PAGE>
(PAGE) 29
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be
valid or obligatory for any purpose unless there appears on such
Security a
certificate of authentication substantially in the form provided
for herein
executed by the Trustee by manual signature, and such certificate
upon any
Security shall be conclusive evidence, and the only evidence,
that such
Security has been duly authenticated and delivered hereunder.
Not-
withstanding the foregoing, if any Security shall have been
authenticated
and delivered hereunder but never issued and sold by the Issuers,
and the
Issuers shall deliver such Security to the Trustee for
cancellation as
provided in Section 309, for all purposes of this Indenture such
Security
shall be deemed never to have been authenticated and delivered
hereunder
and shall never be entitled to the benefits of this Indenture.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities of any
series, the
Issuers may execute, and upon an Issuer Order and receipt by the
Trustee of
the other documents required by Sections 102 and 303 the Trustee
shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any
authorized denomination, substantially of the tenor of the
definitive
Securities in lieu of which they are issued and with such
appropriate
insertions, omissions, substitutions and other variations as the
officers
executing such Securities may determine, as evidenced by their
execution of
such Securities.
If temporary Securities of any series are issued, the Issuers
will
cause definitive Securities of that series to be prepared without
unreasonable delay. After the preparation of definitive
Securities of such
series, the temporary Securities of such series shall be
exchangeable for
definitive Securities of such series upon surrender of the
temporary
Securities of such series at the office or agency of the Issuers
in a Place
of Payment for that series, without charge to the Holder. Upon
surrender
for cancellation of any one or more temporary Securities of any
series, the
Issuers shall execute and the Trustee shall authenticate and
deliver in
exchange therefor one or more definitive Securities of the same
series, of
any authorized denominations and of like tenor and aggregate
principal
amount. Until so exchanged, the temporary Securities of any
series shall in
all respects be entitled to the same benefits under this
Indenture as
definitive Securities of such series and tenor.
SECTION 305. Registration, Registration of Transfer and
Exchange.
The Issuers shall cause to be kept at the Corporate Trust
Office of the
Trustee a register (the register maintained in such office and in
any other
office or agency of the Issuers in a Place of Payment being
herein
sometimes collectively referred to as the "Security Register") in
which,
subject to such reasonable regulations as they may prescribe, the
Issuers
shall provide for the registration of Securities and of transfers
of
<PAGE>
(PAGE) 30
Securities. The Trustee is hereby appointed "Security Registrar"
for the
purpose of registering Securities and transfers of Securities as
herein
provided.
Upon surrender for registration of transfer of any Security
of a series
at the office or agency of the Issuers in a Place of Payment for
that
series, the Issuers shall execute, and the Trustee shall
authenticate and
deliver, in the name of the designated transferee or transferees,
one or
more new Securities of the same series, of any authorized
denominations and
of like tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be
exchanged
for other Securities of the same series, of any authorized
denominations
and of like tenor and aggregate principal amount, upon surrender
of the
Securities to be exchanged at such office or agency. Whenever any
Securi-
ties are so surrendered for exchange, the Issuers shall execute,
and the
Trustee shall authenticate and deliver, the Securities which the
Holder
making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of
Securities shall be the valid obligations of the Issuers,
evidencing the
same debt, and entitled to the same benefits under this
Indenture, as the
Securities surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of
transfer or
for exchange shall (if so required by the Issuers or the Trustee)
be duly
endorsed, or be accompanied by a written instrument of transfer
in form
satisfactory to the Issuers and the Security Registrar duly
executed, by
the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or
exchange of Securities, but the Issuers may require payment of a
sum
sufficient to cover any tax or other governmental charge that may
be
imposed in connection with any registration of transfer or
exchange of
Securities, other than exchanges pursuant to Section 304, 906 or
1107 not
involving any transfer.
If the Securities of any series (or of any series and
specified tenor)
are to be redeemed in part, the Issuers shall not be required (A)
to issue,
register the transfer of or exchange any Securities of that
series (or of
that series and specified tenor, as the case may be) during a
period
beginning at the opening of business 15 days before the day of
the mailing
of a notice of redemption of any such Securities selected for
redemption
under Section 1103 and ending at the close of business on the day
of such
mailing, or (B) to register the transfer of or exchange any
Security so
selected for redemption in whole or in part, except the
unredeemed portion
of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall
apply only
to Global Securities:
(1) Each Global Security authenticated under this
Indenture shall be
registered in the name of the Depositary designated for such
Global
Security or a nominee thereof and delivered to such Depositary
or a
nominee thereof or custodian therefor,
<PAGE>
(PAGE) 31
and each such Global Security shall constitute a single
Security for all
purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture,
no Global
Security may be exchanged in whole or in part for Securities
registered,
and no transfer of a Global Security in whole or in part may be
registered, in the name of any Person other than the Depositary
for such
Global Security or a nominee thereof unless (A) such Depositary
(i) has
notified the Issuers that it is unwilling or unable to continue
as
Depositary for such Global Security or (ii) has ceased to be a
clearing
agency registered under the Exchange Act, (B) there shall have
occurred
and be continuing an Event of Default with respect to such
Global
Security or (C) there shall exist such circumstances, if any,
in addition
to or in lieu of the foregoing as have been specified for this
purpose as
contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security
for other Securities may be made in whole or in part, and all
Securities
issued in exchange for a Global Security or any portion thereof
shall be
registered in such names as the Depositary for such Global
Security shall
direct.
(4) Every Security authenticated and delivered upon
registration of
transfer of, or in exchange for or in lieu of, a Global
Security or any
portion thereof, whether pursuant to this Section, Section 304,
306, 906
or 1107 or otherwise, shall be authenticated and delivered in
the form
of, and shall be, a Global Security, unless such Security is
registered
in the name of a Person other than the Depositary for such
Global
Security or a nominee thereof.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the
Issuers
shall execute and the Trustee shall authenticate and deliver in
exchange
therefor a new Security of the same series and of like tenor and
principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Issuers and the Trustee
(i) evidence
to their satisfaction of the destruction, loss or theft of any
Security and
(ii) such security or indemnity as may be required by them to
save each of
them and any agent of either of them harmless, then, in the
absence of
notice to the Issuers or the Trustee that such Security has been
acquired
by a bona fide purchaser, the Issuers shall execute and the
Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or
stolen
Security, a new Security of the same series and of like tenor and
principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen
Security has
become or is about to become due and payable, the Issuers in
their
discretion may, instead of issuing a new Security, pay such
Security.
<PAGE>
(PAGE) 32
Upon the issuance of any new Security under this Section, the
Issuers
may require the payment of a sum sufficient to cover any tax or
other
governmental charge that may be imposed in relation thereto and
any other
expenses (including the fees and expenses of the Trustee)
connected
therewith.
Every new Security of any series issued pursuant to this
Section in
lieu of any destroyed, lost or stolen Security shall constitute
an original
additional contractual obligation of the Issuers, whether or not
the
destroyed, lost or stolen Security shall be at any time
enforceable by
anyone, and shall be entitled to all the benefits of this
Indenture equally
and proportionately with any and all other Securities of that
series duly
issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the
extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Except as otherwise provided as contemplated by Section 301
with
respect to any series of Securities, interest on any Security
which is
payable, and is punctually paid or duly provided for, on any
Interest Pay-
ment Date shall be paid to the Person in whose name that Security
(or one
or more Predecessor Securities) is registered at the close of
business on
the Regular Record Date for such interest.
Any interest on any Security of any series which is payable,
but is not
punctually paid or duly provided for, on any Interest Payment
Date (herein
called "Defaulted Interest") shall forthwith cease to be payable
to the
Holder on the relevant Regular Record Date by virtue of having
been such
Holder, and such Defaulted Interest may be paid by the Issuers,
at their
election in each case, as provided in Clause (1) or (2) below:
(1) The Issuers may elect to make payment of any
Defaulted
Interest to the Persons in whose names the Securities of such
series
(or their respective Predecessor Securities) are registered
at the
close of business on a Special Record Date for the payment of
such
Defaulted Interest, which shall be fixed in the following
manner. The
Issuers shall notify the Trustee in writing of the amount of
Defaulted
Interest proposed to be paid on each Security of such series
and the
date of the proposed payment, and at the same time the
Issuers shall
deposit with the Trustee an amount of money equal to the
aggregate
amount proposed to be paid in respect of such Defaulted
Interest or
shall make arrangements satisfactory to the Trustee for such
deposit
prior to the date of the proposed payment, such money when
deposited to
be held in trust for the benefit of the Persons entitled to
such
Defaulted Interest as in this Clause provided. Thereupon the
Trustee
shall fix a Special Record Date for the payment of such
Defaulted
Interest which shall be not more than 15 days and not less
than 10 days
prior to the date of the proposed payment and not less than
10 days
after the receipt by the Trustee of the notice of the
proposed payment.
The Trustee shall promptly notify the Issuers of such Special
Record
Date and, in
<PAGE>
(PAGE) 33
the name and at the expense of the Issuers, shall cause
notice of the
proposed payment of such Defaulted Interest and the Special
Record Date
therefor to be given to each Holder of Securities of such
series in the
manner set forth in Section 106, not less than 10 days prior
to such
Special Record Date. Notice of the proposed payment of such
Defaulted
Interest and the Special Record Date therefor having been so
mailed, such
Defaulted Interest shall be paid to the Persons in whose
names the
Securities of such series (or their respective Predecessor
Securities) are
registered at the close of business on such Special Record
Date and shall
no longer be payable pursuant to the following Clause (2).
(2) The Issuers may make payment of any Defaulted
Interest on the
Securities of any series in any other lawful manner not
inconsistent
with the requirements of any securities exchange on which
such
Securities may be listed, and upon such notice as may be
required by
such exchange, if, after notice given by the Issuers to the
Trustee of
the proposed payment pursuant to this Clause, such manner of
payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each
Security
delivered under this Indenture upon registration of transfer of
or in
exchange for or in lieu of any other Security shall carry the
rights to
interest accrued and unpaid, and to accrue, which were carried by
such
other Security.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration of
transfer,
the Issuers, the Trustee and any agent of the Issuers or the
Trustee may
treat the Person in whose name such Security is registered as the
owner of
such Security for the purpose of receiving payment of principal
of and any
premium and (subject to Section 307) any interest on such
Security and for
all other purposes whatsoever, whether or not such Security be
overdue, and
neither the Issuers, the Trustee nor any agent of the Issuers or
the
Trustee shall be affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of
transfer or exchange or for credit against any sinking fund
payment shall,
if surrendered to any Person other than the Trustee, be delivered
to the
Trustee and shall be promptly cancelled by it. The Issuers may at
any time
deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Issuers may have
acquired
in any manner whatsoever, and may deliver to the Trustee (or to
any other
Person for delivery to the Trustee) for cancellation any
Securities
previously authenticated hereunder which the Issuers have not
issued and
sold, and all Securities so delivered shall be promptly cancelled
by the
Trustee. No Securities shall be authenticated in lieu of or in
exchange for
any Securities cancelled as provided in this Section, except as
expressly
permitted by this Indenture. All cancelled Securities held by the
Trustee
shall be disposed
<PAGE>
(PAGE) 34
of as directed by an Issuer Order. In the absence of such an
Issuer Order,
the Trustee shall dispose of all cancelled Securities in
accordance with
its standard procedures and shall deliver a certificate of such
disposition
to the Issuers.
SECTION 310. Computation of Interest.
Except as otherwise specified as contemplated by Section 301
for
Securities of any series, interest on the Securities of each
series shall
be computed on the basis of a 360-day year of twelve 30-day
months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon an Issuer Request cease to be of
further
effect (except as to any surviving rights of registration of
transfer or
exchange of Securities herein expressly provided for), and the
Trustee, at
the expense of the Issuers, shall execute proper instruments
acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and
delivered (other
than (i) Securities which have been destroyed, lost or stolen
and which
have been replaced or paid as provided in Section 306 and
(ii) Securi-
ties for whose payment money has theretofore been deposited
in trust or
segregated and held in trust by the Issuers and thereafter
repaid to
the Issuers or discharged from such trust, as provided in
Section 1003)
have been delivered to the Trustee for cancellation; or
(B) all such Securities not theretofore delivered to the
Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within
one year, or
(iii) 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
Issuers,
and the Issuers, in the case of (i), (ii) or (iii) above,
have
deposited or caused to be deposited with the Trustee as trust
funds in
trust for the purpose an amount sufficient to pay and
discharge the
entire indebtedness on such Securities not theretofore
<PAGE>
(PAGE) 35
delivered to the Trustee for cancellation, for principal and
any premium
and interest to the date of such deposit (in the case of
Securities which
have become due and payable) or to the Stated Maturity or
Redemption Date,
as the case may be;
(2) the Issuers have paid or caused to be paid all other
sums payable
hereunder by the Issuers; and
(3) the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all
conditions
precedent herein provided for relating to the satisfaction and
discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this
Indenture, the
obligations of the Issuers to the Trustee under Section 607, the
obligations of the Trustee to any Authenticating Agent under
Section 614
and, if money shall have been deposited with the Trustee pursuant
to
subclause (B) of Clause (1) of this Section, the obligations of
the Trustee
under Section 402 and the last paragraph of Section 1003 shall
survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all
money deposited with the Trustee pursuant to Section 401 shall be
held in
trust and applied by it, in accordance with the provisions of the
Securities and this Indenture, to the payment, either directly or
through
any Paying Agent (including an Issuer acting as Paying Agent) as
the
Trustee may determine, to the Persons entitled thereto, of the
principal
and any premium and interest for whose payment such money has
been
deposited with the Trustee.
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein with respect to
Securities of
any series, means any one of the following events (whatever the
reason for
such Event of Default and whether it shall be occasioned by the
provisions
of Article Fourteen or be voluntary or involuntary or be effected
by
operation of law or pursuant to any judgment, decree or order of
any court
or any order, rule or regulation of any administrative or
governmental
body):
(1) default in the payment of any interest upon any
Security of that
series when it becomes due and payable, and continuance of such
default
for a period of 30 days; or
<PAGE>
(PAGE) 36
(2) default in the payment of the principal of or any
premium on any
Security of that series at its Maturity; or
(3) default in the deposit of any sinking fund payment,
when and as
due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant
or
warranty of an Issuer in this Indenture (other than a covenant
or
warranty a default in whose performance or whose breach is
elsewhere in
this Section specifically dealt with or which has expressly
been included
in this Indenture solely for the benefit of series of
Securities other
than that series), and continuance of such default or breach
for a period
of 60 days after there has been given, by registered or
certified mail,
to the Issuers by the Trustee or to the Issuers and the Trustee
by the
Holders of at least 25% in principal amount of the Outstanding
Securities
of that series a written notice specifying such default or
breach and
requiring it to be remedied and stating that such notice is a
"Notice of
Default" hereunder; or
(5) a default under any bond, debenture, note or other
evidence of
indebtedness for money borrowed by an Issuer (including a
default with
respect to Securities of any series other than that series)
having an
aggregate principal amount outstanding of at least $5,000,000,
or under
any mortgage, indenture or instrument (including this
Indenture) under
which there may be issued or by which there may be secured or
evidenced
any indebtedness for money borrowed by an Issuer having an
aggregate
principal amount outstanding of at least $5,000,000, whether
such
indebtedness now exists or shall hereafter be created, which
default (A)
shall constitute a failure to pay any portion of the principal
of such
indebtedness when due and payable after the expiration of any
applicable
grace period with respect thereto or (B) shall have resulted in
such
indebtedness becoming or being declared due and payable prior
to the date
on which it would otherwise have become due and payable,
without, in the
case of Clause (A), such indebtedness having been discharged or
without,
in the case of Clause (B), such indebtedness having been
discharged or
such acceleration having been rescinded or annulled, in each
such case
within a period of 10 days after there shall have been given,
by
registered or certified mail, to the Issuers by the Trustee or
to the
Issuers and the Trustee by the Holders of at least 10% in
principal
amount of the Outstanding Securities of that series a written
notice
specifying such default and requiring the Issuers to cause such
indebtedness to be discharged or cause such acceleration to be
rescinded
or annulled, as the case may be, and stating that such notice
is a
"Notice of Default" hereunder; provided, however, that, subject
to the
provisions of Sections 601 and 602, the Trustee shall not be
deemed to
have knowledge of such default unless either (A) a Responsible
Officer of
the Trustee shall have actual knowledge of such default or (B)
the
Trustee shall have received written notice thereof from the
Issuers, from
any Holder, from the holder of any such indebtedness or from
the trustee
under any such mortgage, indenture or other instrument; or
(6) the entry by a court having jurisdiction in the
premises of
(A) a decree or order for relief in respect of an Issuer or any
Subsidiary in an involuntary case or proceeding under any
applicable
Federal or State bankruptcy, insolvency, reorganization
<PAGE>
(PAGE) 37
or other similar law or (B) a decree or order adjudging an
Issuer a bank-
rupt or insolvent, or approving as properly filed a petition
seeking reor-
ganization, arrangement, adjustment or composition of or in
respect of such
Issuer under any applicable Federal or State law, or appointing
a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or other
similar official of such Issuer or of any substantial part of
its property,
or ordering the winding up or liquidation of its affairs, and
the
continuance of any such decree or order for relief or any such
other decree
or order unstayed and in effect for a period of 60 consecutive
days; or
(7) the commencement by an Issuer of a voluntary case or
proceeding
under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or
proceeding to
be adjudicated a bankrupt or insolvent, or the consent by it to
the entry
of a decree or order for relief in respect of such Issuer or
any
Subsidiary in an involuntary case or proceeding under any
applicable
Federal or State bankruptcy, insolvency, reorganization or
other similar
law or to the commencement of any bankruptcy or insolvency case
or
proceeding against it, or the filing by it of a petition or
answer or
consent seeking reorganization or relief under any applicable
Federal or
State law, or the consent by it to the filing of such petition
or to the
appointment of or taking possession by a custodian, receiver,
liquidator,
assignee, trustee, sequestrator or other similar official of
such Issuer
or of any substantial part of its property, or the making by it
of an
assignment for the benefit of creditors, or the admission by it
in
writing of its inability to pay its debts generally as they
become due,
or the taking of corporate action by such Issuer in furtherance
of any
such action; or
(8) the entry of a final judgment or final judgments for
the payment
of money against an Issuer or any Subsidiary in an aggregate
amount (not
otherwise covered by insurance) in excess of $5,000,000 by a
court or
courts of competent jurisdiction, which judgments remain
undischarged or
unbonded for a period (during which execution shall not be
effectively
stayed) of 60 days after the right to appeal all such judgments
has
expired; provided, however, that, subject to the provisions of
Sections
601 and 602, the Trustee shall not be deemed to have knowledge
of such
judgment or judgments unless either (A) a Responsible Officer
of the
Trustee shall have actual knowledge of such judgment or
judgments or
(B) the Trustee shall have received written notice thereof from
the
Issuers, from any Holder or from the holder of any such
judgment or
judgments; or
(9) default, on the applicable Purchase Date, in the
purchase of
Securities required to be purchased by the Issuers pursuant to
an Offer
to Purchase as to which an Offer has been mailed to Holders; or
(10) default in the performance, or breach, of Section
801; or
(11) any other Event of Default provided with respect to
Securities
of that series.
<PAGE>
(PAGE) 38
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in
Section 501(6) or 501(7)) with respect to Securities of any
series at the
time Outstanding occurs and is continuing, then in every such
case the
Trustee or the Holders of not less than 25% in principal amount
of the
Outstanding Securities of that series may declare the principal
amount of
all the Securities of that series (or, if any Securities of that
series are
Original Issue Discount Securities, such portion of the principal
amount of
such Securities as may be specified by the terms thereof) to be
due and
payable immediately, by a notice in writing to the Issuers (and
to the
Trustee if given by Holders), and upon any such declaration such
principal
amount (or specified amount) shall become immediately due and
payable. If
an Event of Default specified in Section 501(6) or 501(7) with
respect to
Securities of any series at the time Outstanding occurs, the
principal
amount of all the Securities of that series (or, if any
Securities of that
series are Original Issue Discount Securities, such portion of
the
principal amount of such Securities as may be specified by the
terms
thereof) shall automatically, and without any declaration or
other action
on the part of the Trustee or any Holder, become immediately due
and
payable.
At any time after such a declaration of acceleration with
respect to
Securities of any series has been made and before a judgment or
decree for
payment of the money due has been obtained by the Trustee as
hereinafter in
this Article provided, the Holders of a majority in principal
amount of the
Outstanding Securities of that series, by written notice to the
Issuers and
the Trustee, may rescind and annul such declaration and its
consequences if
(1) the Issuers have paid or deposited with the Trustee a
sum
sufficient to pay
(A) all overdue interest on all Securities of that
series,
(B) the principal of (and premium, if any, on) any
Securities of
that series which have become due otherwise than by such
declaration of
acceleration and any interest thereon at the rate or rates
prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is
lawful, interest
upon overdue interest at the rate or rates prescribed
therefor in such
Securities, and
(D) all sums paid or advanced by the Trustee hereunder
and the
reasonable compensation, expenses, disbursements and advances
of the
Trustee, its agents and counsel;
and
(2) all Events of Default with respect to Securities of
that series,
other than the non-payment of the principal of Securities of
that series
which have become due solely by such declaration of
acceleration, have
been cured or waived as provided in Section 513.
<PAGE>
(PAGE) 39
No such rescission shall affect any subsequent default or impair
any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by
Trustee.
The Issuers covenant that if
(1) default is made in the payment of any interest on any
Security
when such interest becomes due and payable and such default
continues for
a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium,
if any, on) any Security at the Maturity thereof,
the Issuers will, upon demand of the Trustee, pay to the Trustee,
for the
benefit of the Holders of such Securities, the whole amount then
due and
payable on such Securities for principal and any premium and
interest and,
to the extent that payment of such interest shall be legally
enforceable,
interest on any overdue principal and premium and on any overdue
interest,
at the rate or rates prescribed therefor in such Securities, and,
in addi-
tion thereto, 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.
If an Event of Default with respect to Securities of any
series occurs
and is continuing, the Trustee may in its discretion proceed to
protect and
enforce its rights and the rights of the Holders of Securities of
such
series by such appropriate judicial proceedings as the Trustee
shall deem
most effectual to protect and enforce any such rights, whether
for the
specific enforcement of any covenant or agreement in this
Indenture or in
aid of the exercise of any power granted herein, or to enforce
any other
proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to an Issuer (or
any other
obligor upon the Securities), its property or its creditors, the
Trustee
shall be entitled and empowered, by intervention in such
proceeding or
otherwise, to take any and all actions authorized under the Trust
Indenture
Act in order to have claims of the Holders and the Trustee
allowed in any
such proceeding. In particular, the Trustee shall be authorized
to collect
and receive any moneys or other property payable or deliverable
on any such
claims and to distribute the same; and any custodian, receiver,
assignee,
trustee, liquidator, sequestrator or other similar official in
any such
judicial proceeding is hereby authorized by each Holder to make
such
payments to the Trustee and, in the event that the Trustee shall
consent to
the making of such payments directly to the Holders, to pay to
the Trustee
any amount due it for the reasonable compensation, expenses,
disbursements
and advances of the Trustee, its agents and counsel, and any
other amounts
due the Trustee under Section 607.
<PAGE>
(PAGE) 40
No provision of this Indenture 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 be a member of a creditors' or other similar
committee.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities
may be prosecuted and enforced by the Trustee without the
possession of any
of the Securities or the production thereof in any proceeding
relating
thereto, and any such proceeding instituted by the Trustee shall
be brought
in its own name as trustee of an express trust, and any recovery
of
judgment shall, after provision for the payment of the reasonable
compensa-
tion, expenses, disbursements and advances of the Trustee, its
agents and
counsel, be for the ratable benefit of the Holders of the
Securities in
respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be
applied in the following order, at the date or dates fixed by the
Trustee
and, in case of the distribution of such money on account of
principal or
any premium or interest, upon presentation of the Securities and
the
notation thereon of the payment if only partially paid and upon
surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: Subject to Article Fourteen, to the payment of
the amounts
then due and unpaid for principal of and any premium and
interest on the
Securities in respect of which or for the benefit of which such
money has
been collected, ratably, without preference or priority of any
kind,
according to the amounts due and payable on such Securities for
principal
and any premium and interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security of any series shall have any right
to
institute any proceeding, judicial or otherwise, with respect to
this
Indenture, or for the appointment of a receiver or trustee, or
for any
other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee
of a continuing Event of Default with respect to the Securities
of that
series;
<PAGE>
(PAGE) 41
(2) the Holders of not less than 25% in principal amount
of the
Outstanding Securities of that series shall have made written
request to
the Trustee to institute proceedings in respect of such Event
of Default
in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable
indemnity against the costs, expenses and liabilities to be
incurred in
compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request
has been
given to the Trustee during such 60-day period by the Holders
of a
majority in principal amount of the Outstanding Securities of
that
series;
it being understood and intended that no one or more of such
Holders shall
have any right in any manner whatever by virtue of, or by
availing of, any
provision of this Indenture to affect, disturb or prejudice the
rights of
any other of such Holders, or to obtain or to seek to obtain
priority or
preference over any other of such Holders or to enforce any right
under
this Indenture, except in the manner herein provided and for the
equal and
ratable benefit of all of such Holders.
SECTION 508. Unconditional Right of Holders to Receive
Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Holder of
any Security shall have the right, which is absolute and
unconditional, to
receive payment of the principal of and any premium and (subject
to
Section 307) interest on such Security on the respective Stated
Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to institute suit for the enforcement of any
such
payment, and such rights shall not be impaired without the
consent of such
Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce
any right or remedy under this Indenture and such proceeding has
been
discontinued or abandoned for any reason, or has been determined
adversely
to the Trustee or to such Holder, then and in every such case,
subject to
any determination in such proceeding, the Issuers, the Trustee
and the
Holders shall be restored severally and respectively to their
former posi-
tions hereunder and thereafter all rights and remedies of the
Trustee and
the Holders shall continue as though no such proceeding had been
instituted.
<PAGE>
(PAGE) 42
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment
of mutilated, destroyed, lost or stolen Securities in the last
paragraph of
Section 306, no right or remedy herein conferred upon or reserved
to the
Trustee or to the Holders is intended to be exclusive of any
other right or
remedy, and every right and remedy shall, to the extent permitted
by law,
be cumulative and in addition to every other right and remedy
given
hereunder or now or hereafter existing at law or in equity or
otherwise.
The assertion or employment of any right or remedy hereunder, or
otherwise,
shall not prevent the concurrent assertion or employment of any
other
appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Securities
to exercise any right or remedy accruing upon any Event of
Default shall
impair any such right or remedy or constitute a waiver of any
such Event of
Default or an acquiescence therein. Every right and remedy given
by this
Article or by law to the Trustee or to the Holders may be
exercised from
time to time, and as often as may be deemed expedient, by the
Trustee or by
the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in principal amount of the
Outstanding
Securities of any series shall 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 the
Trustee, with
respect to the Securities of such series, provided that
(1) such direction shall not be in conflict with any rule
of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by
the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount
of the
Outstanding Securities of any series may on behalf of the Holders
of all
the Securities of such series waive any past default hereunder
with respect
to such series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on
any Security of such series, or
<PAGE>
(PAGE) 43
(2) in respect of a covenant or provision hereof which
under Article
Nine cannot be modified or amended without the consent of the
Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and
any Event
of Default arising therefrom shall be deemed to have been cured,
for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent
thereon.
SECTION 514. 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,
suffered or omitted by it as Trustee, a court may require any
party
litigant in such suit to file an undertaking to pay the costs of
such suit,
and may assess costs against any such party litigant, in the
manner and to
the extent provided in the Trust Indenture Act; provided that the
provisions of this Section shall not apply to any suit instituted
by the
Trustee and neither this Section nor the Trust Indenture Act
shall be
deemed to authorize any court to require such an undertaking or
to make
such an assessment in any suit instituted by the Issuers.
SECTION 515. Waiver of Usury, Stay or Extension Laws.
The Issuers covenant (to the extent that they may lawfully do
so) that
they will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any usury,
stay or
extension law wherever enacted, now or at any time hereafter in
force,
which may affect the covenants or the performance of this
Indenture; and
the Issuers (to the extent that they may lawfully do so) hereby
expressly
waive all benefit or advantage of any such law and covenant that
they will
not hinder, delay or impede the execution of any power herein
granted to
the Trustee, but will suffer and permit the execution of every
such power
as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be as
provided by
the Trust Indenture Act. Notwithstanding the foregoing, 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 in the exercise of any of its rights or
powers, if it
shall have reasonable grounds for believing that repayment of
such funds or
adequate indemnity against such risk or liability is not
reasonably assured
to it.
<PAGE>
(PAGE) 44
Whether or not therein expressly so provided, every provision of
this
Indenture relating to the conduct or affecting the liability of
or
affording protection to the Trustee shall be subject to the
provisions of
this Section.
SECTION 602. Notice of Defaults.
If a default occurs hereunder with respect to Securities of
any series,
the Trustee shall give the Holders of Securities of such series
notice of
such default as and to the extent provided by the Trust Indenture
Act;
provided, however, that in the case of any default of the
character
specified in Section 501(4) with respect to Securities of such
series, no
such notice to Holders shall be given until at least 30 days
after the
occurrence thereof. For the purpose of this Section, the term
"default"
means any event which is, or after notice or lapse of time or
both would
become, an Event of Default with respect to Securities of such
series.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting
or
refraining from acting upon any resolution, certificate,
statement,
instrument, opinion, report, notice, request, direction,
consent, order,
bond, debenture, note, other evidence of indebtedness or other
paper or
document believed by it to be genuine and to have been signed
or
presented by the proper party or parties;
(2) any request or direction of the Issuers mentioned
herein shall
be sufficiently evidenced by an Issuer Request or an Issuer
Order, and
any resolution of the Board of Directors of an Issuer shall be
sufficiently evidenced by a Board Resolution of such Issuer;
(3) whenever in the administration of this Indenture the
Trustee
shall deem it desirable that a matter be proved or established
prior to
taking, suffering or omitting any action hereunder, the Trustee
(unless
other evidence be herein specifically prescribed) may, in the
absence of
bad faith on its part, rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel and the written
advice of
such counsel or any Opinion of Counsel shall be full and
complete
authorization and protection in respect of any action taken,
suffered or
omitted by it hereunder in good faith and in reliance thereon;
(5) 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;
<PAGE>
(PAGE) 45
(6) 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 Issuers, personally or by agent or attorney;
and
(7) the Trustee may execute any of the trusts or powers
hereunder or
perform any duties hereunder either directly or by or through
agents or
attorneys and the Trustee shall not be responsible for any
misconduct or
negligence on the part of any agent or attorney appointed with
due care
by it hereunder.
(8) the Trustee shall not be liable for any action taken,
suffered
or omitted by it in good faith and reasonably believed by it to
be
authorized or within the discretion or rights or powers
conferred upon it
by this Indenture.
SECTION 604. Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except
the
Trustee's certificates of authentication, shall be taken as the
statements
of the Issuers, and neither the Trustee nor any Authenticating
Agent
assumes any responsibility for their correctness. The Trustee
makes no
representations as to the validity or sufficiency of this
Indenture or of
the Securities. Neither the Trustee nor any Authenticating Agent
shall be
accountable for the use or application by the Issuers of
Securities or the
proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any
Security
Registrar or any other agent of the Issuers, in its individual or
any other
capacity, may become the owner or pledgee of Securities and,
subject to
Sections 608 and 613, may otherwise deal with the Issuers with
the same
rights it would have if it were not Trustee, Authenticating
Agent, Paying
Agent, Security Registrar or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated
from other funds except to the extent required by law. The
Trustee shall be
under no liability for interest on any money received by it
hereunder
except as otherwise agreed with the Issuers.
<PAGE>
(PAGE) 46
SECTION 607. Compensation and Reimbursement.
The Issuers agree
(1) to pay to the Trustee from time to time reasonable
compensation
for all services rendered by it hereunder (which compensation
shall not
be limited by any provision of law in regard to the
compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the
Trustee upon its request for all reasonable expenses,
disbursements and
advances incurred or made by the Trustee in accordance with any
provision
of this Indenture (including the reasonable compensation and
the expenses
and disbursements of its agents and counsel), except any such
expense,
disbursement or advance as may be attributable to its
negligence or bad
faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against,
any loss, liability or expense incurred without negligence or
bad faith
on its part, arising out of or in connection with the
acceptance or
administration of the trust or trusts hereunder, including the
costs and
expenses of defending itself against any claim or liability in
connection
with the exercise or performance of any of its powers or duties
hereunder.
As security for the performance of the obligations of the
Company under
this Section the Trustee shall have a lien prior to the
Securities upon all
property and funds held or collected by the Trustee as such,
except funds
held in trust for the payment of principal of (and premium, if
any) or
interest on particular Securities.
When the Trustee incurs expenses or renders services in
connection with
an Event of Default specified in Section 501(6) or (7), the
expenses and
the compensation for the services are intended to constitute
expenses of
administration under any bankruptcy law.
The Company's obligations under this Section 607 and any lien
arising
hereunder shall survive the resignation or removal of any
Trustee, the
discharge of the Company's obligations pursuant to Article Four
of this
Indenture and/or the termination of this Indenture.
SECTION 608. Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the
meaning of the Trust Indenture Act, the Trustee shall either
eliminate such
interest or resign, to the extent and in the manner provided by,
and
subject to the provisions of, the Trust Indenture Act and this
Indenture.
To the extent permitted by such Act, the Trustee shall not be
deemed to
have a conflicting interest by virtue of being a trustee under
this
Indenture with respect to Securities of more than one series.
<PAGE>
(PAGE) 47
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be one (and only one) Trustee
hereunder with
respect to the Securities of each series, which may be Trustee
hereunder
for Securities of one or more other series. Each Trustee shall be
a Person
that is eligible pursuant to the Trust Indenture Act to act as
such and has
a combined capital and surplus of at least $50,000,000. If any
such Person
publishes reports of condition at least annually, pursuant to law
or to the
requirements of its supervising or examining authority, then for
the
purposes of this Section and to the extent permitted by the Trust
Indenture
Act, the combined capital and surplus of such Person shall be
deemed to be
its combined capital and surplus as set forth in its most recent
report of
condition so published. If at any time the Trustee with respect
to the
Securities of any series shall cease to be eligible in accordance
with the
provisions of this Section, it shall resign immediately in the
manner and
with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
No resignation or removal of the Trustee and no appointment
of a
successor Trustee pursuant to this Article shall become effective
until the
acceptance of appointment by the successor Trustee in accordance
with the
applicable requirements of Section 611.
The Trustee may resign at any time with respect to the
Securities of
one or more series by giving written notice thereof to the
Issuers. If the
instrument of acceptance by a successor Trustee required by
Section 611
shall not have been delivered to the Trustee within 30 days after
the
giving of such notice of resignation, the resigning Trustee may
petition
any court of competent jurisdiction for the appointment of a
successor
Trustee with respect to the Securities of such series.
The Trustee may be removed at any time with respect to the
Securities
of any series by Act of the Holders of a majority in principal
amount of
the Outstanding Securities of such series, delivered to the
Trustee and to
the Issuers.
If at any time:
(1) the Trustee shall fail to comply with Section 608
after written
request therefor by the Issuers or by any Holder who has been a
bona fide
Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section
609 and
shall fail to resign after written request therefor by the
Issuers or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be
adjudged a bankrupt or insolvent or a receiver of the Trustee
or of its
property shall be appointed or any public officer shall take
charge or
control of the Trustee or of its property or affairs for the
purpose of
rehabilitation, conservation or liquidation,
<PAGE>
(PAGE) 48
then, in any such case, (A) the Issuers by Issuer Board
Resolutions may
remove the Trustee with respect to all Securities, or (B) subject
to
Section 514, any Holder who has been a bona fide Holder of a
Security for
at least six months may, on behalf of himself and all others
similarly
situated, petition any court of competent jurisdiction for the
removal of
the Trustee with respect to all Securities and the appointment of
a
successor Trustee or Trustees.
If the Trustee shall resign, be removed or become incapable
of acting,
or if a vacancy shall occur in the office of Trustee for any
cause, with
respect to the Securities of one or more series, the Issuers, by
Issuer
Board Resolutions, shall promptly appoint a successor Trustee or
Trustees
with respect to the Securities of that or those series (it being
understood
that any such successor Trustee may be appointed with respect to
the
Securities of one or more or all of such series and that at any
time there
shall be only one Trustee with respect to the Securities of any
particular
series) and shall comply with the applicable requirements of
Section 611.
If, within one year after such resignation, removal or
incapability, or the
occurrence of such vacancy, a successor Trustee with respect to
the Secu-
rities of any series shall be appointed by Act of the Holders of
a majority
in principal amount of the Outstanding Securities of such series
delivered
to the Issuers and the retiring Trustee, the successor Trustee so
appointed
shall, forthwith upon its acceptance of such appointment in
accordance with
the applicable requirements of Section 611, become the successor
Trustee
with respect to the Securities of such series and to that extent
supersede
the successor Trustee appointed by the Issuers. If no successor
Trustee
with respect to the Securities of any series shall have been so
appointed
by the Issuers or the Holders and accepted appointment in the
manner
required by Section 611, any Holder who has been a bona fide
Holder of a
Security of such series for at least six months may, on behalf of
himself
and all others similarly situated, petition any court of
competent juris-
diction for the appointment of a successor Trustee with respect
to the
Securities of such series.
The Issuers shall give notice of each resignation and each
removal of
the Trustee with respect to the Securities of any series and each
appointment of a successor Trustee with respect to the Securities
of any
series to all Holders of Securities of such series in the manner
provided
in Section 106. Each notice shall include the name of the
successor Trustee
with respect to the Securities of such series and the address of
its
Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
In case of the appointment hereunder of a successor Trustee
with
respect to all Securities, every such successor Trustee so
appointed shall
execute, acknowledge and deliver to the Issuers and to the
retiring Trustee
an instrument accepting such appointment, and thereupon the
resignation or
removal of the retiring Trustee shall become effective and such
successor
Trustee, without any further act, deed or conveyance, shall
become vested
with all the rights, powers, trusts and duties of the retiring
Trustee;
but, on the request of the Issuers or the successor Trustee, such
retiring
Trustee shall, upon payment of its charges, execute and deliver
an
instrument transferring to such successor
<PAGE>
(PAGE) 49
Trustee all the rights, powers and trusts of the retiring Trustee
and shall
duly assign, transfer and deliver to such successor Trustee all
property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee
with
respect to the Securities of one or more (but not all) series,
the Issuers,
the retiring Trustee and each successor Trustee with respect to
the
Securities of one or more series shall execute and deliver an
indenture
supplemental hereto wherein each successor Trustee shall accept
such
appointment and which (1) shall contain such provisions as shall
be
necessary or desirable to transfer and confirm to, and to vest
in, each
successor Trustee all the rights, powers, trusts and duties of
the retiring
Trustee with respect to the Securities of that or those series to
which the
appointment of such successor Trustee relates, (2) if the
retiring Trustee
is not retiring with respect to all Securities, shall contain
such
provisions as shall be deemed necessary or desirable to confirm
that all
the rights, powers, trusts and duties of the retiring Trustee
with respect
to the Securities of that or those series as to which the
retiring Trustee
is not retiring shall continue to be vested in the retiring
Trustee, and
(3) shall add to or change any of the provisions of this
Indenture as shall
be necessary to provide for or facilitate the administration of
the trusts
hereunder by more than one Trustee, it being understood that
nothing herein
or in such supplemental indenture shall constitute such Trustees
co-
trustees of the same trust and that each such Trustee shall be
trustee of a
trust or trusts hereunder separate and apart from any trust or
trusts
hereunder administered by any other such Trustee; and upon the
execution
and delivery of such supplemental indenture the resignation or
removal of
the retiring Trustee shall become effective to the extent
provided therein
and each such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers,
trusts and
duties of the retiring Trustee with respect to the Securities of
that or
those series to which the appointment of such successor Trustee
relates;
but, on request of the Issuers or any successor Trustee, such
retiring
Trustee shall duly assign, transfer and deliver to such successor
Trustee
all property and money held by such retiring Trustee hereunder
with respect
to the Securities of that or those series to which the
appointment of such
successor Trustee relates.
Upon request of any such successor Trustee, the Issuers shall
execute
any and all instruments for more fully and certainly vesting in
and
confirming to such successor Trustee all such rights, powers and
trusts
referred to in the first or second preceding paragraph, as the
case may be.
No successor Trustee shall accept its appointment unless at
the time of
such acceptance such successor Trustee shall be qualified and
eligible
under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or
with which it may be consolidated, or any corporation resulting
from any
merger, conversion or consolidation to which the Trustee shall be
a party,
or any corporation succeeding to all or substantially all the
corporate
trust business of the Trustee, shall be the successor of
<PAGE>
(PAGE) 50
the Trustee hereunder, provided such corporation shall be
otherwise
qualified and eligible under this Article, without the execution
or filing
of any paper or any further act on the part of any of the parties
hereto.
In case any Securities shall have been authenticated, but not
delivered, by
the Trustee then in office, any successor by merger, conversion
or consoli-
dation to such authenticating Trustee may adopt such
authentication and
deliver the Securities so authenticated with the same effect as
if such
successor Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against the
Issuers.
If and when the Trustee shall be or become a creditor of the
Issuers
(or any other obligor upon the Securities), the Trustee shall be
subject to
the provisions of the Trust Indenture Act regarding the
collection of
claims against the Issuers (or any such other obligor).
SECTION 614. Appointment of Authenticating Agent.
The Trustee may appoint an Authenticating Agent or Agents
with respect
to one or more series of Securities which shall be authorized to
act on
behalf of the Trustee to authenticate Securities of such series
issued upon
original issue and upon exchange, registration of transfer or
partial
redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture
and shall
be valid and obligatory for all purposes as if authenticated by
the Trustee
hereunder. Wherever reference is made in this Indenture to the
authen-
tication and delivery of Securities by the Trustee or the
Trustee's
certificate of authentication, such reference shall be deemed to
include
authentication and delivery on behalf of the Trustee by an
Authenticating
Agent and a certificate of authentication executed on behalf of
the Trustee
by an Authenticating Agent. Each Authenticating Agent shall be
acceptable
to the Issuers and shall at all times be a corporation organized
and doing
business under the laws of the United States of America, any
State thereof
or the District of Columbia, authorized under such laws to act as
Authenticating Agent, having a combined capital and surplus of
not less
than $50,000,000 and subject to supervision or examination by
Federal or
State authority. If such Authenticating Agent publishes reports
of
condition at least annually, pursuant to law or to the
requirements of said
supervising or examining authority, then for the purposes of this
Section,
the combined capital and surplus of such Authenticating Agent
shall be
deemed to be its combined capital and surplus as set forth in its
most
recent report of condition so published. If at any time an
Authenticating
Agent shall cease to be eligible in accordance with the
provisions of this
Section, such Authenticating Agent shall resign immediately in
the manner
and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or
converted or with which it may be consolidated, or any
corporation
resulting from any merger, conversion or consolidation to which
such
Authenticating Agent shall be a party, or any corporation
succeeding to the
corporate agency or corporate trust business of an Authenticating
Agent,
shall continue to be an Authenticating Agent, provided such
corporation
<PAGE>
(PAGE) 51
shall be otherwise eligible under this Section, without the
execution or
filing of any paper or any further act on the part of the Trustee
or the
Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice
thereof to the Trustee and to the Issuers. The Trustee may at any
time
terminate the agency of an Authenticating Agent by giving written
notice
thereof to such Authenticating Agent and to the Issuers. Upon
receiving
such a notice of resignation or upon such a termination, or in
case at any
time such Authenticating Agent shall cease to be eligible in
accordance
with the provisions of this Section, the Trustee may appoint a
successor
Authenticating Agent which shall be acceptable to the Issuers and
shall
give notice of such appointment in the manner provided in Section
106 to
all Holders of Securities of the series with respect to which
such
Authenticating Agent will serve. Any successor Authenticating
Agent upon
acceptance of its appointment hereunder shall become vested with
all the
rights, powers and duties of its predecessor hereunder, with like
effect as
if originally named as an Authenticating Agent. No successor
Authenticating
Agent shall be appointed unless eligible under the provisions of
this
Section.
The Trustee agrees to pay to each Authenticating Agent from
time to
time reasonable compensation for its services under this Section,
and the
Trustee shall be entitled to be reimbursed for such payments,
subject to
the provisions of Section 607.
If an appointment with respect to one or more series is made
pursuant
to this Section, the Securities of such series may have endorsed
thereon,
in addition to the Trustee's certificate of authentication, an
alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated
therein referred
to in the within-mentioned Indenture.
CHEMICAL BANK,
As Trustee
By.....................................,
As Authenticating Agent
By......................................
As Authorized Officer
<PAGE>
(PAGE) 52
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS
SECTION 701. Issuers to Furnish Trustee Names and Addresses of
Holders.
The Issuers will furnish or cause to be furnished to the
Trustee
(1) semi-annually, not later than _______________ and
_________________ in each year, a list, in such form as the
Trustee may
reasonably require, of the names and addresses of the Holders
of
Securities of each series as of the preceding ______________ or
______________, as the case may be, and
(2) at such other times as the Trustee may request in
writing,
within 30 days after the receipt by the Issuers of any such
request, a
list of similar form and content as of a date not more than 15
days
prior to the time such list is furnished;
provided, however, that if and so long as the Trustee shall be
the Security
Registrar for Securities of a series, no such list need be
furnished with
respect to such series of Securities.
SECTION 702. Preservation of Information; Communications to
Holders.
The Trustee shall preserve, in as current a form as is
reasonably
practicable, the names and addresses of Holders contained in the
most
recent list furnished to the Trustee as provided in Section 701
and the
names and addresses of Holders received by the Trustee in its
capacity as
Security Registrar. The Trustee may destroy any list furnished to
it as
provided in Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with
respect to
their rights under this Indenture or under the Securities, and
the
corresponding rights and privileges of the Trustee, shall be as
provided by
the Trust Indenture Act.
Every Holder of Securities, by receiving and holding the
same, agrees
with the Issuers and the Trustee that neither the Issuers nor the
Trustee
nor any agent of either of them shall be held accountable by
reason of any
disclosure of information as to names and addresses of Holders
made
pursuant to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
The Trustee shall transmit to Holders such reports concerning
the
Trustee and its actions under this Indenture as may be required
pursuant to
the Trust Indenture Act at the times and in the manner provided
pursuant
thereto.
<PAGE>
(PAGE) 53
A copy of each such report shall, at the time of such
transmission to
Holders, be filed by the Trustee with each stock exchange upon
which any
Securities are listed, with the Commission and with the Issuers.
The Iss-
uers will notify the Trustee when any Securities are listed on
any stock
exchange.
SECTION 704. Reports by Issuers.
The Issuers shall file with the Trustee and the Commission,
and
transmit to Holders, such information, documents and other
reports, and
such summaries thereof, as may be required pursuant to the Trust
Indenture
Act at the times and in the manner provided pursuant to such Act;
provided
that any such information, documents or reports required to be
filed with
the Commission pursuant to Section 13 or 15(d) of the Exchange
Act shall be
filed with the Trustee within 15 days after the same is so
required to be
filed with the Commission.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, Etc., Only on Certain
Terms.
Neither Issuer shall, in a single transaction or a series of
related
transactions, consolidate with or merge into any other Person or
convey,
transfer or lease its properties and assets substantially as an
entirety to
any Person, and neither Issuer shall permit any Person to
consolidate with
or merge into such Issuer or convey, transfer or lease its
properties and
assets substantially as an entirety to such Issuer, unless:
(1) in case an Issuer shall consolidate with or merge into
another
Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, such Issuer is the
resulting
or surviving Person or the Person formed by such consolidation
or into
which such Issuer is merged or the Person which acquires by
conveyance or
transfer, or which leases, the properties and assets of such
Issuer sub-
stantially as an entirety shall be a corporation, partnership
or trust,
shall be organized and validly existing under the laws of the
United
States of America, any State thereof or the District of
Columbia and
shall expressly assume, by an indenture supplemental hereto,
executed and
delivered to the Trustee, in form satisfactory to the Trustee,
the due
and punctual payment of the principal of and any premium and
interest on
all the Securities and the performance or observance of every
covenant of
this Indenture on the part of such Issuer to be performed or
observed;
(2) immediately after giving effect to such transaction
and treating
any indebtedness which becomes an obligation of an Issuer or
any
Subsidiary as a result of such transaction as having been
incurred by
such Issuer or such Subsidiary at the time of such transaction,
no Event
of Default, and no event which, after notice or lapse of
<PAGE>
(PAGE) 54
time or both, would become an Event of Default, shall have
happened and be
continuing;
(3) if, as a result of any such consolidation or merger or
such
conveyance, transfer or lease, properties or assets of an
Issuer would
become subject to a mortgage, pledge, lien, security interest
or other
encumbrance which would not be permitted by this Indenture,
such Issuer
or such successor Person, as the case may be, shall take such
steps as
shall be necessary effectively to secure the Securities equally
and
ratably with (or prior to) all indebtedness secured thereby;
and
(4) the Issuer has delivered to the Trustee an Officers'
Certificate
and an Opinion of Counsel, each stating that such
consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture
is
required in connection with such transaction, such supplemental
indenture
comply with this Article and that all conditions precedent
herein
provided for relating to such transaction have been complied
with.
SECTION 802. Successor Substituted.
Upon any consolidation of an Issuer with, or merger of an
Issuer into,
any other Person or any conveyance, transfer or lease of the
properties and
assets of substantially as an entirety in accordance with Section
801, the
successor Person formed by such consolidation or into which an
Issuer is
merged or to which such conveyance, transfer or lease is made
shall succeed
to, and be substituted for, and may exercise every right and
power of, an
Issuer under this Indenture with the same effect as if such
successor
Person had been named as an Issuer herein, and thereafter, except
in the
case of a lease, the predecessor Person shall be relieved of all
obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Issuers, when
authorized by
Issuer Board Resolutions, and the Trustee, at any time and from
time to
time, may enter into one or more indentures supplemental hereto,
in form
satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to an
Issuer and
the assumption by any such successor of the covenants of such
Issuer
herein and in the Securities; or
(2) to add to the covenants of the Issuers for the benefit
of the
Holders of all or any series of Securities (and if such
covenants are to
be for the benefit of less than all
<PAGE>
(PAGE) 55
series of Securities, stating that such covenants are expressly
being
included solely for the benefit of such series) or to surrender
any right
or power herein conferred upon the Issuers; or
(3) to add any additional Events of Default for the
benefit of the
Holders of all or any series of Securities (and if such
additional Events
of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly
being included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to
such extent as shall be necessary to permit or facilitate the
issuance of
Securities in bearer form, registrable or not registrable as to
princi-
pal, and with or without interest coupons, or to permit or
facilitate the
issuance of Securities in uncertificated form; or
(5) to add to, change or eliminate any of the provisions
of this
Indenture in respect of one or more series of Securities,
provided that
any such addition, change or elimination (A) shall neither (i)
apply to
any Security of any series created prior to the execution of
such
supplemental indenture and entitled to the benefit of such
provision nor
(ii) modify the rights of the Holder of any such Security with
respect to
such provision or (B) shall become effective only when there is
no such
Security Outstanding; or
(6) to secure the Securities; or
(7) to establish the form or terms of Securities of any
series as
permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of
appointment
hereunder by a successor Trustee with respect to the Securities
of one or
more series and to add to or change any of the provisions of
this Inden-
ture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one
Trustee, pursuant
to the requirements of Section 611; or
(9) to cure any ambiguity, to correct or supplement any
provision
herein which may be defective or inconsistent with any other
provision
herein, or to make any other provisions with respect to matters
or
questions arising under this Indenture, provided that such
action
pursuant to this Clause (9) shall not adversely affect the
interests of
the Holders of Securities of any series in any material
respect.
SECTION 902. Supplemental Indentures With Consent of Holders.
With the consent of the Holders of not less than a majority
in
principal amount of the Outstanding Securities of each series
affected by
such supplemental indenture, by Act of said Holders delivered to
the
Issuers and the Trustee, the Issuers, when authorized by Issuer
Board
Resolutions, and the Trustee may enter into an indenture or
indentures
supplemental hereto for the purpose of adding any provisions to
or changing
in any
<PAGE>
(PAGE) 56
manner or eliminating any of the provisions of this Indenture or
of
modifying in any manner the rights of the Holders of Securities
of such
series under this Indenture; provided, however, that no such
supplemental
indenture shall, without the consent of the Holder of each
Outstanding
Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of principal of or interest on, any Security, or
reduce the
principal amount thereof or the rate of interest thereon or any
premium
payable upon the redemption thereof, or reduce the amount of
the
principal of an Original Issue Discount Security or any other
Security
which would be due and payable upon a declaration of
acceleration of the
Maturity thereof pursuant to Section 502, or change any Place
of Payment
where, or the coin or currency in which, any Security or any
premium or
interest thereon is payable, or impair the right to institute
suit for
the enforcement of any such payment on or after the Stated
Maturity
thereof (or, in the case of redemption, on or after the
Redemption Date),
or modify the provisions of this Indenture with respect to the
subordination of the Securities in a manner adverse to the
Holders, or
(2) reduce the percentage in principal amount of the
Outstanding
Securities of any series, the consent of whose Holders is
required for
any such supplemental indenture, or the consent of whose
Holders is
required for any waiver (of compliance with certain provisions
of this
Indenture or certain defaults hereunder and their consequences)
provided
for in this Indenture, or
(3) modify any of the provisions of this Section, Section
513 or
Section 1010, except to increase any such percentage or to
provide that
certain other provisions of this Indenture cannot be modified
or waived
without the consent of the Holder of each Outstanding Security
affected
thereby; provided, however, that this clause shall not be
deemed to
require the consent of any Holder with respect to changes in
the
references to "the Trustee" and concomitant changes in this
Section and
Section 1010, or the deletion of this proviso, in accordance
with the
requirements of Sections 611 and 901(8), or
(4) following the mailing of an Offer with respect to an
Offer to
Purchase pursuant to Section 1008, modify the provisions of
this
Indenture with respect to such Offer to Purchase in a manner
adverse to
such Holder, or
(5) reduce the amount of or postpone the date fixed for,
the payment
of any sinking fund or analogous obligation, or
(6) modify any provisions of the Securities of such series
relating
to rights to convert or exchange such Securities for other
securities or
property of either or both of the Issuers or otherwise in a
manner
adverse to the Holders, including decreasing the conversion or
exchange
rate or increasing the conversion or exchange price thereof.
A supplemental indenture which changes or eliminates any covenant
or other
provision of this Indenture which has expressly been included
solely for
the benefit of one or more
<PAGE>
(PAGE) 57
particular series of Securities, or which modifies the rights of
the
Holders of Securities of such series with respect to such
covenant or other
provision, shall be deemed not to affect the rights under this
Indenture of
the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this
Section to
approve the particular form of any proposed supplemental
indenture, but it
shall be sufficient if such Act shall approve the substance
thereof.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by,
any
supplemental indenture permitted by this Article or the
modifications
thereby of the trusts created by this Indenture, the Trustee
shall be
entitled to receive, and (subject to Section 601) shall be fully
protected
in relying upon, an Opinion of Counsel stating that the execution
of such
supplemental indenture is authorized or permitted by this
Indenture. The
Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights,
duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article,
this Indenture shall be modified in accordance therewith, and
such
supplemental indenture shall form a part of this Indenture for
all
purposes; and every Holder of Securities theretofore or
thereafter
authenticated and delivered hereunder shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities of any series authenticated and delivered after
the
execution of any supplemental indenture pursuant to this Article
may, and
shall if required by the Trustee, bear a notation in form
approved by the
Trustee as to any matter provided for in such supplemental
indenture. If
the Issuers shall so determine, new Securities of any series so
modified as
to conform, in the opinion of the Trustee and the Issuers, to any
such
supplemental indenture may be prepared and executed by the
Issuers and
authenticated and delivered by the Trustee in exchange for
Outstanding
Securities of such series.
<PAGE>
(PAGE) 58
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest.
The Issuers covenant and agree for the benefit of each series
of
Securities that they will duly and punctually pay the principal
of and any
premium and interest on the Securities of that series in
accordance with
the terms of the Securities and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Issuers will maintain in each Place of Payment for any
series of
Securities an office or agency where Securities of that series
may be
presented or surrendered for payment, where Securities of that
series may
be surrendered for registration of transfer or exchange and where
notices
and demands to or upon the Issuers in respect of the Securities
of that
series and this Indenture may be served. The Issuers will 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 Issuers
shall fail
to maintain any such required office or agency or shall fail to
furnish the
Trustee with the address thereof, such presentations, surrenders,
notices
and demands may be made or served at the Corporate Trust Office
of the
Trustee, and the Issuers hereby appoint the Trustee as their
agent to
receive all such presentations, surrenders, notices and demands.
The Issuers may also from time to time designate one or more
other
offices or agencies where the Securities of one or more series
may be
presented or surrendered for any or all such purposes and may
from time to
time rescind such designations; provided, however, that no such
designation
or rescission shall in any manner relieve the Issuers of its
obligation to
maintain an office or agency in each Place of Payment for
Securities of any
series for such purposes. The Issuers will give prompt written
notice to
the Trustee of any such designation or rescission and of any
change in the
location of any such other office or agency.
SECTION 1003. Money for Securities Payments to Be Held in Trust.
If an Issuer shall at any time act as Paying Agent with
respect to any
series of Securities, it will, on or before each due date of the
principal
of or any premium or interest on any of the Securities of that
series,
segregate and hold in trust for the benefit of the Persons
entitled thereto
a sum sufficient to pay the principal and any premium and
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.
<PAGE>
(PAGE) 59
Whenever the Issuers shall have one or more Paying Agents for
any
series of Securities, it will, prior to each due date of the
principal of
or any premium or interest on any Securities of that series,
deposit with a
Paying Agent a sum sufficient to pay such amount, such sum to be
held as
provided by the Trust Indenture Act, and (unless such Paying
Agent is the
Trustee) the Issuers will promptly notify the Trustee of its
action or
failure so to act.
The Issuers will cause each Paying Agent for any series of
Securities
other than the Trustee to execute and deliver to the Trustee an
instrument
in which such Paying Agent shall agree with the Trustee, subject
to the
provisions of this Section, that such Paying Agent will (1)
comply with the
provisions of the Trust Indenture Act applicable to it as a
Paying Agent
and (2) during the continuance of any default by an Issuer (or
any other
obligor upon the Securities of that series) in the making of any
payment in
respect of the Securities of that series, upon the written
request of the
Trustee, forthwith pay to the Trustee all sums held in trust by
such Paying
Agent for payment in respect of the Securities of that series.
The Issuers may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other
purpose, pay,
or by Issuer Order direct any Paying Agent to pay, to the Trustee
all sums
held in trust by the Issuers or such Paying Agent, such sums to
be held by
the Trustee upon the same trusts as those upon which such sums
were held by
the Issuers or such Paying Agent; and, upon such payment by any
Paying
Agent to the Trustee, such Paying Agent shall be released from
all further
liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or
then held
by the Issuers, in trust for the payment of the principal of or
any premium
or interest on any Security of any series and remaining unclaimed
for two
years after such principal, premium or interest has become due
and payable
shall be paid to the Issuers on an Issuer Request, or (if then
held by the
Issuers) shall be discharged from such trust; and the Holder of
such
Security shall thereafter, as an unsecured general creditor, look
only to
the Issuers for payment thereof, and all liability of the Trustee
or such
Paying Agent with respect to such trust money, and all liability
of the
Issuers as trustee thereof, shall thereupon cease; provided,
however, that
the Trustee or such Paying Agent, before being required to make
any such
repayment, may at the expense of the Issuers cause to be
published once, in
a newspaper published in the English language, customarily
published on
each Business Day and of general circulation in the City of New
York,
notice that such money remains unclaimed and that, after a date
specified
therein, which shall not be less than 30 days from the date of
such
publication, any unclaimed balance of such money then remaining
will be
repaid to the Issuers.
SECTION 1004. Statement by Officers as to Default.
The Issuers will deliver to the Trustee, within 120 days
after the end
of each fiscal year of the Issuers ending after the date hereof,
an
Officers' Certificate, stating whether or not to the best
knowledge of the
signers thereof an Issuer is in default in the
<PAGE>
(PAGE) 60
performance and observance of any of the terms, provisions and
conditions
of this Indenture (without regard to any period of grace or
requirement of
notice provided hereunder) and, if an Issuer shall be in default,
specifying all such defaults and the nature and status thereof of
which
they may have knowledge.
SECTION 1005. Existence.
Subject to Article Eight, the Issuers will do or cause to be
done all
things necessary to preserve and keep in full force and effect
their
existence, rights (charter and statutory) and franchises;
provided,
however, that the Issuers shall not be required to preserve any
such right
or franchise if the Board of Directors of such Issuer shall
determine that
the preservation thereof is no longer desirable in the conduct of
the
business of such Issuer and that the loss thereof is not
disadvantageous in
any material respect to the Holders.
SECTION 1006. Maintenance of Properties.
The Issuers will cause all properties used or useful in the
conduct of
their business or the business of any Subsidiary to be maintained
and kept
in good condition, repair and working order and supplied with all
necessary
equipment and will cause to be made all necessary repairs,
renewals,
replacements, betterments and improvements thereof, all as in the
judgment
of the Issuers may be necessary so that the business carried on
in connec-
tion therewith may be properly and advantageously conducted at
all times;
provided, however, that nothing in this Section shall prevent an
Issuer
from discontinuing the operation or maintenance of any of such
properties
if such discontinuance is, in the judgment of such Issuer,
desirable in the
conduct of its business or the business of any Subsidiary and not
disadvan-
tageous in any material respect to the Holders.
SECTION 1007. Payment of Taxes and Other Claims.
The Issuers will pay or discharge or cause to be paid or
discharged,
before the same shall become delinquent, (1) all taxes,
assessments and
governmental charges levied or imposed upon any Issuer or any
Subsidiary of
an Issuer or upon the income, profits or property of any Issuer
or any
Subsidiary of an Issuer, and (2) all lawful claims for labor,
materials and
supplies which, if unpaid, might by law become a lien upon the
property of
any Issuer or any Subsidiary of an Issuer; provided, however,
that the
Issuers shall not be required to pay or discharge or cause to be
paid or
discharged any such tax, assessment, charge or claim whose
amount,
applicability or validity is being contested in good faith by
appropriate
proceedings.
SECTION 1008. Change of Control.
(a) Upon the occurrence of a Change in Control, each Holder
of a
Security shall have the right to have such Security repurchased
by the
Issuers on the terms and condi-
<PAGE>
(PAGE) 61
tions precedent set forth in this Section 1008 and this
Indenture. The
Issuers shall, within 30 days following the date of the
consummation of a
transaction resulting in a Change of Control, mail an Offer with
respect to
an Offer to Purchase all Outstanding Securities at a purchase
price equal
to 101% of their aggregate principal amount plus accrued interest
to the
Purchase Date; (provided, however, that installments of interest
whose
Stated Maturity is on or prior to the Purchase Date shall be
payable to the
Holders of such Securities, or one or more Predecessor
Securities,
registered as such at the close of business on the relevant
Record Dates
according to their terms and the provisions of Section 307).
Prior to the
mailing of the notice to Holders provided for in the preceding
sentence,
but in any event within 30 days following any Change of Control,
the
Issuers hereby covenant to use their best efforts to obtain the
requisite
consent under the Bank Agreement to permit the repurchase of the
Securities
as provided for in this Section 1008 without violating the terms
of such
Bank Agreement; provided, that, the failure to receive such
consent shall
in no way affect the right of each Holder to have such Security
repurchased
or the obligations of the Issuers to commence the Offer to
Purchase and to
repurchase the Securities pursuant to this Section 1008. 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) The Issuers and the Trustee shall perform their
respective
obligations specified in the Offer for the Offer to Purchase.
Prior to the
Purchase Date, the Issuers shall (i) accept for payment
Securities or
portions thereof tendered pursuant to the Offer, (ii) deposit
with the
Paying Agent (or, if an Issuer is acting as Paying Agent,
segregate and
hold in trust as provided in Section 1003) 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 all
Securities so
accepted together with an Officers' Certificate stating the
Securities or
portions thereof accepted for payment by the Issuers. The Paying
Agent
shall promptly mail or deliver to Holders of Securities so
accepted payment
in an amount equal to the purchase price, and the Trustee shall
promptly
authenticate and mail or deliver to such Holders 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 Issuers
to the
Holder thereof. The Issuers shall publicly announce the results
of the
Offer on or as soon as practicable after the Purchase Date.
(c) A "Change of Control" shall be deemed to have occurred
at such
time, after the date of this Indenture, as any of the following
occur:
(i) any Person or any Persons acting together that would
constitute a
group (for purposes of Section 13(d) of the Securities Exchange
Act of
1934, or any successor provision thereto) (a "Group"), together
with any
Affiliates or Related Persons thereof shall beneficially own
(as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, or any
successor
provision thereto) at least 30% of the aggregate voting power
of all
classes of Capital Stock of either Issuer entitled to vote
generally in
the election of directors; or
<PAGE>
(PAGE) 62
(ii) any Person or Group, together with any Affiliates or
Related
Persons thereof, shall succeed in having a sufficient number of
its
nominees elected to the Board of Directors of either Issuer
such that
such nominees, when added to any existing director remaining on
the Board
of Directors of such Issuer after such election who is an
Affiliated or
Related Person of such Group, will constitute a majority of the
Board of
Directors of such Issuer.
Notwithstanding the foregoing, with respect to OMS, Scotts shall
be deemed
not to constitute such a Person or Group for the purposes of
clauses (i)
and (ii) above.
SECTION 1009. Provision of Financial Information.
Whether or not the Issuers are subject to Section 13(a) or
15(d) of the
Exchange Act, or any successor provision thereto, the Issuers
shall file
with the Commission, to the extent permitted by the Commission or
the
Exchange Act, the annual reports, quarterly reports and other
documents
which the Issuers would have been required to file with the
Commission
pursuant to such Section 13(a) or 15(d) or any successor
provision thereto
if the Issuers were so required, such documents to be filed with
the
Commission on or prior to the respective dates (the "Required
Filing
Dates") by which the Issuers would have been required so to file
such docu-
ments if the Issuers were so required. The Issuers shall also in
any event
(a) within 15 days of each Required Filing Date (i) transmit 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
Issuers
would have been required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act or any successor
provisions
thereto if the Issuers were required to be subject to such
Sections and
(b) if filing such documents by the Issuers with the Commission
is not
permitted under the Exchange Act, promptly upon written request,
supply, in
lieu of filing with the Commission as otherwise required by the
first
sentence of this Section 1009, copies of such documents to any
prospective
Holder.
SECTION 1010. Waiver of Certain Covenants.
Except as otherwise specified as contemplated by Section 301
for
Securities of such series, the Issuers may, with respect to the
Securities
of any series, omit in any particular instance to comply with any
term,
provision or condition set forth in any covenant provided
pursuant to
Section 301(18), 901(2) or 901(7) for the benefit of the Holders
of such
series or in any of Sections 1006 to 1009, inclusive, if before
the time
for such compliance the Holders of at least a majority in
principal amount
of the Outstanding Securities of such series shall, by Act of
such Holders,
either waive such compliance in such instance or generally waive
compliance
with such term, provision or condition, but no such waiver shall
extend to
or affect such term, provision or condition except to the extent
so
expressly waived, and, until such waiver shall become effective,
the
obligations of the Issuers and the duties of the Trustee in
respect of any
such term, provision or condition shall remain in full force and
effect;
provided, however, with respect to an
<PAGE>
(PAGE) 63
Offer to Purchase as to which an Offer has been mailed, no such
waiver may
be made or shall be effective against any Holder tendering
Securities
pursuant to such Offer, and the Issuers may not omit to comply
with the
terms of such Offer as to such Holder.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article.
Securities of any series which are redeemable before their
Stated
Maturity shall be redeemable in accordance with their terms and
(except as
otherwise specified as contemplated by Section 301 for such
Securities) in
accordance with this Article.
SECTION 1102. Election to Redeem; Notice to Trustee.
The election of the Issuers to redeem any Securities shall be
evidenced
by Issuer Board Resolutions or in another manner specified as
contemplated
by Section 301 for such Securities. In case of any redemption at
the
election of the Issuers of less than all the Securities of any
series
(including any such redemption affecting only a single Security),
the
Issuers shall, at least 60 days prior to the Redemption Date
fixed by the
Issuers (unless a shorter notice shall be satisfactory to the
Trustee),
notify the Trustee of such Redemption Date, of the principal
amount of
Securities of such series to be redeemed and, if applicable, of
the tenor
of the Securities to be redeemed. In the case of any redemption
of
Securities prior to the expiration of any restriction on such
redemption
provided in the terms of such Securities or elsewhere in this
Indenture,
the Issuers shall furnish the Trustee with an Officers'
Certificate
evidencing compliance with such restriction.
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities of any series are to be
redeemed
(unless all the Securities of such series and of a specified
tenor are to
be redeemed or unless such redemption affects only a single
Security), the
particular Securities to be redeemed shall be selected not more
than
60 days prior to the Redemption Date by the Trustee, from the
Outstanding
Securities of such series not previously called for redemption,
by such
method as the Trustee shall deem fair and appropriate and which
may provide
for the selection for redemption of a portion of the principal
amount of
any Security of such series, provided that the unredeemed portion
of the
principal amount of any Security shall be in an authorized
denomination
(which shall not be less than the minimum authorized
denomination) for such
Security. If less than all the Securities of such series and of a
specified
tenor are to be redeemed (unless such redemption affects only a
single
Security), the particular Securities to be redeemed shall be
selected not
more than 60 days
<PAGE>
(PAGE) 64
prior to the Redemption Date by the Trustee, from the Outstanding
Securities of such series and specified tenor not previously
called for
redemption in accordance with the preceding sentence.
The Trustee shall promptly notify the Issuers in writing of
the
Securities selected for redemption as aforesaid and, in case of
any
Securities selected for partial redemption as aforesaid, the
principal
amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall not
apply with
respect to any redemption affecting only a single Security,
whether such
Security is to be redeemed in whole or in part. In the case of
any such
redemption in part, the unredeemed portion of the principal
amount of the
Security shall be in an authorized denomination (which shall not
be less
than the minimum authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise
requires, all provisions relating to the redemption of Securities
shall
relate, in the case of any Securities redeemed or to be redeemed
only in
part, to the portion of the principal amount of such Securities
which has
been or is to be redeemed.
SECTION 1104. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage
prepaid, mailed not less than 30 nor more than 60 days prior to
the
Redemption Date, to each Holder of Securities to be redeemed, at
his
address appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any
series con-
sisting of more than a single Security are to be redeemed, the
identifi-
cation (and, in the case of partial redemption of any such
Securities,
the principal amounts) of the particular Securities to be
redeemed and,
if less than all the Outstanding Securities of any series
consisting of a
single Security are to be redeemed, the principal amount of the
particular Security to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due
and payable upon each such Security to be redeemed and, if
applicable,
that interest thereon will cease to accrue on and after said
date,
(5) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(6) that the redemption is for a sinking fund, if such is
the case.
<PAGE>
(PAGE) 65
Notice of redemption of Securities to be redeemed at the
election of
the Issuers shall be given by the Issuers or, at the Issuers'
request, by
the Trustee in the name and at the expense of the Issuers and
shall be
irrevocable.
SECTION 1105. Deposit of Redemption Price.
On or prior to any Redemption Date, the Issuers shall deposit
with the
Trustee or with a Paying Agent (or, if an Issuer is acting as
Paying Agent,
segregate and hold in trust as provided in Section 1003) an
amount of money
sufficient to pay the Redemption Price of, and (except if the
Redemption
Date shall be an Interest Payment Date) accrued interest on, all
the
Securities which are to be redeemed on that date.
SECTION 1106. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the
Securities so
to be redeemed shall, on the Redemption Date, become due and
payable at the
Redemption Price therein specified, and from and after such date
(unless
the Issuers shall default in the payment of the Redemption Price
and
accrued interest) such Securities shall cease to bear interest.
Upon
surrender of any such Security for redemption in accordance with
said
notice, such Security shall be paid by the Issuers at the
Redemption Price,
together with accrued interest to the Redemption Date; provided,
however,
that, unless otherwise specified as contemplated by Section 301,
installments of interest whose Stated Maturity is on or prior to
the
Redemption Date will be payable to the Holders of such
Securities, or one
or more Predecessor Securities, registered as such at the close
of business
on the relevant Record Dates according to their terms and the
provisions of
Section 307.
If any Security called for redemption shall not be so paid
upon
surrender thereof for redemption, the principal and any premium
shall,
until paid, bear interest from the Redemption Date at the rate
prescribed therefor in the Security.
SECTION 1107. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered
at a Place of Payment therefor (with, if the Issuers or the
Trustee so
requires, due endorsement by, or a written instrument of transfer
in form
satisfactory to the Issuers and the Trustee duly executed by, the
Holder
thereof or his attorney duly authorized in writing), and the
Issuers shall
execute, and the Trustee shall authenticate and deliver to the
Holder of
such Security without service charge, a new Security or
Securities of the
same series and of like tenor, of any authorized denomination as
requested
by such Holder, in aggregate principal amount equal to and in
exchange for
the unredeemed portion of the principal of the Security so
surrendered.
<PAGE>
(PAGE) 66
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article.
The provisions of this Article shall be applicable to any
sinking fund
for the retirement of Securities of any series except as
otherwise
specified as contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for
by the
terms of any Securities is herein referred to as a "mandatory
sinking fund
payment", and any payment in excess of such minimum amount
provided for by
the terms of such Securities is herein referred to as an
"optional sinking
fund payment". If provided for by the terms of any Securities,
the cash
amount of any sinking fund payment may be subject to reduction as
provided
in Section 1202. Each sinking fund payment shall be applied to
the
redemption of Securities as provided for by the terms of such
Securities.
SECTION 1202. Satisfaction of Sinking Fund Payments with
Securities.
The Issuers (1) may deliver Outstanding Securities of a
series (other
than any previously called for redemption) and (2) may apply as a
credit
Securities of a series which have been redeemed either at the
election of
the Issuers pursuant to the terms of such Securities or through
the
application of permitted optional sinking fund payments pursuant
to the
terms of such Securities, in each case in satisfaction of all or
any part
of any sinking fund payment with respect to any Securities of
such series
required to be made pursuant to the terms of such Securities as
and to the
extent provided for by the terms of such Securities; provided
that the
Securities to be so credited have not been previously so
credited. The
Securities to be so credited shall be received and credited for
such pur-
pose by the Trustee at the Redemption Price, as specified in the
Securities
so to be redeemed, for redemption through operation of the
sinking fund and
the amount of such sinking fund payment shall be reduced
accordingly.
SECTION 1203. Redemption of Securities for Sinking Fund.
Not less than 15 days prior to each sinking fund payment date
for any
Securities, the Issuers will deliver to the Trustee an Officers'
Certificate specifying the amount of the next ensuing sinking
fund payment
for such Securities pursuant to the terms of such Securities, the
portion
thereof, if any, which is to be satisfied by payment of cash and
the
portion thereof, if any, which is to be satisfied by delivering
and
crediting Securities pursuant to Section 1202 and will also
deliver to the
Trustee any Securities to be so delivered. Not less than 45 days
prior to
each such sinking fund payment date, the Trustee shall select the
Securities to be redeemed upon such sinking fund payment date in
the manner
specified in Section 1103 and cause notice of the redemption
thereof to be
<PAGE>
(PAGE) 67
given in the name of and at the expense of the Issuers in the
manner
provided in Section 1104. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in
the
manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Issuers' Option to Effect Defeasance or Covenant
Defeasance.
The Issuers may elect, at their option at any time, to have
Section 1302 or Section 1303 applied to any Securities or any
series of
Securities, as the case may be, designated pursuant to Section
301 as being
defeasible pursuant to such Section 1302 or 1303, in accordance
with any
applicable requirements provided pursuant to Section 301 and upon
compliance with the conditions set forth below in this Article.
Any such
election shall be evidenced by Issuer Board Resolutions or in
another
manner specified as contemplated by Section 301 for such
Securities.
SECTION 1302. Defeasance and Discharge.
Upon the Issuers' exercise of their option (if any) to have
this
Section applied to any Securities or any series of Securities, as
the case
may be, the Issuers shall be deemed to have been discharged from
their
obligations, and the provisions of Article Fourteen shall cease
to be
effective, with respect to such Securities as provided in this
Section on
and after the date the conditions set forth in Section 1304 are
satisfied
(hereinafter called "Defeasance"). For this purpose, such
Defeasance means
that the Issuers shall be deemed to have paid and discharged the
entire
indebtedness represented by such Securities and to have satisfied
all its
other obligations under such Securities and this Indenture
insofar as such
Securities are concerned (and the Trustee, at the expense of the
Issuers,
shall execute proper instruments acknowledging the same), subject
to the
following which shall survive until otherwise terminated or
discharged
hereunder: (1) the rights of Holders of such Securities to
receive, solely
from the trust fund described in Section 1304 and as more fully
set forth
in such Section, payments in respect of the principal of and any
premium
and interest on such Securities when payments are due, (2) the
Issuers'
obligations with respect to such Securities under Sections 304,
305, 306,
1002 and 1003, (3) the rights, powers, trusts, duties and
immunities of the
Trustee hereunder and (4) this Article. Subject to compliance
with this
Article, the Issuers may exercise their option (if any) to have
this
Section applied to any Securities notwithstanding the prior
exercise of its
option (if any) to have Section 1303 applied to such Securities.
<PAGE>
(PAGE) 68
SECTION 1303. Covenant Defeasance.
Upon the Issuers' exercise of their option (if any) to have
this
Section applied to any Securities or any series of Securities, as
the case
may be, (1) the Issuers shall be released from their obligations
under
Section 801(3), Sections 1006 through 1010, inclusive, and any
covenants
provided pursuant to Section 301(18), 901(2) or 901(7) for the
benefit of
the Holders of such Securities, (2) the occurrence of any event
specified
in Sections 501(4) (with respect to any of Section 801(3),
Sections 1006
through 1010, inclusive, and any such covenants provided pursuant
to
Section 301(18), 901(2) or 901(7)), 501(5), 501(8) and 501(11)
shall be
deemed not to be or result in an Event of Default and (3) the
provisions of
Article Fourteen shall cease to be effective, in each case with
respect to
such Securities as provided in this Section on and after the date
the
conditions set forth in Section 1304 are satisfied (hereinafter
called
"Covenant Defeasance"). For this purpose, such Covenant
Defeasance means
that, with respect to such Securities, the Issuers may omit to
comply with
and shall have no liability in respect of any term, condition or
limitation
set forth in any such specified Section (to the extent so
specified in the
case of Section 501(4)) or Article Fourteen, whether directly or
indirectly
by reason of any reference elsewhere herein to any such Section
or Article
or by reason of any reference in any such Section or Article to
any other
provision herein or in any other document, but the remainder of
this
Indenture and such Securities shall be unaffected thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to the application of
Section 1302 or Section 1303 to any Securities or any series of
Securities,
as the case may be:
(1) The Issuers shall irrevocably have deposited or caused
to be
deposited with the Trustee (or another trustee which satisfies
the
requirements contemplated by Section 609 and agrees to comply
with the
provisions of this Article applicable to it) as trust funds in
trust for
the purpose of making the following payments, specifically
pledged as
security for, and dedicated solely to, the benefits of the
Holders of
such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal
and interest
in respect thereof in accordance with their terms will provide,
not later
than one day before the due date of any payment, money in an
amount, or
(C) a combination thereof, in each case sufficient, in the
opinion of a
nationally recognized firm of independent public accountants
expressed in
a written certification thereof delivered to the Trustee, to
pay and
discharge, and which shall be applied by the Trustee (or any
such other
qualifying trustee) to pay and discharge, the principal of and
any
premium and interest on such Securities on the respective
Stated
Maturities, in accordance with the terms of this Indenture and
such
Securities. As used herein, "U.S. Government Obligation" means
(x) any
security which is (i) a direct obligation of the United States
of America
for the payment of which the full faith and credit of the
United States
of America is pledged or (ii) an obligation of a Person
controlled or
supervised by and acting as an agency or instrumentality of the
United
States of America the payment of which is uncondi-
<PAGE>
(PAGE) 69
tionally guaranteed as a full faith and credit obligation by the
United
States of America, which, in either case (i) or (ii), is not
callable or
redeemable at the option of the issuer thereof, and (y) any
depositary
receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities
Act) as custodian with respect to any U.S. Government Obligation
which is
specified in Clause (x) above and held by such bank for the
account of the
holder of such depositary receipt, or with respect to any
specific payment
of principal of or interest on any U.S. Government Obligation
which is so
specified and held, provided that (except as required by law)
such
custodian is not authorized to make any deduction from the amount
payable
to the holder of such depositary receipt from any amount received
by the
custodian in respect of the U.S. Government Obligation or the
specific
payment of principal or interest evidenced by such depositary
receipt.
(2) In the event of an election to have Section 1302 apply
to any
Securities or any series of Securities, as the case may be, the
Issuers
shall have delivered to the Trustee an Opinion of Counsel
stating that
(A) the Issuers have received from, or there has been published
by, the
Internal Revenue Service a ruling or (B) since the date of this
instrument, there has been a change in the applicable Federal
income tax
law, in either case (A) or (B) to the effect that, and based
thereon such
opinion shall confirm that, the Holders of such Securities will
not
recognize gain or loss for Federal income tax purposes as a
result of the
deposit, Defeasance and discharge to be effected with respect
to such
Securities and will be subject to Federal income tax on the
same amount,
in the same manner and at the same times as would be the case
if such
deposit, Defeasance and discharge were not to occur.
(3) In the event of an election to have Section 1303 apply
to any
Securities or any series of Securities, as the case may be, the
Issuers
shall have delivered to the Trustee an Opinion of Counsel to
the effect
that the Holders of such Securities will not recognize gain or
loss for
Federal income tax purposes as a result of the deposit and
Covenant
Defeasance to be effected with respect to such Securities and
will be
subject to Federal income tax on the same amount, in the same
manner and
at the same times as would be the case if such deposit and
Covenant
Defeasance were not to occur.
(4) The Issuers shall have delivered to the Trustee an
Officer's
Certificate to the effect that neither such Securities nor any
other
Securities of the same series, if then listed on any securities
exchange,
will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both
would become, an Event of Default with respect to such
Securities or any
other Securities shall have occurred and be continuing at the
time of
such deposit or, with regard to any such event specified in
Sections 501(6) and (7), at any time on or prior to the 90th
day after
the date of such deposit (it being understood that this
condition shall
not be deemed satisfied until after such 90th day).
(6) Such Defeasance or Covenant Defeasance shall not cause
the
Trustee to have a conflicting interest within the meaning of
the Trust
Indenture Act (assuming all Securities are in default within
the meaning
of such Act).
<PAGE>
(PAGE) 70
(7) Such Defeasance or Covenant Defeasance shall not
result in a
breach or violation of, or constitute a default under, any
other
agreement or instrument to which an Issuer is a party or by
which it is
bound.
(8) Such Defeasance or Covenant Defeasance shall not
result in the
trust arising from such deposit constituting an investment
company within
the meaning of the Investment Company Act unless such trust
shall be
registered under such Act or exempt from registration
thereunder.
(9) At the time of such deposit, (A) no default in the
payment of
any principal of or premium or interest on any Senior Debt
shall have
occurred and be continuing, (B) no event of default with
respect to any
Senior Debt shall have resulted in such Senior Debt becoming,
and
continuing to be, due and payable prior to the date on which it
would
otherwise have become due and payable (unless payment of such
Senior Debt
has been made or duly provided for), and (C) no other event of
default
with respect to any Senior Debt shall have occurred and be
continuing
permitting (after notice or lapse of time or both) the holders
of such
Senior Debt (or a trustee on behalf of such holders) to declare
such
Senior Debt due and payable prior to the date on which it would
otherwise
have become due and payable.
(10) The Issuers shall have delivered to the Trustee an
Officer's
Certificate and an Opinion of Counsel, each stating that all
conditions
precedent with respect to such Defeasance or Covenant
Defeasance have
been complied with.
SECTION 1305. Deposited Money and U.S. Government Obligations to
Be
Held in Trust; Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all
money and U.S. Government Obligations (including the proceeds
thereof)
deposited with the Trustee or other qualifying trustee (solely
for purposes
of this Section and Section 1306, the Trustee and any such other
trustee
are referred to collectively as the "Trustee") pursuant to
Section 1304 in
respect of any Securities shall be held in trust and applied by
the
Trustee, in accordance with the provisions of such Securities and
this
Indenture, to the payment, either directly or through any such
Paying Agent
(including an Issuer acting as Paying Agent) as the Trustee may
determine,
to the Holders of such Securities, of all sums due and to become
due
thereon in respect of principal and any premium and interest, but
money so
held in trust need not be segregated from other funds except to
the extent
required by law. Money and U.S. Government Obligations so held in
trust
shall not be subject to the provisions of Article Fourteen.
The Issuers shall pay and indemnify the Trustee against any
tax, fee or
other charge imposed on or assessed against the U.S. Government
Obligations
deposited pursuant to Section 1304 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.
<PAGE>
(PAGE) 71
Anything in this Article to the contrary notwithstanding, the
Trustee
shall deliver or pay to the Issuers from time to time upon an
Issuer
Request any money or U.S. Government Obligations held by it as
provided in
Section 1304 with respect to any Securities which, in the opinion
of a
nationally recognized firm of independent public accountants
expressed in a
written certification thereof delivered to the Trustee, are in
excess of
the amount thereof which would then be required to be deposited
to effect
the Defeasance or Covenant Defeasance, as the case may be, with
respect to
such Securities.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in
accordance with this Article with respect to any Securities by
reason of
any order or judgment of any court or governmental authority
enjoining,
restraining or otherwise prohibiting such application, then the
obligations
under this Indenture and such Securities from which the Issuers
has been
discharged or released pursuant to Section 1302 or 1303 shall be
revived
and reinstated as though no deposit had occurred pursuant to this
Article
with respect to such Securities, until such time as the Trustee
or Paying
Agent is permitted to apply all money held in trust pursuant to
Section 1305 with respect to such Securities in accordance with
this
Article; provided, however, that if the Issuers make any payment
of
principal of or any premium or interest on any such Security
following such
reinstatement of its obligations, the Issuers shall be subrogated
to the
rights (if any) of the Holders of such Securities to receive such
payment
from the money so held in trust.
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES
SECTION 1401. Agreement that the Securities be Subordinated to
the Extent
Provided.
Each Issuer, for itself, its successors and assigns,
covenants and
agrees, and each Holder of a Security of any series likewise
covenants and
agrees by his acceptance thereof that the obligation of the
Issuers to make
any payment of principal of and interest on each and all of the
Securities
of any series is hereby expressly subordinated, to the extent and
in the
manner hereinafter set forth (subject to the provisions of
Section 401 and
402) to the prior payment in full of all Senior Debt of the
Issuers. All
Securities of any series issued hereunder shall rank pari passu
with all
other Securities of that series and all Securities of any other
series
issued hereunder.
SECTION 1402. Issuers Not to Make Payments With Respect to
Securities in
Certain Circumstances.
In the event that any Senior Payment Default (as defined
below) shall
have occurred and be continuing, then no payment of principal of
or
interest on the Securities of any series shall be made unless and
until
such Senior Payment Default shall have been cured
<PAGE>
(PAGE) 72
or waived or shall have ceased to exist or all amounts then due
and payable
in respect of Senior Debt shall have been paid in full, or
provision shall
have been made for such payment in cash or cash equivalents or
otherwise in
a manner satisfactory to the holders of Senior Debt. "Senior
Payment
Default" means any default in the payment of principal of (or
premium, if
any) or interest on any Senior Debt when due, whether at the
Stated
Maturity of any such payment or by declaration of acceleration,
call for
redemption or otherwise.
In the event that any Senior Nonmonetary Default (as defined
below)
shall have occurred and be continuing, then, upon the receipt by
the
Issuers and the Trustee of written notice of such Senior
Nonmonetary
Default from holders of not less than 25% of the principal amount
of such
Senior Debt (or a trustee, agent or other representative for such
a
holder), no payment of principal of or interest on the Securities
shall be
made during the period (the "Payment Blockage Period") commencing
on the
date of such receipt of such written notice and ending on the
earlier of
(i) the date on which such Senior Nonmonetary Default shall have
been cured
or waived or shall have ceased to exist and any acceleration of
Senior Debt
shall have been rescinded or annulled or the Senior Debt to which
such
Senior Nonmonetary Default relates shall have been discharged or
(ii) the
179th day after the date of such receipt of such written notice.
No more
than one Payment Blockage Period may be commenced with respect to
the
Securities during any 360-day period and there shall be a period
of at
least 181 consecutive days in each 360-day period when no Payment
Blockage
Period is in effect. For all purposes of this paragraph, no
Senior Payment
Default or Senior Nonmonetary Default that existed or was
continuing on the
date of commencement of any Payment Blockage Period shall be, or
be made,
the basis for the commencement of a subsequent Payment Blockage
Period by
holders of Senior Debt or their representatives unless such
Senior Payment
Default or Senior Nonmonetary Default shall have been cured for a
period of
not less than 90 consecutive days. "Senior Nonmonetary Default"
means the
occurrence or existence and continuance of any event of default,
or of any
event which, after notice or lapse of time (or both), would
become an event
of default, under the terms of any instrument pursuant to which
any Senior
Debt is outstanding, permitting (after notice or lapse of time or
both) one
or more holders of such Senior Debt (or a trustee or agent on
behalf of the
holders thereof) to declare such Senior Debt due and payable
prior to the
date on which it would otherwise become due and payable, other
than a
Senior Payment Default.
In the event that, notwithstanding the foregoing, the Issuers
shall make
any payment of principal of or interest on the Securities to the
Trustee or
any Holder prohibited by the foregoing provisions of this
Section, and if
such fact shall, at or prior to the time of such payment of or
interest on
Securities, have been made known to the Trustee or, as the case
may be, such
Holder, then and in such event such payment shall be paid over
and delivered
forthwith to the Issuers.
The provisions of this Section shall not apply to any payment
of or
interest on Securities with respect to which Section 1403 would
be applicable.
<PAGE>
(PAGE) 73
SECTION 1403. Securities Subordinated to Prior Payment of All
Senior Debt of the Issuers on Dissolution,
Liquidation
or Reorganization of an Issuer.
Upon any distribution of the assets of an Issuer in
connection with
dissolution, winding up, liquidation or reorganization of such
Issuer
(whether voluntary or involuntary, whether or not involving
bankruptcy,
insolvency or receivership proceedings or whether upon an
assignment for
the benefit of creditors or any other marshalling of the assets
and liabili-
ties of such Issuer or otherwise), the holders of Senior Debt
shall receive
payment of the principal thereof (and premium, if any) and the
interest due
thereon (including interest thereon accruing with the
commencement of any
such proceedings) before the holders of the Securities of any
series are
entitled to receive any payment on the Securities of such series.
Upon any
such dissolution, winding up, liquidation or reorganization, any
payment or
distribution of assets of an Issuer of any kind or character,
whether in
cash, property or securities, to which the Holders of the
Securities of any
series would be entitled except for the provisions of this
Article, including
any such payment or distribution which may be payable or
deliverable by
reason of the payment of any other indebtedness of an Issuer
being subordin-
ated to the payment of Securities of any other Person making such
payment or
distribution, whether a trustee in bankruptcy, a receiver or
liquidating
trustee or otherwise, shall be made directly to the holders of
Senior Debt of
an Issuer or their representative or representatives or to the
trustee or
trustees under any indenture under which any instruments
evidencing any of
such Senior Debt may have been issued, ratably according to the
aggregate
amounts remaining unpaid on account of the principal of (and
premium, if any)
and interest (including interest accruing subsequent to the
commencement of
any proceeding for the bankruptcy or reorganization of an Issuer
under any
applicable bankruptcy, insolvency, or similar law now or
hereafter in
effect) on the Senior Debt of an Issuer held or represented by
each, to the
extent necessary to pay in full all such Senior Debt remaining
unpaid,
after giving effect to any concurrent payment or distribution to
the
holders of such Senior Debt.
If the Holders of the Securities of any series, or any of
them, or the
Trustee acting pursuant to the authority granted to the Trustee
pursuant to
the provisions of Section 504, shall fail to file a proper claim
in the form
required in any proceeding referred to in the first paragraph of
this Section,
prior to thirty days before the expiration of the time to file
such claim or
claims, then the holders of Senior Debt of an Issuer are hereby
authorized to
file an appropriate claim or claims for and on behalf of the
Holders of the
Securities of such series in the form required in any such
proceeding.
In the event that, notwithstanding the foregoing, upon any
such dissolu-
tion, winding up, liquidation or reorganization, any payment or
distribution
of assets of an Issuer of any kind or character, whether in cash,
property or
securities, including any such payment or distribution which may
be payable
or deliverable by reason of the payment of any other indebtedness
of an
Issuer being subordinated to the payment of the Securities of
such series
shall be received by the Trustee, any paying agent or the holders
of the
Securities of such series before all Senior Debt of an Issuer
<PAGE>
(PAGE) 74
is paid in full, such payment or distribution shall be held in
trust for
the benefit of and shall be paid over to the holders of such
Senior Debt or
their representative or representatives or to the trustee or
trustees under
any indenture under which any instruments evidencing any of such
Senior
Debt may have been issued, ratably as aforesaid for application
to the
payment of all Senior Debt of an Issuer remaining unpaid until
all such
Senior Debt shall have been paid in full, after giving effect to
any
concurrent payment or distribution to the holders of such Senior
Debt.
Subject to the payment in full of all Senior Debt of an
Issuer, the
Holders of the Securities of each series shall be subrogated to
the rights
of the holders of such Senior Debt to receive payments or
distributions of
assets of an Issuer applicable to such Senior Debt until the
Securities of
such series shall be paid in full and none of the payments or
distributions
to the holders of such Senior Debt to which the Holders of the
Securities
of such series or the Trustee would be entitled except for the
provisions of
this Article or of payments over, pursuant to the provisions of
this Article,
to the holders of such Senior Debt by the Holders of the
Securities of such
series or the Trustee shall, as between the Issuer, its creditors
other than
the holders of such Senior Debt, and the Holders of the
Securities of such
series, be deemed to be a payment by the Issuer to or on account
of such
Senior Debt and not on account of such series, it being
understood that the
provisions of this Article 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 Debt of such Issuer, on the
other hand.
The Issuers shall give prompt written notice to the Trustee
of any
dissolution, winding up, liquidation or reorganization of an
Issuer within
the meaning of this Article. The Trustee, subject to the
provisions of
Section 601, shall be entitled to assume that no such event has
occurred
unless the Issuers or any one or more holders of Senior Debt of
an Issuer
or any trustee therefor (who shall have been certified or
otherwise
established to the satisfaction of the Trustee to be such a
holder or
trustee) has given written notice thereof to the Trustee at its
Corporate
Trust Office. Upon any distribution of assets of an Issuer
referred to in
this Article, the Trustee and the Holders of the Securities of
any series
shall be entitled to rely upon any order or decree of a court of
competent
jurisdiction in which such dissolution, winding up, liquidation
or reorgani-
zation proceedings are pending for the purpose of ascertaining
the Persons
entitled to participate in such distribution, the holders of the
Senior Debt
of an Issuer, the amount thereof or payable thereon, the amount
or amounts
paid or distributed thereon and all other facts pertinent thereto
or to this
Article and the Trustee, subject to the provisions of Article
Six, and the
Holders of any series of Securities shall be entitled to rely
upon a certi-
ficate of the liquidating trustee or agent or other Person making
any
distribution to the Trustee or to the Holders of the Securities
of any series
for the purpose of ascertaining the Persons entitled to
participate in such
distribution, the holders of the Senior Debt of an Issuer, the
amount thereof
or payable thereon, the amount or amount paid or distributed
thereon and all
other facts pertinent thereto or to this Article. In the event
that the
Trustee determines, in good faith, that further evidence is
required with
respect to the right of any Person, as a holder of Senior Debt of
an Issuer,
to participate in any payment or distribution pursuant to this
Section, the
Trustee may request such Person
<PAGE>
(PAGE) 75
to furnish evidence to the reasonable satisfaction of the Trustee
as to the
amount of such Senior Debt held by such Person, as to the extent
to which
such Person is entitled to participation in such payment or
distribution,
and as to other facts pertinent to the rights of such Person
under this
Section, and if such evidence is not furnished, the Trustee may
defer any
payment to such Person pending judicial determination as to the
rights of
such Person to receive such payment.
SECTION 1404. Obligation of the Issuers Unconditional.
Nothing contained in this Article or elsewhere in this
Indenture or in
the Securities is intended to or shall impair, as between the
Issuers and the
Holders of the Securities of each series, the obligations of the
Issuers,
which are absolute and unconditional, to pay to the Holders of
the Securities
of such series the principal of and interest (including interest
accruing
subsequent to the commencement of any proceeding for the
bankruptcy or
reorganization of an Issuer under any applicable bankruptcy,
insolvency, or
similar law now or hereafter in effect) on the Securities of such
series as
and when the same shall become due and payable in accordance with
the terms
thereof, or is intended to or shall affect the relative rights of
the Holders
of the Securities of any series and creditors of an Issuer other
than the
holders of the Senior Debt of an Issuer, nor shall anything
herein or therein
prevent the Trustee or the Holder of any Securities of any series
from
exercising all remedies otherwise permitted by applicable law
upon default
under this Indenture, subject to the rights, if any, under this
Article of
the holders of Senior Debt of an Issuer in respect of cash,
property, or
securities of an Issuer or otherwise received upon the exercise
of any such
remedy.
SECTION 1405. No Fiduciary Duty to Holders of Senior Debt of an
Issuer.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders
of Senior Debt of an Issuer, but shall have only such obligations
to such
holders as are expressly set forth in Section 1403.
SECTION 1406. Notice to Trustee of Facts Prohibiting Payments.
Notwithstanding any of the provisions of this Article or any
other
provision of this Indenture, neither the Trustee nor any Paying
Agent (other
than an Issuer acting as Paying Agent) shall at any time be
charged with
knowledge of the existence of any facts which would prohibit the
making of
any payment of moneys to or by the Trustee or any Paying Agent,
when required
pursuant to the Securities of any series and this Indenture,
unless and until
the Trustee or any Paying Agent shall have received at its
Corporate Trust
Office written notice thereof from the Issuers or written notice
from one or
more holders of Senior Debt of an Issuer or from any trustee
therefor who
shall have been certified by an Issuer or otherwise established
to the
reasonable satisfaction of the Trustee to be such a holder or
trustee; and,
prior to the receipt of any such written notice, the Trustee or
any Paying
Agent, subject to the provisions of Section 601 shall be entitled
in all
respects to assume that no such facts exist; provided, however,
that, if
prior to the fifth Business Day preceding the date
<PAGE>
(PAGE) 76
upon which by the terms hereof any such moneys may become payable
for any
purpose, or in the event of the execution of an instrument
pursuant to
Section 401 acknowledging satisfaction and discharge of this
Indenture,
then if prior to the second Business Day preceding the date of
such
execution, the Trustee or any Paying Agent shall not have
received with
respect to such moneys or such execution the notice provided for
in this
Section, then, anything herein contained to the contrary
notwithstanding,
the Trustee or any Paying Agent may receive such moneys and 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 either
such date, as the case may be; provided, however, no such
application shall
affect the obligations under this Article of the Persons
receiving such
moneys from the Trustee or any Paying Agent.
SECTION 1407. Subordination Rights Not Impaired by Acts or
Omissions of the Issuers or Holders of Senior
Debt of an Issuer.
No right of any present or future holders of any Senior Debt
of an Issuer
to enforce subordination as herein provided shall at any time in
any way be
prejudiced or impaired by any act or failure to act on the part
of the Issuers
or by any act or failure to act, in good faith, by any such
holder, or by any
noncompliance of this Indenture, regardless of any knowledge
thereof which any
such holder may have or be otherwise charged with. The holders of
such Senior
Debt of an Issuer may at any time or from time to time and in
their absolute
discretion, change the manner, place or terms of payment, change
or extend
the time of payment, or renew or alter, any such Senior Debt, or
amend or
supplement any instrument pursuant to which any such Senior Debt
is issued
or by which it may be secured, or release any security therefor,
or
exercise or refrain from exercising any other of their rights
under the
Senior Debt of an Issuer, including, without limitation, the
waiver of
default thereunder, all without notice to or assent from the
Holders of the
Securities of any series or of the Trustee and without affecting
the
obligations of an Issuer, the Trustee or the Holders of the
Securities of
any series under this Article.
SECTION 1408. Authorization of Trustee to Effectuate
Subordination of the Securities.
Each Holder of a Security of any series, by his acceptance
thereof,
authorized and expressly directs the Trustee on his behalf to
take such
action as may be necessary or appropriate to effectuate, as
between the
Holders of Securities of such series and the holders of Senior
Debt of an
Issuer, the subordination provided in this Article.
SECTION 1409. Right of Trustee to Hold Senior Debt of an Issuer.
The Trustee shall be entitled to all of therights set forth
in this
Article in respect of any Senior Debt of an Issuer at any time
held by it to
the same extent as any other holder of such Senior Debt, and
nothing in this
Indenture shall be construed to deprive the Trustee of any of its
rights as
such holder.
<PAGE>
(PAGE) 77
SECTION 1410. Article Fourteen Not to Prevent Defaults.
The failure to make a payment pursuant to the Securities of
any series by
reason of any provision in this Article shall not be construed as
preventing
the occurrence of a default, a Default or an Event of Default.
This instrument may be executed in any number of
counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts
shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be
duly executed, and their respective corporate seals to be
hereunto affixed
and attested, all as of the day and year first above written.
THE SCOTTS COMPANY
By____________________________
Title:
Attest:
____________________________
Title:
THE O.M. SCOTT & SONS COMPANY
By_____________________________
Title:
Attest:
____________________________
Title:
<PAGE>
(PAGE) 78
CHEMICAL BANK
By_____________________________
Title:
Attest:
____________________________
Title:
<PAGE>
(PAGE) 79
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came
..........................., to me known, who, being by me duly
sworn, did
depose and say that he is .................... of
........................
........., one of the corporations described in and which
executed the
foregoing instrument; that he knows the seal of said corporation;
that the
seal affixed to said instrument is such corporate seal; that it
was so
affixed by authority of the Board of Directors of said
corporation; and
that he signed his name thereto by like authority.
...............................................
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came
..........................., to me known, who, being by me duly
sworn, did
depose and say that he is .................... of
........................
........., one of the corporations described in and which
executed the
foregoing instrument; that he knows the seal of said corporation;
that the
seal affixed to said instrument is such corporate seal; that it
was so
affixed by authority of the Board of Directors of said
corporation; and
that he signed his name thereto by like authority.
...............................................
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the .... day of ..........., ...., before me personally
came
..........................., to me known, who, being by me duly
sworn, did
depose and say that he is .................... of
........................
........., one of the corporations described in and which
executed the
foregoing instrument; that he knows the seal of said corporation;
that the
seal affixed to said instrument is such corporate seal; that it
was so
affixed by authority of the Board of Directors of said
corporation; and
that he signed his name thereto by like authority.
...............................................
<PAGE>
(PAGE) 1
TABLE OF CONTENTS
__________
PAGE
PARTIES . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE ISSUERS . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act . . . . . . . . . . . . . . . . 2
Affiliate; control . . . . . . . . 2
Authenticating Agent . . . . . . . 2
Bank Agreement . . . . . . . . . . 2
Bank Hedging Agreement . . . . . . 2
Board of Directors . . . . . . . . 2
Board Resolution . . . . . . . . . 2
Business Day . . . . . . . . . . . 3
Capital Lease Obligation . . . . . 3
Capital Stock . . . . . . . . . . . 3
Commission . . . . . . . . . . . . 3
Corporate Trust Office . . . . . . 3
corporation . . . . . . . . . . . . 3
Covenant Defeasance . . . . . . . . 3
Debt . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . 4
Defeasance . . . . . . . . . . . . 4
Depositary . . . . . . . . . . . . 4
Event of Default . . . . . . . . . 4
Exchange Act . . . . . . . . . . . 4
Expiration Date . . . . . . . . . . 4
Global Security . . . . . . . . . . 4
Guarantee . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . 4
interest . . . . . . . . . . . . . 5
Interest Payment Date . . . . . . . 5
Investment Company Act . . . . . . 5
Issuer Board Resolutions . . . . . 5
Issuer Request; Issuer Order . . . 5
Maturity . . . . . . . . . . . . . 5
_____________
NOTE: This table of contents shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE>
(PAGE) 2
Notice of Default . . . . . . . . . 5
Offer . . . . . . . . . . . . . . . 5
Offer to Purchase . . . . . . . . . 5
Officers' Certificate . . . . . . . 7
OMS . . . . . . . . . . . . . . . . 7
Opinion of Counsel . . . . . . . . 7
Original Issue Discount Security . 7
Outstanding . . . . . . . . . . . . 8
Paying Agent . . . . . . . . . . . 9
Person . . . . . . . . . . . . . . 9
Place of Payment . . . . . . . . . 9
Predecessor Security . . . . . . . 9
Purchase Amount . . . . . . . . . . 9
Purchase Date . . . . . . . . . . . 9
Purchase Price . . . . . . . . . . 9
Redeemable Stock . . . . . . . . . 9
Redemption Date . . . . . . . . . . 9
Redemption Price . . . . . . . . . 9
Regular Record Date . . . . . . . . 9
Responsible Officer . . . . . . . . 9
Scotts . . . . . . . . . . . . . . 10
Securities . . . . . . . . . . . . 10
Securities Act . . . . . . . . . . 10
Security Register and Security
Registrar . . . . . . . . . . . . 10
Senior Debt . . . . . . . . . . . . 10
Senior Indenture . . . . . . . . . 10
Special Record Date . . . . . . . . 10
Stated Maturity . . . . . . . . . . 10
Subsidiary . . . . . . . . . . . . 10
Trust Indenture Act . . . . . . . . 10
Trustee . . . . . . . . . . . . . . 11
U.S. Government Obligation . . . . 11
Vice President . . . . . . . . . . 11
Wholly Owned Subsidiary . . . . . . 11
SECTION 102. Compliance Certificates and
Opinions . . . . . . . . . . . . 11
SECTION 103. Form of Documents Delivered to
Trustee . . . . . . . . . . . . . 12
SECTION 104. Acts of Holders; Record Dates . . . 12
SECTION 105. Notices, Etc., to Trustee and
Issuers . . . . . . . . . . . . . 14
SECTION 106. Notice to Holders; Waiver . . . . . 15
SECTION 107. Conflict with Trust Indenture
Act . . . . . . . . . . . . . . . 15
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . 16
<PAGE>
(PAGE) 3
SECTION 109. Successors and Assigns . . . . . . 16
SECTION 110. Separability Clause . . . . . . . . 16
SECTION 111. Benefits of Indenture . . . . . . . 16
SECTION 112. Governing Law . . . . . . . . . . . 16
SECTION 113. Legal Holidays . . . . . . . . . . 16
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally . . . . . . . . . . 17
SECTION 202. Form of Face of Security . . . . . 17
SECTION 203. Form of Reverse of Security . . . . 19
SECTION 204. Form of Legend for Global
Securities . . . . . . . . . . . 24
SECTION 205. Form of Trustee's Certificate
of Authentication . . . . . . . . 24
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in
Series . . . . . . . . . . . . . 24
SECTION 302. Denominations . . . . . . . . . . . 27
SECTION 303. Execution, Authentication,
Delivery and Dating . . . . . . . 27
SECTION 304. Temporary Securities . . . . . . . 29
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . 29
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . 31
SECTION 307. Payment of Interest; Interest
Rights Preserved . . . . . . . . 32
SECTION 308. Persons Deemed Owners . . . . . . . 33
SECTION 309. Cancellation . . . . . . . . . . . 33
SECTION 310. Computation of Interest . . . . . . 34
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . 34
SECTION 402. Application of Trust Money . . . . 35
<PAGE>
(PAGE) 4
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default . . . . . . . . . 35
SECTION 502. Acceleration of Maturity;
Rescission and Annulment . . . . 38
SECTION 503. Collection of Indebtedness and
Suits for Enforcement by
Trustee . . . . . . . . . . . . . 39
SECTION 504. Trustee May File Proofs of
Claim . . . . . . . . . . . . . . 39
SECTION 505. Trustee May Enforce Claims
Without Possession of
Securities . . . . . . . . . . . 40
SECTION 506. Application of Money Collected . . 40
SECTION 507. Limitation on Suits . . . . . . . . 40
SECTION 508. Unconditional Right of Holders
to Receive Principal, Premium
and Interest . . . . . . . . . . 41
SECTION 509. Restoration of Rights and
Remedies . . . . . . . . . . . . 41
SECTION 510. Rights and Remedies Cumulative . . 42
SECTION 511. Delay or Omission Not Waiver . . . 42
SECTION 512. Control by Holders . . . . . . . . 42
SECTION 513. Waiver of Past Defaults . . . . . . 42
SECTION 514. Undertaking for Costs . . . . . . . 43
SECTION 515. Waiver of Usury, Stay or
Extension Laws . . . . . . . . . 43
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and
Responsibilities . . . . . . . . 43
SECTION 602. Notice of Defaults . . . . . . . . 44
SECTION 603. Certain Rights of Trustee . . . . . 44
SECTION 604. Not Responsible for Recitals
or Issuance of Securities . . . . 45
SECTION 605. May Hold Securities . . . . . . . . 45
SECTION 606. Money Held in Trust . . . . . . . . 45
SECTION 607. Compensation and Reimbursement . . 46
SECTION 608. Conflicting Interests . . . . . . . 46
SECTION 609. Corporate Trustee Required;
Eligibility . . . . . . . . . . . 47
SECTION 610. Resignation and Removal;
Appointment of Successor . . . . 47
SECTION 611. Acceptance of Appointment
by Successor . . . . . . . . . . 48
SECTION 612. Merger, Conversion, Consolidation
or Succession to Business . . . . 49
<PAGE>
(PAGE) 5
SECTION 613. Preferential Collection of Claims
Against the Issuers . . . . . . . 50
SECTION 614. Appointment of Authenticating
Agent . . . . . . . . . . . . . . 50
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND ISSUERS
SECTION 701. Issuers to Furnish Trustee Names
and Addresses of Holders . . . . 52
SECTION 702. Preservation of Information;
Communications to Holders . . . . 52
SECTION 703. Reports by Trustee . . . . . . . . 52
SECTION 704. Reports by Issuers . . . . . . . . 53
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Issuers May Consolidate, Etc.,
Only on Certain Terms . . . . . . 53
SECTION 802. Successor Substituted . . . . . . . 54
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without
Consent of Holders . . . . . . . 54
SECTION 902. Supplemental Indentures With
Consent of Holders . . . . . . . 55
SECTION 903. Execution of Supplemental
Indentures . . . . . . . . . . . 57
SECTION 904. Effect of Supplemental
Indentures . . . . . . . . . . . 57
SECTION 905. Conformity with Trust Indenture
Act . . . . . . . . . . . . . . . 57
SECTION 906. Reference in Securities to
Supplemental Indentures . . . . . 57
<PAGE>
(PAGE) 6
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium
and Interest . . . . . . . . . . 58
SECTION 1002. Maintenance of Office or
Agency . . . . . . . . . . . . . 58
SECTION 1003. Money for Securities Payments
to Be Held in Trust . . . . . . 58
SECTION 1004. Statement by Officers as to
Default . . . . . . . . . . . . 59
SECTION 1005. Existence . . . . . . . . . . . . 60
SECTION 1006. Maintenance of Properties . . . . 60
SECTION 1007. Payment of Taxes and Other
Claims . . . . . . . . . . . . . 60
SECTION 1008. Change of Control . . . . . . . . 60
SECTION 1009. Provision of Financial
Information . . . . . . . . . . 62
SECTION 1010. Waiver of Certain Covenants . . . . 62
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article . . . . . 63
SECTION 1102. Election to Redeem; Notice to
Trustee . . . . . . . . . . . . 63
SECTION 1103. Selection by Trustee of
Securities to Be Redeemed . . . . 63
SECTION 1104. Notice of Redemption . . . . . . . 64
SECTION 1105. Deposit of Redemption Price . . . . 65
SECTION 1106. Securities Payable on Redemption
Date . . . . . . . . . . . . . . 65
SECTION 1107. Securities Redeemed in Part . . . . 65
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article . . . . . 66
SECTION 1202. Satisfaction of Sinking Fund
Payments with Securities . . . . 66
SECTION 1203. Redemption of Securities for
Sinking Fund . . . . . . . . . . 66
<PAGE>
(PAGE) 7
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Issuers' Option to Effect
Defeasance or Covenant
Defeasance . . . . . . . . . . . 67
SECTION 1302. Defeasance and Discharge . . . . . 67
SECTION 1303. Covenant Defeasance . . . . . . . 68
SECTION 1304. Conditions to Defeasance or
Covenant Defeasance . . . . . . 68
SECTION 1305. Deposited Money and U.S.
Government Obligations to Be
Held in Trust; Miscellaneous
Provisions . . . . . . . . . . . 70
SECTION 1306. Reinstatement . . . . . . . . . . 71
ARTICLE FOURTEEN
SUBORDINATION OF SECURITIES
SECTION 1401. Agreement that the Securities be
Subordinated to the Extent
Provided . . . . . . . . . . . . 71
SECTION 1402. Issuers Not to Make Payments With
Respect to Securities in Certain
Circumstances . . . . . . . . . 71
SECTION 1403. Securities Subordinated to Prior
Payment of All Senior Debt of the
Issuers on Dissolution,
Liquidation or Reorganization
of an Issuer . . . . . . . . . . 73
SECTION 1404. Obligation of the Issuers
Unconditional . . . . . . . . . 75
SECTION 1405. No Fiduciary Duty of Holders of
Senior Debt of an Issuer . . . . 75
SECTION 1406. Notice to Trustee of Facts
Prohibiting Payments . . . . . . 75
SECTION 1407. Subordination Rights Not Impaired
by Acts or Omissions of the
Issuers or Holders of Senior
Debt of an Issuer . . . . . . . 76
SECTION 1408. Authorization of Trustee to
Effectuate Subordination of
the Securities . . . . . . . . . 76
SECTION 1409. Right of Trustee to Hold Senior
Debt of an Issuer . . . . . . . 76
SECTION 1410. Article Fourteen Not to Prevent
Defaults . . . . . . . . . . . . 77
TESTIMONIUM . . . . . . . . . . . . . . . . . 77
SIGNATURES AND SEALS . . . . . . . . . . . . . . 77
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . 79
<EX-5>
EXHIBIT 5
(614) 464-6400
June 16, 1994
The Scotts Company
The O.M. Scott & Sons Company
14111 Scottslawn Road
Marysville, Ohio 43041
Ladies and Gentlemen:
We have acted as counsel to The Scotts Company (the
"Company") and The O.M. Scott & Sons Company ("OMS" and, together
with the Company, the "Issuers") in connection with the
registration under the Securities Act of 1933, as amended (the
"Act"), of $100,000,000 aggregate principal amount of the
Issuers' debt securities (the "Debt Securities"). The Debt
Securities are to be issued pursuant to either a senior
Indenture, dated as of June 1, 1994, to be entered into by and
among the Issuers and Chemical Bank, as Trustee (the "Senior
Indenture"), or a subordinated Indenture, dated as of June 1,
1994, to be entered into by and among the Issuers and Chemical
Bank, as Trustee (the "Subordinated Indenture" and, together with
the Senior Indenture, the "Indentures").
This opinion is being furnished in accordance with the
requirements of Item 601(b)(5) of Regulation S-K of the General
Rules and Regulations promulgated under the Act (the "Rules and
Regulations").
In connection with the preparation of this opinion, we
have examined and are familiar with each of the following:
1. The Certificate of Incorporation and Bylaws of the
Company, each as currently in effect, and the
Company's corporate minute book.
2. The Certificate of Incorporation and Bylaws of
OMS, each as currently in effect, and OMS'
corporate minute book.
3. The form of underwriting agreement (the
"Underwriting Agreement") proposed to be entered
into by and among the Issuers and the
representatives of the underwriters to be named
therein.
4. The Registration Statement on Form S-3 (File No.
33-53941) filed with the Securities and Exchange
Commission through the EDGAR system under the Act
on June 1, 1994.
5. A copy of the form of Senior Indenture.
6. A copy of the form of Subordinated Indenture.
7. Certain forms of the Debt Securities.
8. The resolutions adopted by the Boards of Directors
of the Company and OMS relating to the issuance of
the Debt Securities, authorizing the proper
officers of the Company and OMS to determine the
final terms of the Debt Securities and approving
the Indentures.
9. Such other records, documents or instruments as in
our judgment are necessary or appropriate to
enable us to render the opinions herein.
In our examinations and in rendering the opinions set
forth below, we have assumed, without independent investigation
or examination, (a) the genuineness of all signatures, the
authenticity and completeness of documents submitted to us as
originals, the conformity to original documents of all documents
submitted to us as copies and the authenticity of such originals
of such latter documents; (b) that the final, executed copy of
each document submitted to us in draft form will not differ in
any material respect from the draft form of such document
submitted to use; (c) that with respect to documents executed by
parties other than the Issuers, such parties had the power,
corporate or otherwise, to enter into and perform all obligations
thereunder and that such documents were duly authorized by all
requisite action, corporate or otherwise, of such parties, that
such documents were duly executed and delivered by such parties
and that such documents are the valid and binding agreements of
such parties; (d) that the Indentures will be duly authorized,
executed and delivered by the Trustee of each; (e) that prior to
the offering and sale of the Debt Securities, the proper officers
of the Issuers duly authorized by such Issuer's Board of
Directors or a committee thereof will authorize by proper
corporate action the terms of and the prices at which the Debt
Securities are to be issued and sold pursuant to the terms of the
applicable Indenture; (f) that the denomination of Debt
Securities in a currency other than United States dollars will
not contravene the exchange control laws of the jurisdiction the
currency of which the Debt Securities are denominated; (g) that
the Underwriting Agreement will constitute the legal, valid and
binding obligation of the parties thereto, other than the
Issuers, enforceable against such parties in accordance with
their respective terms; and (h) that the internal laws of the
State of New York and the judicial interpretations thereof (which
law the Indentures and the Debt Securities specify as the
governing law with respect thereto) do not differ, in any respect
material to our opinion, from the internal laws of the State of
Ohio and the judicial interpretations thereof. As to any facts
material to our opinions expressed herein which were not
independently established or verified, we have relied upon oral
or written statements and representations of officers and other
representatives of the Issuers and others.
Based upon and subject to the foregoing, and the
further qualifications and limitations set forth below, as of the
date hereof, we are of the opinion that:
1. Each of the Indentures has been duly authorized by
the Issuers and, upon execution and delivery by the Issuers in
accordance with the provisions thereof, will be a valid and
binding agreement, enforceable against the Company and OMS,
respectively, in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or
other similar laws now or hereafter in effect relating to
creditors' rights and remedies generally and by general
principles of equity (whether considered in a proceeding at law
or in equity), and except further as enforcement thereof may be
limited by (x) requirements that a claim with respect to any Debt
Securities denominated other than in United States dollars (or a
foreign currency or foreign currency unit judgment in respect of
such claim) be converted into United States dollars at a rate of
exchange prevailing on a date determined pursuant to applicable
law or (y) the governmental authority to limit, delay or prohibit
the making of payments in foreign currency or foreign currency
units or payments outside the United States, and except further
with respect to those provisions, if any, which are limited or
prohibited by public policy.
2. The Debt Securities, when duly executed by the
Issuers and authenticated by the Trustee in accordance with the
applicable Indenture and paid for by the purchasers thereof, will
be valid and binding obligations of the Issuers entitled to the
benefit of such Indenture and enforceable against the Company and
OMS, respectively, in accordance with their respective terms,
except to the extent that enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws now or hereafter in
effect relating to creditors' rights and remedies generally and
by general principles of equity (whether considered in a
proceeding at law or in equity), and except further as
enforcement thereof may be limited by (x) requirements that a
claim with respect to any Debt Securities denominated other than
in United States dollars (or a foreign currency or foreign
currency unit judgment in respect of such claim) be converted
into United States dollars at a rate of exchange prevailing on a
date determined pursuant to applicable law or (y) governmental
authority to limit, delay or prohibit the making of payments in
foreign currency units or payments outside the United States, and
except further with respect to those provisions, if any, which
are limited or prohibited by public policy.
We are members of the Bar of the State of Ohio and do
not purport to be experts in the laws of any jurisdiction other
than the laws of the State of Ohio, the laws of the United States
of America and the General Corporation Law of the State of
Delaware.
We hereby consent to the use of our name in the
Registration Statement under the caption "Validity of the Debt
Securities" and to the filing of this opinion as Exhibit 5 to the
Registration Statement. In giving this consent, we do not admit
that we come within the category of persons whose consent is
required under Section 7 of the Act or the Rules and Regulations.
/s/VORYS, SATER, SEYMOUR AND PEASE
<EX-25>
______________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
CHEMICAL BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
THE SCOTTS COMPANY
THE O.M. SCOTT & SONS COMPANY
(Exact name of obligor as specified in its charter)
Delaware 31-1199481
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.
14111 Scottslawn Road
Marysville, Ohio 43041
(Address of principal executive offices) (Zip Code)
_____________________________________________
Debt Securities
(Title of the indenture securities)
_____________________________________________________
GENERAL
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, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551 and Federal Reserve Bank of New York, District
No. 2, 33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C.,
20429.
(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.
None.
- 2 -
16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now
in effect, including the Organization Certificate and the
Certificates of Amendment dated February 17, 1969, August 31,
1977, December 31, 1980, September 9, 1982, February 28, 1985
and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to
Commence Business (see Exhibit 2 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is
incorporated by reference).
3. None, authorization to exercise corporate trust powers
being contained in the documents identified above as Exhibits 1
and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit
4 to Form T-1 filed in connection with Registration Statement
No. 33-46892, which is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of
the Act (see Exhibit 6 to Form T-1 filed in connection with
Registration Statement No. 33-50010, which is incorporated by
reference).
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.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of
1939 the Trustee, Chemical Bank, a corporation organized and
existing under the laws of the State of New York, has duly
caused this statement of eligibility 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 1st day of June,
1994.
CHEMICAL BANK
By /s/F. J. Grippo.
F. J. Grippo
Vice President
- 3 -
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
Chemical Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1994, published in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin................. $ 5,741
Interest-bearing balances......... 3,768
Securities .........................
Held to maturity securities......... 7,503
Available for sale securities....... 15,662
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 IBF's:
Federal funds sold ................. 2,514
Securities purchased under
agreements to resell ........... 995
Loans and lease financing receivables:
Loans and leases, net of unearned
income $61,140
Less: Allowance for loan
and lease losses 2,315
Less: Allocated transfer
risk reserve 115
Loans and leases, net of
unearned income, allowance,
and reserve............. 58,710
Assets held in trading
accounts .............. 26,249
Premises and fixed assets (including capitalized
leases).................. 1,310
Other real estate owned ............... 642
Investments in unconsolidated
subsidiaries and associated
companies.......................... 120
Customer's liability to this bank
on acceptance outstanding ........ 1,093
Intangible assets ................. 549
Other assets...................... 7,807
TOTAL ASSETS ............... $132,663
- 4 -
LIABILITIES
Deposits
In domestic offices ................ $49,180
Noninterest-bearing ....... $16,896
Interest-bearing .......... 32,284
In foreign offices, Edge and Agreement
subsidiaries, and IBF's ............ 25,612
Noninterest-bearing ......... $ 128
Interest-bearing ............ 25,484
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 IBF's
Federal funds purchased ............ 10,710
Securities sold under agreements to
repurchase ......................... 1,789
Demand notes issued to the U.S. Treasury 1,493
Trading liabilities .................. 14,745
Other Borrowed money:
with original maturity of one year
or less ............................ 6,331
with original maturity of more than
one year ........................... 1,031
Mortgage indebtedness and obligations
under capitalized leases ........... 21
Bank's liability on acceptances executed and
outstanding......................... 1,096
Subordinated notes and debentures..... 3,500
Other liabilities .................... 9,562
TOTAL LIABILITIES .................... 125,070
EQUITY CAPITAL
Common stock ......................... 620
Surplus .............................. 4,501
Undivided profits and capital reserves 2,684
Less: Net unrealized loss on marketable
equity securities................... (210)
Cumulative foreign currency translation
adjustments ........................ (2)
TOTAL EQUITY CAPITAL ................. 7,593
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ........... $132,663
I, Joseph L. Sclafani, S.V.P. & Controller of the
above-named bank, do hereby declare that this Report of
Condition is true and correct to the best of my knowledge and
belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of
this statement of resources and liabilities. We declare that
it has been examined by us, and to the best of our knowledge
and belief has been prepared in conformance with the
instructions and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
WILLIAM B. HARRISON )
- 5 -
