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As filed with the Securities and Exchange Commission on April 20, 1999
REGISTRATION NO. 333-XXXXX
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE SCOTTS COMPANY
(Exact name of Registrant as specified in its charter)
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OHIO 2875 31-1199481
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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14111 SCOTTSLAWN ROAD, MARYSVILLE, OHIO 43041, (937) 644-0011
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
G. ROBERT LUCAS
14111 SCOTTSLAWN ROAD
MARYSVILLE, OHIO 43041
(937) 644-0011
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
COPIES TO:
RONALD A. ROBINS, JR.
VORYS, SATER, SEYMOUR AND PEASE LLP
52 EAST GAY STREET, P.O. BOX 1008
COLUMBUS, OHIO 43216-1008
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement as the Registrant shall determine.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT REGISTRATION FEE
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8.625% Senior Subordinated Notes due 2009 $330,000,000 100% $91,740
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the prospectus is delivered in final form. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
SUBJECT TO COMPLETION, DATED APRIL 20, 1999
PRELIMINARY PROSPECTUS
[Company Logo] $330,000,000
THE SCOTTS COMPANY
OFFER TO EXCHANGE ITS
8.625% SENIOR SUBORDINATED NOTES
DUE 2009, WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR AN EQUAL PRINCIPAL AMOUNT OF ITS
8.625% SENIOR SUBORDINATED NOTES DUE 2009,
WHICH HAVE NOT BEEN REGISTERED
THE EXCHANGE OFFER, INCLUDING THE WITHDRAWAL RIGHTS, WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1999, UNLESS EXTENDED
By this prospectus and the accompanying letter of transmittal, Scotts is
offering to exchange up to $330,000,000 in principal amount of its 8.625% Senior
Subordinated Notes due 2009, which have been registered under the Securities Act
of 1933, as amended, for a like principal amount of its outstanding 8.625%
Senior Subordinated Notes due 2009, which have not been so registered. The notes
which have been registered are referred to as the "Exchange Notes." The notes
which are outstanding and which have not been registered are referred to as the
"Original Notes." The Exchange Notes and the Original Notes are identical,
except that the Original Notes contained transfer restrictions and registration
rights that the Exchange Notes do not contain.
The Exchange Offer is not conditioned upon the tender of any minimum amount of
Original Notes. The Exchange Offer will remain open for at least 30 days from
today. For a description of the customary conditions to the Exchange Offer, see
"The Exchange Offer."
The notes will bear interest at the rate of 8.625% per year. Interest on the
notes is payable on January 15 and July 15 of each year, beginning on July 15,
1999. The notes will mature on January 15, 2009. Scotts may redeem some or all
of the notes at any time after January 15, 2004. The redemption prices are
discussed under the caption "Description of Notes -- Optional Redemption."
If Scotts cannot make payments on the notes, its subsidiary guarantors will make
them instead. Not all of Scotts' subsidiaries will be subsidiary guarantors.
The notes and the subsidiary guarantees will be unsecured senior subordinated
obligations of Scotts and the subsidiary guarantors and will be subordinated in
right of payment to all of Scotts' and its subsidiary guarantors' senior
indebtedness.
The notes are expected to trade in the Private Offerings, Resales, and Trading
through Automatic Linkages Market ("Portal Market").
Scotts will not receive any proceeds from the Exchange Offer and will pay all
expenses incident to the Exchange Offer.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 13.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
, 1999
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. SCOTTS IS NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
TABLE OF CONTENTS
Page
Incorporation of Documents by Reference...........................
General Information...............................................
Disclosure Regarding Forward-Looking Statements...................
Prospectus Summary................................................
Risk Factors......................................................
The Transactions..................................................
Ratio of Earnings to Fixed Charges................................
Use of Proceeds...................................................
Capitalization....................................................
Unaudited Selected Pro Forma Combined Financial Data..............
Selected Financial Information....................................
The Exchange Offer................................................
Description of Notes..............................................
Selected United States Federal Tax Considerations.................
Plan of Distribution..............................................
Legal Matters.....................................................
Independent Auditors..............................................
INCORPORATION OF DOCUMENTS BY REFERENCE
We are incorporating the following documents into this Prospectus by reference:
(i) our Annual Report on Form 10-K for the fiscal year ended September 30, 1998;
(ii) our Quarterly Report on Form 10-Q for the fiscal quarter ended January 2,
1999; (iii) our Current Reports on Form 8-K dated as of December 21, 1998 and
January 7, 1999; and (iv) all other documents that we file pursuant to Sections
13(a), 13(c), 14 or 15(d) prior to the consummation of the Exchange Offer.
The Company is currently subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and files periodic reports and
other information with the Securities and Exchange Commission (the
"Commission"). Our periodic reports and other information filed with the
Commission may be inspected without charge at the Public Reference Section of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
will also be available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any portion of such material may also be
obtained at prescribed rates from the Public Reference Section of the Commission
upon payment of certain prescribed fees. In addition, the Commission maintains a
website that contains periodic reports and other information filed by the
Company. This website can be accessed at www.sec.gov. Copies of such material
can also be obtained from the Company upon request.
Copies of documents incorporated in this Prospectus by reference may be obtained
upon request without charge by contacting The Scotts Company, 14111 Scottslawn
Road, Marysville, Ohio 43041, Attention: Treasurer, (614) 644-0011.
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GENERAL INFORMATION
Roundup(R) is a registered trademark of Monsanto Company ("Monsanto"). Unless
otherwise indicated, all other trademarks, service marks or brand names
appearing in this Prospectus are the property of the Company.
This Prospectus contains summaries, believed to be accurate, of selected terms
of relevant documents. However, we refer you to the actual documents, copies of
which we will make available upon request, for the complete information
contained therein. All summaries of these documents are qualified in their
entirety by this reference.
This Exchange Offer is not being made, nor will we accept surrenders for
exchange from, holders of Original Notes in any jurisdiction in which this
Exchange Offer or our acceptance of Original Notes, would not be in compliance
with the applicable securities or blue sky laws.
Scotts expects that the Exchange Notes will be represented by one or more Global
Notes (as defined herein), which will be deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Notes
representing the Exchange Notes will be shown on, and transfers thereof will be
effected through, records maintained by the Depositary and its participants.
After the initial issuance of the Global Notes, Exchange Notes in certificated
form will be issued in exchange for the Global Notes only under limited
circumstances on the terms set forth in the Indenture. See "Description of Notes
- -- Book-Entry; Delivery and Form."
Scotts will not receive any cash proceeds from the issuance of the Exchange
Notes offered by this Prospectus. We are not using any dealer-manager for this
Exchange Offer.
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL TOGETHER CONSTITUTE THE
"EXCHANGE OFFER" AND CONTAIN IMPORTANT INFORMATION. HOLDERS OF ORIGINAL NOTES
SHOULD READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY
BEFORE DECIDING WHETHER TO TENDER THEIR ORIGINAL NOTES IN THIS EXCHANGE OFFER.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus includes and incorporates by reference "forward looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including, in particular, the statements about the Company's plans, strategies
and prospects under the headings "Prospectus Summary," "Selected Historical and
Pro Forma Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business." Although we
believe that our plans, intentions and expectations reflected in or suggested by
such forward-looking statements are reasonable, we can give no assurance that
such plans, intentions or expectations will be achieved. Important factors that
could cause actual results to differ materially from the forward looking
statements we make in this Prospectus are set forth below under the caption
"Risk Factors" and incorporated by reference to "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Forward-Looking
Statements" in our Annual Report on Form 10-K for the fiscal year ended
September 30, 1998. All forward-looking statements are expressly qualified in
their entirety by those cautionary statements.
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PROSPECTUS SUMMARY
Throughout this prospectus, the words "Scotts," "Company" and "we" refer to The
Scotts Company and its subsidiaries. The following summary contains basic
information about the Company and this exchange offering. It likely does not
contain all the information that is important to you. For a more complete
understanding of this exchange offer, we encourage you to read this entire
document and the documents to which we have referred you. For purposes of this
prospectus, when we describe information as being on a "pro forma" basis, unless
otherwise indicated, we are assuming that the RPJ Acquisition, the Ortho
Acquisition and the Roundup Marketing Agreement (each as defined herein and,
collectively, the "Transactions"), Scotts' new credit facility and the offering
of the Original Notes had been completed on the first day of the period
indicated, in the case of sales or other income statement information, or as of
the day indicated, in the case of assets, liabilities or other balance sheet
information. In this prospectus, we rely on and refer to information regarding
the consumer lawn and garden market and its segments in the United States
provided by Triad market research reports covering the period January 1998
through September 1998 and other publicly available sources. Although we believe
this information is reliable, we cannot guarantee the accuracy and completeness
of the information and have not independently verified it.
THE COMPANY
We are the leading global marketer and manufacturer of branded products for the
consumer lawn and garden care, professional turf care and professional
horticultural markets. We believe that our market leadership is driven by our
leading brands, consumer-focused marketing, superior product performance and
extensive relationships with major national retailers. Our portfolio of leading
consumer brands, including recent transactions, includes the following:
- SCOTTS (R), the leading brand of consumer lawn fertilizers in the
United States with a 54% market share, more than four times that
of the next leading competitor.
- MIRACLE-GRO(R), the leading brand of consumer water-soluble
garden fertilizers in the United States with an 86% market share.
- ORTHO(R), the leading brand of selective herbicides and outdoor
insecticides in the United States with a 63% market share and 39%
market share, respectively. We acquired the Ortho(R) family of
products from Monsanto on January 20, 1999.
- ROUNDUP(R), the leading brand of non-selective herbicides in the
United States with a 69% market share. In September 1998, we
entered into an agreement with Monsanto, which owns the
Roundup(R) brand, to market and distribute consumer Roundup(R)
products.
- MIRACLE-GRO(R), WEEDOL(R), LEVINGTON(R), KB(R), FERTILIGENE(R),
CELAFLOR(R) AND NEXA-LOTTE(R), the leading brands of consumer
lawn and garden fertilizers, herbicides and insecticides in the
European Union.
- HYPONEX(R), the leading brand of consumer growing media products
in the United States.
We support our consumer brands through national television and print
advertising, ongoing consumer research, superior products, technological
advancements and consumer education programs. Our extensive sales and
distribution network includes key relationships with home improvement centers,
mass merchandisers, hardware stores, garden centers and other retailers. On a
pro forma basis, our 1998 total revenues and Adjusted EBITDA (as defined in this
prospectus) were $1.5 billion and $231.2 million, respectively.
We have built our company through a series of strategic acquisitions, mergers
and marketing alliances which have significantly enhanced our geographic
presence and broadened our product lines. Our strategy has been to acquire
undermarketed brands and apply our marketing expertise to grow sales by
increasing market share and growing the overall category. Since 1995, we have
entered into five strategic transactions that have positioned us as a global
leader in all categories of the lawn and garden consumables market.
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- In January 1999, we acquired Ortho from Monsanto for $300
million, subject to adjustment.
- In October 1998, we acquired Rhone-Poulenc Jardin ("RPJ"), a
leading European manufacturer and marketer of consumer products
for garden and household plants, including the KB(R) and
Fertiligene(R) brands. RPJ was acquired for approximately $216
million, including approximately $36 million (on a present value
basis) payable over the next four years.
- In September 1998, we entered into an exclusive marketing and
agency agreement for the marketing and distribution rights to
consumer Roundup(R) products in the United States and other
specified countries, including Australia, Austria, Canada,
France, Germany and the United Kingdom.
- In January 1997, we purchased the outstanding interest in Miracle
Garden Care Ltd. ("Miracle Garden") that we did not already own
for $47.0 million. In December 1997, we acquired Levington Group
Limited ("Levington") for $94.0 million and integrated it with
Miracle Garden. Together, they make us the leading marketer and
manufacturer of consumer and professional lawn fertilizers and
growing media in the United Kingdom.
- In February 1998, we acquired EarthGro, Inc. ("EarthGro"), a
leading regional manufacturer and marketer of growing media in
the northeastern United States for $47.0 million.
BUSINESS GROUPS
We operate in three market segments: North American Consumer (which
includes Consumer Lawns, Consumer Gardens, Consumer Growing Media and
Ortho), International and Professional.
Consumer Lawns (24.2% of pro forma fiscal 1998 sales)
The Consumer Lawns Business Group consists of product categories in lawn
fertilizer and combination fertilizer and control products (herbicides and
insecticides), grass seed and spreaders. This business features the
Scotts(R) brand with products including Scotts Turf Builder(R), Scotts Turf
Builder with Plus 2(TM) Weed Control and Scotts Turf Builder(R) with
Halts(R) Crabgrass Preventer.
Consumer Gardens (8.7% of pro forma fiscal 1998 sales)
The Consumer Gardens Business Group's product categories include plant
foods, ornamental plant care products, no-clog feeders and indoor plant
care products. This group is led by the Miracle-Gro(R) brand for water
soluble garden fertilizers, and also includes consumer Osmocote(R)
controlled-release garden fertilizer products.
Consumer Growing Media (15.2% of pro forma fiscal 1998 sales)
The Consumer Growing Media Business Group's product categories include
potting and planting soils, soil conditioners, barks and mulches. These
products are marketed under the Hyponex(R), Miracle-Gro(R), Scotts(R) and
EarthGro(R) brands.
Ortho (17.6% of pro forma fiscal 1998 sales)
The Ortho Business Group was formed in October 1998 for the purpose of
operating the Ortho assets upon consummation of the Ortho Acquisition and
to implement the Roundup Marketing Agreement. Ortho(R) and Roundup(R) are
the market leaders in the North American consumer lawn and garden
herbicides and insecticides market.
International (22.5% of pro forma fiscal 1998 sales)
The International segment is a leader in the European Union lawn and garden
market. The segment has leading positions in pesticides, lawn and garden
fertilizers and growing media through the Miracle-Gro(R), Weedol(R),
Pathclear(R), Grasshopper(R), Levington(R), Shamrock(R), KB(R),
Fertiligene(R), Celaflor(R) and Nexa Lotte(R) brands. Our international
sales, distribution and manufacturing infrastructure provides a platform to
expand the market
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position of other Scotts products overseas. Our products are sold in
consumer and professional markets throughout the European Union and in
other international markets including Australia, Japan, New Zealand and
Latin America.
Professional (11.8% of pro forma fiscal 1998 sales)
The Professional segment is a leader in providing innovative products,
services and consultative sales support to professional turf care and
horticulture customers. Our product categories include turf fertilizers,
grass seed, spreaders, custom application service, fertilizers, plant
protection products and growing media. These products are marketed under
the Pro Turf(R), Osmocote(R), Miracle-Gro(R) and Peter's(R) brands. The
group's main customers include golf courses, professional sports stadiums,
landscape companies, commercial nurseries and specialty crop growers.
BUSINESS STRATEGY
Enhance Market Leadership Through Consumer-Focused Brand Management. We
will continue to execute our successful demand-pull marketing strategy to
strengthen our leading market positions. We believe this approach, which
emphasizes consumer-directed marketing rather than price promotion, builds
brand awareness and drives product sales growth. We have grown the sales
and market share of the three principal brands we owned prior to the Ortho
Acquisition -- Scotts(R), Miracle-Gro(R) and Hyponex(R) -- since fiscal
1996 through the successful execution of this strategy. Ortho(R), which we
acquired in the Ortho Acquisition, and Roundup(R), which we market pursuant
to the Roundup Marketing Agreement, provide us with additional growth
opportunities through the application of our demand-pull marketing
strategy.
Capitalize on Relationships With Leading Retailers. We believe that our
leading brands and our aggressive advertising make our products "traffic
builders" at the retail location. This, in addition to our position as the
leading nationwide supplier of a full line of consumer lawn and garden
products, gives us an advantage in selling to retailers, who value the
efficiency of dealing with a limited number of suppliers. We are the
largest vendor to the lawn and garden departments at Home Depot, Wal*Mart
and Kmart. In addition, during fiscal 1998, we became "category manager" of
the lawn and garden fertilizer category at Wal*Mart and category co-manager
with Kmart of its lawn and garden product category. As category manager,
our representatives work together with retailers to determine advantageous
product mix, merchandising, shelving and pricing, based on consumer data.
We believe that the addition of the Ortho(R) and Roundup(R) brands provide
us opportunities to become category manager at additional leading
retailers.
Increase Sales by Growing the Overall Consumer Lawn and Garden Market. Our
strategy is to grow the overall consumer lawn and garden category and to
capture all of this growth. In recent years, we have increased consumer
advertising, expanded our range of products while reducing the number of
SKUs, enhanced product packaging and emphasized year-round fertilizer
applications to drive category growth. Recent new product introductions
include Scotts(R) branded potting soils, GrubEx(R), which provides
season-long protection against grubs, the No-Clog-4 in 1(R), which allows
for sprinkler feeding of fertilizer, and Miracle-Gro(R) branded potting
mixes. In fiscal 1999, the Company introduced Miracle-Gro(R) Flower Seeding
Mix, Miracle-Gro(R) Bloom Booster(R) and Miracle-Gro(R) Tree Spikes.
Enhance Competitive Position Through Recent Acquisitions. We recently
completed three important transactions: we acquired RPJ; we acquired Ortho
and we entered into the Roundup Marketing Agreement. These transactions
enhance our product portfolio, expand our geographic presence and
strengthen our position with retailers. Specifically, the Ortho Acquisition
and the Roundup Marketing Agreement immediately provided us with a leading
position in the U.S. pesticides segment of the consumer lawn and garden
category, and the RPJ Acquisition established a strong presence for us in
continental Europe. In addition, we expect to achieve $18 million to $27
million of annual cost savings from reductions in general and
administrative, sales, distribution, purchasing, research and development
and corporate overhead costs to be fully realized in the 2001 fiscal year.
These cost savings have not been included in the pro forma financial
information included in this prospectus, and there can be no assurance that
these cost savings will be realized to the extent indicated, or at all. We
expect to redirect a significant portion of these cost savings into
increased consumer marketing spending. These transactions substantially
complete our transformation into the global leader in the lawn and garden
consumables market.
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THE TRANSACTIONS
RPJ ACQUISITION
In October 1998, we acquired Rhone-Poulenc Jardin, the consumer lawn and
garden division of Rhone-Poulenc S.A. and related entities (the "RPJ
Acquisition"). The total consideration for the RPJ Acquisition was
approximately $216 million, including approximately $36 million (on a
present value basis) payable over the next four years.
ORTHO ACQUISITION
We entered into an Asset Purchase Agreement with Monsanto dated as of
November 11, 1998 (the "Ortho Agreement") and agreed to acquire
substantially all of the non-Roundup assets of Monsanto's consumer lawn and
garden division for $300 million, subject to adjustment depending on the
level of normalized working capital as of the closing date (the "Ortho
Acquisition"). These assets include the Ortho(R), Green Cross(R), White
Swan(R) and Defender(R) product lines, as well as formulation facilities in
Fort Madison, Iowa and Corwen, United Kingdom. We closed the Ortho
Acquisition on January 21, 1999. As of such date, the working capital
adjustment was $39.9 million. The parties are still in the process of
determining the final working capital adjustment, which may be greater than
or less than $39.9 million.
ROUNDUP MARKETING AGREEMENT
On September 30, 1998, we entered into an Exclusive Agency and Marketing
Agreement with Monsanto (as amended and restated, the "Roundup Marketing
Agreement"). Pursuant to the Roundup Marketing Agreement, we became
Monsanto's exclusive agent for the marketing and distribution of consumer
Roundup(R) products in the consumer lawn and garden market in the United
States and other specified countries, including Australia, Austria, Canada,
France, Germany and the United Kingdom. In addition, if Monsanto develops
new products containing glyphosate, the active ingredient in Roundup(R), or
other non-selective herbicides, we have specified rights to market such
products as well in the consumer lawn and garden market.
Under the Roundup Marketing Agreement, we and Monsanto will jointly develop
global consumer and trade marketing programs for Roundup(R), and we have
assumed responsibility for sales support, merchandising, distribution and
logistics. We have already taken responsibility for these functions in
North America, with a longer transition expected in Europe and Australia.
Monsanto will continue to own all the assets of the consumer Roundup
business and will provide significant oversight of its brand. In addition,
Monsanto will continue to own, operate and market the agricultural Roundup
business.
NEW CREDIT FACILITY
On December 4, 1998, we and certain of our subsidiaries entered into a new
credit agreement (the "New Credit Facility") which provides for aggregate
borrowings of up to $1.025 billion and consists of a $500 million revolving
credit facility and $525 million of term loan facilities. We used the
proceeds of the New Credit Facility to refinance our then existing credit
facility and to fund the RPJ Acquisition. On a pro forma basis, as of
April 3, 1999, we would have had $_____ million outstanding under the
New Credit Facility and $_____ million available.
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THE ISSUANCE OF THE ORIGINAL NOTES
The Original Notes were originally issued and sold on January 21, 1999, in
a transaction not registered under the Securities Act in reliance upon an
exemption from the registration requirements thereof. The initial purchaser
(the "Initial Purchaser") of the Original Notes was Salomon Smith Barney
Inc. The Initial Purchaser subsequently offered and resold the Original
Notes pursuant to Rule 144A and Regulation S under the Securities Act. In
connection with the issuance of the Original Notes, the Company entered
into a Registration Rights Agreement with the Initial Purchaser (the
"Registration Rights Agreement") which provides the holders of the Notes
with registration and exchange rights. The Exchange Offer is intended to
satisfy certain of the Company's obligations under the Registration Rights
Agreement.
The Original Notes are represented by two, permanent global notes which are
registered in the name of a nominee of DTC. Participants in the DTC system
who have accounts with DTC ("DTC Participants") hold interests in the
global notes in book-entry form. Accordingly, ownership of beneficial
interests in such Notes is limited to DTC Participants or persons who hold
such interests through DTC Participants.
The term "Book-Entry Holder" with respect to any Notes means the DTC
Participant that is listed as the holder of such Notes in the records
maintained by DTC.
THE EXCHANGE OFFER
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The Exchange Offer.................. Up to $330 million in principal
amount of the Exchange Notes are
being offered in exchange for a like
principal amount of Original Notes.
Scotts is making the Exchange Offer
in order to satisfy its obligations
under the Registration Rights
Agreement relating to the Original
Notes. We provide a description of
the procedures for tendering
Original Notes in the section
entitled "The Exchange Offer --
Procedures for Tendering."
Expiration Date..................... 5:00 p.m., New York City time, on
, 1999, unless the Exchange Offer is
extended (in which case the
Expiration Date will be the latest
date and time to which the Exchange
Offer is extended).
Conditions of the Exchange Offer.... The Exchange Offer is subject to the
condition that the Exchange Offer
does not violate applicable law or
the Securities and Exchange
Commission's staff interpretations.
If Scotts determines that applicable
federal law does not permit the
Exchange Offer, we may terminate the
Exchange Offer. The Exchange Offer
is not conditioned upon the tender
of any minimum principal amount of
Original Notes.
Resale of the Exchange Notes........ Based on an interpretation by the
staff of the Securities and Exchange
Commission set forth in no-action
letters to third parties, Scotts
believes that Exchange Notes issued
pursuant to the Exchange Offer in
exchange for Original Notes
generally may be offered for resale
and may be resold or otherwise
transferred by any holder of
Exchange Notes without restriction.
However, a broker-dealer who
purchased Original Notes directly
from Scotts for resale pursuant to
Rule 144A or any other available
exemption under the Securities Act
must comply with the registration
and prospectus delivery provisions
of the Securities Act. Restrictions
also apply to resales by a person
that is an "affiliate" of Scotts
within the meaning of Rule 405 under
the Securities Act.
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Scotts will require that each holder
of Original Notes who wants to
acquire Exchange Notes represent to
Scotts that the holder is acquiring
the Exchange Notes in the ordinary
course of business and is not
participating, and has no
arrangement or understanding with
any person to participate, in the
distribution of the Exchange Notes.
If a holder inaccurately makes this
representation and transfers
Exchange Notes in violation of the
prospectus delivery provisions of
the Securities Act and without an
exemption from registration, the
holder may incur liability under the
Securities Act. Scotts does not
assume or indemnify holders of
Exchange Notes against liability
under the Securities Act, although
Scotts does not believe that any
such liability should exist.
Broker-dealers that receive Exchange
Notes for their own accounts in
exchange for Original Notes should
refer to the applicable provisions
described in the section entitled
"Plan of Distribution."
All resales of Exchange Notes must
be made in compliance with
applicable state securities or "blue
sky" laws. Scotts assumes no
responsibility for compliance by
holders of Exchange Notes with these
requirements. Scotts is not making
the Exchange Offer to and will not
accept surrenders for exchange from
holders of Original Notes in any
jurisdiction in which the Exchange
Offer or the acceptance of the
Exchange Offer would not be in
compliance with the applicable
securities or "blue sky" laws.
Procedures for Tendering Notes...... Each holder of Original Notes
that wants to accept the Exchange
Offer must complete, sign and date
the accompanying Letter of
Transmittal or a copy of it in
accordance with the applicable
instructions. The holder must then
mail the Letter of Transmittal,
together with the Original Notes and
any other required documentation to
the Exchange Agent at the address on
the Letter of Transmittal. By
executing a Letter of Transmittal,
each holder will represent that:
- the Exchange Notes are being
obtained in the ordinary course
of business of the person
receiving the Exchange Notes,
whether or not that person is
the holder of record;
- neither the holder or record nor
the person who will receive the
Exchange Notes has any
arrangement or understanding
with any person to participate
in the distribution of the
Exchange Notes;
- neither the holder or record nor
the person who will receive the
Exchange Notes is engaged in, or
intends to engage in, a
distribution of the Exchange
Notes; and
- neither the holder of record nor
the person who will receive the
Exchange Notes is an
"affiliate," as defined in Rule
405 under the Securities Act, of
the Company.
Special Procedures for Beneficial
Owners.............................. Any beneficial owner whose Original
Notes are registered in the name of
a broker, dealer, commercial bank,
trust company or other nominee and
who wishes to tender should contact
the registered holder promptly and
instruct the registered holder to
tender on the beneficial owner's
behalf.
Guaranteed Delivery Procedures...... Holders of Original Notes who want
to tender their Original Notes and
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C>
whose Original Notes are not
immediately available or who cannot
deliver their Original Notes, the
Letter of Transmittal or any other
documents required by the Letter of
Transmittal to the Exchange Agent,
or who cannot comply with the
procedures for book-entry transfer,
prior to the Expiration Date must
tender their Original Notes
according to the guaranteed delivery
procedures described in the section
entitled "The Exchange Offer" under
the heading "Guaranteed Delivery
Procedures."
Untendered Notes.................... Following the closing of the
Exchange Offer, holders of Original
Notes eligible to participate in the
Exchange Offer but who do not tender
their Original Notes will not have
any further exchange rights, and
their Original Notes will continue
to be subject to the restrictions on
transfer on the Original Notes.
Accordingly, the liquidity of the
market for those Original Notes
could be adversely affected by the
Exchange Offer.
Consequences of Failure to
Exchange............................ The Original Notes that are not
exchanged in the Exchange Offer will
remain restricted securities and may
be resold only:
- to Scotts;
- to a qualified institutional
buyer under Rule 144A or Rule
144 under the Securities Act;
- in an offshore transaction under
Rule 903 or Rule 904 of
Regulation S under the
Securities Act;
- to an institutional accredited
investor or otherwise pursuant
to an exemption from
registration under the
Securities Act; or
- pursuant to an effective
registration statement under the
Securities Act.
Shelf Registration Statement........ In the limited circumstances
described in the section entitled
"Description of Notes" under the
heading "Registration Rights;
Liquidated Damages," Scotts may be
required to file a shelf
registration statement covering
resales of the Original Notes.
Withdrawal Rights................... Tenders may be withdrawn at any time
prior to 5:00 p.m., New York City
time, on the Expiration Date.
Acceptance of Original Notes and
Delivery of Exchange Notes.......... Scotts will accept for exchange any
Original Notes that are properly
tendered in the Exchange Offer prior
to 5:00 p.m., New York City time, on
the Expiration Date. Scotts will
deliver Exchange Notes promptly
following the Expiration Date.
Federal Income Tax Consequences..... The exchange pursuant to the
Exchange Offer will generally not be
a taxable event for U.S. federal
income tax purposes.
Use of Proceeds..................... There will not be any cash proceeds
to Scotts from the Exchange Offer.
Exchange Agent...................... State Street Bank and Trust Company
</TABLE>
8
<PAGE> 12
THE EXCHANGE NOTES
The Exchange Offer applies to $330 million aggregate principal amount of
the Original Notes. The terms of the Exchange Notes will be substantially
identical to those of the Original Notes except that the Exchange Notes
will be registered under the Securities Act, and, therefore, will not bear
legends restricting transfer and will not be subject to the terms of the
Registration Rights Agreement. The Exchange Notes will evidence the same
debt as the Original Notes and both series of Notes will be entitled to the
benefits of the Indenture and treated as a single class of debt securities.
<TABLE>
<S> <C>
Total Amount of Notes Offered....... $330 million in principal amount of
8.625% Senior Subordinated Notes due
2009 registered under the Securities
Act.
Maturity............................ January 15, 2009.
Interest............................ Annual fixed rate -- 8.625%.
Payment frequency - every six
months on January 15 and July 15.
First payment -- July 15, 1999.
Subsidiary Guarantors............... Each subsidiary guarantor is a
wholly owned domestic subsidiary of
Scotts. Scotts' foreign subsidiaries
are not subsidiary guarantors of the
Exchange Notes. If Scotts cannot
make payments on the Exchange Notes
when they are due, the subsidiary
guarantors must make them instead.
Ranking............................. The Exchange Notes and the
subsidiary guarantees are senior
subordinated debts. They rank
behind all of Scotts' and its
subsidiary guarantors current and
future indebtedness (other than
trade payables), except indebtedness
that expressly provides that it is
not senior to the Exchange Notes and
the subsidiary guarantees.
Assuming this offering had been
completed on April 3, 1999, and the
proceeds had been applied as
intended, and assuming the
Transactions and the New Credit
Facility had been closed as of such
date, the Exchange Notes and the
subsidiary guarantees would have
been subordinated to $_____ of
senior debt.
In addition, the subsidiary
guarantees would have been
structurally subordinated to $_____
million of current operating
liabilities of the non-guarantor
subsidiaries as of April 3, 1999.
Optional Redemption................. On or after January 15, 2004,
Scotts may redeem some or all of
the Exchange Notes at any time at
the redemption prices listed in
the "Description of Notes" section
under the heading "Optional
Redemption."
Before January 15, 2002, Scotts may
redeem up to 35% of the Notes with
the proceeds of one or more public
equity offerings of Scotts' common
shares at the price listed in the
"Description of Notes" section under
the heading "Optional Redemption."
Mandatory Offer to Repurchase....... If Scotts sells certain assets or
experiences specific kinds of
changes of control, it must offer to
repurchase the Exchange Notes at the
prices listed in the "Description of
Notes" section under the heading
"Redemption at the Option of
Holders."
Basic Covenants of Indenture........ Scotts will issue the Exchange
Notes under an indenture with
State
</TABLE>
9
<PAGE> 13
<TABLE>
<S> <C>
Street Bank and Trust Company, as trustee. The indenture will,
among other things, restrict Scotts' ability and the
ability of its subsidiaries to:
- borrow money;
- pay dividends on stock or purchase stock;
- make investments;
- use assets as security in other transactions; and
- sell certain assets or merge with or into other companies.
For more details, see the "Description of Notes" section under the
heading "Certain Covenants."
</TABLE>
RISK FACTORS
See "Risk Factors" beginning on page 13 for a discussion of certain factors that
you should carefully consider before investing in the Notes.
10
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN MILLIONS)
We have derived the historical financial data included in the following summary
financial data from the Company's audited and unaudited consolidated financial
statements which are incorporated by reference herein. The following pro forma
consolidated financial data are presented as if the Transactions and the
offering of the Original Notes had occurred and the New Credit Facility was in
place on October 1, 1997. The following pro forma balance sheet data give effect
to the Transactions, the New Credit Facility and the offering of the Original
Notes and the use of proceeds therefrom as they had occurred on April 3, 1999.
The selected pro forma consolidated financial data is not necessarily indicative
of the results of operations the Company would have obtained had the
Transactions, the New Credit Facility and the offering of the Original Notes
actually occurred as of October 1, 1997. You should read the following
information in conjunction with the Consolidated Financial Statements of the
Company and the Notes thereto, the Financial Statements of RPJ, the Financial
Statements of Ortho and the information contained in "Management's Discussion
and Analysis of Financial Condition and Results of Operations," all of which are
incorporated by reference in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, ACTUAL PRO FORMA
ACTUAL PRO FORMA APRIL 4, APRIL 3, APRIL 3,
1996 1997(1) 1998(2) 1998 1998 1999 1999
---- ------- ------- ---- ---- ---- ----
OPERATING DATA:
<S> <C> <C> <C> <C>
Sales................................ $ 750.4 $ 899.3 $ 1,113.0 $1,526.5
Cost of sales........................ 512.4 573.6 715.0 948.1
-------- --------- ---------- --------
Gross profit......................... 238.0 325.7 398.0 578.4
(Income) from Roundup Marketing -- -- -- (35.0)
Agreement
Selling, general & administrative.... 185.8 214.4 271.6 413.4
Amortization of goodwill and other 8.8 10.2 12.9 25.8
intangibles..........................
Restructuring and other charges...... 17.7 -- 15.4 17.2
Other expense (income), net.......... (0.6) 6.3 4.0 4.4
-------- --------- ---------- --------
Income from operations............... 26.3 94.8 94.1 152.6
Interest expense..................... 25.0 25.2 32.2 86.3
-------- --------- ---------- --------
Income before income taxes........... 1.3 69.6 61.9 66.3
Income tax provision ................ 3.8 30.1 24.9 26.7
-------- --------- ---------- --------
Income before extraordinary item (2.5) 39.5 37.0 39.6
Extraordinary loss on early
extinguishment of debt, net of
income tax benefit................ -- -- 0.7 --
-------- --------- ---------- --------
Net income (loss).................... (2.5) 39.5 36.3 39.6
Preferred stock dividends............ 9.8 9.8 9.8 9.8
-------- --------- ---------- --------
Income (loss) applicable to common
shareholders...................... $ (12.3) $ 29.7 $ 26.5 $ 29.8
========= ========= ========== ========
OTHER FINANCIAL DATA:
EBITDA (3)........................... $ 55.6 $ 125.2 $ 131.9 $ 209.0
Adjusted EBITDA (4).................. 73.3 125.2 152.3 231.2
Cash interest expense (5)............ 24.1 24.2 31.5 81.7
Depreciation and amortization (6).... 29.3 30.4 37.8 56.4
Capital expenditures................. 18.2 28.6 41.3 45.3
Ratio of Adjusted EBITDA to cash
interest expense..................... 3.0x 5.2x 4.8x 2.8x
Ratio of total debt to Adjusted EBITDA 3.1x 1.8x 2.4x 4.3x
Ratio of earnings to fixed charges... 1.0x 3.3x 2.6x 1.7x
</TABLE>
11
<PAGE> 15
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
AS OF APRIL 3, 1999
-----------------------------
ACTUAL PRO FORMA
------ ---------
<S> <C> <C>
Working capital...............
Total assets..................
Total debt....................
Total shareholders' equity (7)
</TABLE>
- ----------------
(1) Includes results from Miracle Garden from January 1997.
(2) Includes results from Levington Group Limited from December 1997 and
EarthGro from February 1998.
(3) "EBITDA" is defined as income from operations, plus depreciation and
amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
used as an alternative to net income as an indicator of operating
performance or to cash flow as a measure of liquidity. EBITDA is included
in this Prospectus because it is a basis upon which Scotts' management
assesses financial performance. While EBITDA is frequently used as a
measure of operations and the ability to meet debt service requirements, it
is not necessarily comparable to other similarly titled captions of other
companies due to potential inconsistencies in the method of calculation.
(4) "Adjusted EBITDA" reflects EBITDA as calculated in note (3) above adjusted
for the effect of the non-recurring restructuring charges taken by the
Company of $17.7 million during the fiscal year ended September 30, 1996
and by the Company of $20.4 million (of which $15.4 million is included in
restructuring and other charges, $2.9 million is included in cost of sales
and $2.1 million is included in selling, general and administrative) and
RPJ of $1.8 million during the twelve months ended September 30, 1998 and
by the Company of $1.4 million for the six months ended April 3, 1999.
(5) Cash interest expense excludes amortization of deferred financing costs and
interest rate locks.
(6) Depreciation and amortization excludes amortization of deferred financing
costs and debt discount.
(7) Includes $195 million aggregate liquidation preference of convertible
preferred stock, convertible at $19 per common share, which is callable at
the option of the Company after May 19, 2000.
12
<PAGE> 16
RISK FACTORS
This Prospectus includes and incorporates by reference "forward looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act including, in particular, the statements about the
Company's plans, strategies, and prospects under the headings "Prospectus
Summary," "Selected Historical and Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business." Although we believe that our plans, intentions and
expectations reflected in or suggested by such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ
materially from the forward looking statements we make or incorporate by
reference in this Prospectus are set forth below and are incorporated by
reference to our periodic reports filed under the Exchange Act. All
forward-looking statements attributable to the Company or persons acting on our
behalf are expressly qualified in their entirety by the following cautionary
statements.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF THE COMPANY AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THE NOTES.
Following the offering of the Original Notes, we have a significant amount of
indebtedness. The following chart shows important credit statistics and is
presented assuming we had completed the Transactions, the New Credit Facility
and the offering of the Original Notes as of the date or at the beginning of the
period specified below and applied the proceeds as intended:
<TABLE>
<CAPTION>
AT APRIL 3, 1999
(DOLLARS IN MILLIONS)
<S> <C>
Total indebtedness......................................
Stockholders' equity....................................
Debt to equity ratio....................................
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect
to the Notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- limit our ability to fund future working capital, capital
expenditures, research and development costs and other general
corporate requirements;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures, research and development efforts and other general
corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors
that have less debt; and
13
<PAGE> 17
- limit, along with the financial and other restrictive covenants in our
indebtedness, among other things, our ability to borrow additional
funds. And, failing to comply with those covenants could result in an
event of default which, if not cured or waived, could have a material
adverse effect on us.
See "Description of Notes -- Repurchase at the Option of Holders -- Change of
Control."
ADDITIONAL BORROWINGS AVAILABLE -- DESPITE CURRENT INDEBTEDNESS LEVELS, WE AND
OUR SUBSIDIARIES MAY STILL BE ABLE TO INCUR SUBSTANTIALLY MORE DEBT. THIS COULD
FURTHER EXACERBATE THE RISKS DESCRIBED ABOVE.
We and our subsidiaries may be able to incur substantial additional indebtedness
in the future. The terms of the indenture do not fully prohibit us or our
subsidiaries from doing so. Our New Credit Facility permits additional
borrowings of up to $1.025 billion and all of those borrowings would be senior
to the Notes and the subsidiary guarantees. If new debt is added to our and our
subsidiaries' current debt levels, the related risks that we and they now face
could intensify.
See "Capitalization" and "Description of Notes -- Repurchase at the Option of
Holders -- Change of Control."
ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL.
Our ability to make payments on and to refinance our indebtedness, including the
Notes, and to fund planned capital expenditures and research and development
efforts will depend on our ability to generate cash in the future. This, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available cash
and available borrowings under the New Credit Facility will be adequate to meet
our future liquidity needs for at least the next few years.
We cannot assure you, however, that our business will generate sufficient cash
flow from operations, that currently anticipated cost savings and operating
improvements will be realized on schedule or at all or that future borrowings
will be available to us under the New Credit Facility in amounts sufficient to
enable us to pay our indebtedness, including the Notes, or to fund our other
liquidity needs. We may need to refinance all or a portion of our indebtedness,
including the Notes, on or before maturity. We cannot assure you that we will be
able to refinance any of our indebtedness, including the New Credit Facility and
the Notes, on commercially reasonable terms or at all.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR
EXISTING INDEBTEDNESS AND POSSIBLY ALL OF OUR FUTURE BORROWINGS. FURTHER, THE
GUARANTEES OF THE NOTES ARE JUNIOR TO ALL OUR SUBSIDIARY GUARANTORS' EXISTING
INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS.
The Notes and the subsidiary guarantees rank behind all of our and the
subsidiary guarantors' existing indebtedness (other than trade payables) and all
of our and their future borrowings (other than trade payables), except any
future indebtedness that expressly provides that it ranks equal with, or is
subordinated in right of payment to, the Notes and the subsidiary guarantees. As
a result, upon any distribution to our creditors or the creditors of the
subsidiary guarantors in a bankruptcy, liquidation or reorganization or similar
proceeding relating to us or the subsidiary guarantors or to our or their
property, the holders of our senior debt and the senior debt of the subsidiary
guarantors will be entitled to be paid in full in cash before any payment may be
made with respect to the Notes or the subsidiary guarantees.
14
<PAGE> 18
In addition, all payments on the Notes and the subsidiary guarantees will be
blocked in the event of a payment default on senior debt and may be blocked for
up to 179 of 360 consecutive days in the event of certain non-payment defaults
on senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our Company or the subsidiary guarantors, holders of the
Notes will participate with trade creditors and all other holders of
subordinated indebtedness of the Company and the subsidiary guarantors in the
assets remaining after we and the subsidiary guarantors have paid all of the
senior debt. However, because the indenture requires that amounts otherwise
payable to holders of the Notes in a bankruptcy or similar proceeding be paid to
holders of senior debt instead, holders of the Notes may receive less, ratably,
than holders of trade payables in any such proceeding. In any of these cases, we
and the subsidiary guarantors may not have sufficient funds to pay all of our
creditors and holders of Notes may receive less, ratably, than the holders of
senior debt.
Assuming we had completed the offering of the Original Notes on April 3, 1999,
and that the Transactions and the New Credit Facility had been completed
on that date, the Notes and the subsidiary guarantees would have been
subordinated to $________ million of senior debt, and approximately $________
million would have been available for borrowing as additional senior debt under
our New Credit Facility. We will be permitted to borrow substantial additional
indebtedness, including senior debt, in the future under the terms of the
indenture. In addition, the Notes and the subsidiary guarantees will be
structurally subordinated to the current operating liabilities, including trade
payables, of all of our subsidiaries that are not subsidiary guarantors. See
note 21 to the Company's Consolidated Financial Statements, which are
incorporated by reference in this Prospectus.
INTEGRATION ISSUES -- INABILITY TO INTEGRATE THE ACQUISITIONS WE HAVE MADE COULD
PREVENT US FROM MAXIMIZING SYNERGIES AND COULD ADVERSELY AFFECT OUR FINANCIAL
RESULTS.
We have made several substantial acquisitions in the past four years. The Ortho
Acquisition represents the largest acquisition we have ever made. The success of
any completed acquisition depends, and the success of the Ortho Acquisition will
depend, on our ability to integrate effectively the acquired business. We
believe that the RPJ Acquisition and the Ortho Acquisition provide us with
significant cost saving opportunities. However, if we are not able to
successfully integrate Ortho, RPJ or our other acquired businesses, we will not
be able to maximize these cost saving opportunities. Rather, the failure to
integrate these acquired businesses, because of difficulties in the assimilation
of operations and products, the diversion of management's attention from other
business concerns, the loss of key employees or other factors, could materially
adversely affect our financial results.
CUSTOMER CONCENTRATION -- BECAUSE OF THE CONCENTRATION OF OUR SALES TO A SMALL
NUMBER OF RETAIL CUSTOMERS, THE LOSS OF ONE OR MORE OF OUR TOP CUSTOMERS COULD
ADVERSELY AFFECT OUR FINANCIAL RESULTS.
Our top 10 customers together accounted for approximately 50% of our 1998 fiscal
year sales and 27% of our outstanding accounts receivable as of September 30,
1998. Our top two customers, The Home Depot and Kmart Corporation, represented
approximately 17% and 10%, respectively, of our 1998 fiscal year sales and
approximately 12% and 2%, respectively, of our outstanding accounts receivable
at September 30, 1998. Wal*Mart sales represented approximately 9% of the
Company's fiscal 1998 sales. After allocating buying groups' sales to Wal*Mart,
Wal*Mart sales represented approximately 11% of our sales and 2% of our
outstanding trade accounts receivable at September 30, 1998. All three customers
hold significant positions in the retail lawn and garden market. The loss of, or
reduction in orders from, Home Depot, Kmart, Wal*Mart or any other significant
customer could have a material adverse effect on our business and our financial
results, as could customer disputes regarding shipments, fees, merchandise
condition or related matters with, or our inability to collect accounts
receivable from, any of these customers. In addition, on a pro forma basis, the
Ortho Acquisition could result in even more significant customer concentration.
TERMINATION OF ROUNDUP MARKETING AGREEMENT -- IF MONSANTO TERMINATES THE ROUNDUP
MARKETING AGREEMENT, WE WOULD LOSE A SUBSTANTIAL SOURCE OF FUTURE EARNINGS.
15
<PAGE> 19
Monsanto has the right to terminate the Roundup Marketing Agreement either as a
whole or within a particular region for certain events of default. If Monsanto
rightfully terminates the Roundup Marketing Agreement pursuant to an event of
default, we would not be entitled to any termination fee under the Roundup
Marketing Agreement and would lose the significant source of earnings that we
believe the Roundup Marketing Agreement provides. In addition, Monsanto may
terminate the Roundup Marketing Agreement within a given region, including North
America, without paying us a termination fee, if sales in that region decline on
a consumer sell-through basis over a cumulative three program year period or if
such sales decline by more than 5% for each of two consecutive program years,
unless we can demonstrate that the decline was caused by a severe decline of
general economic conditions or a severe decline in the lawn and garden market in
such region rather than by our failure to perform our duties under the Roundup
Marketing Agreement. See "The Transactions -- Roundup Marketing Agreement --
Termination."
POST-PATENT RESULTS OF ROUNDUP(R) AND SCOTTS TURF BUILDER(R) IN THE UNITED
STATES -- WE CANNOT PREDICT THE SUCCESS OF ROUNDUP(R) AFTER GLYPHOSATE CEASES TO
BE PATENTED OR THE SUCCESS OF THE TURF BUILDER(R) LINE OF PRODUCTS AFTER
EXPIRATION OF THE METHYLENE-UREA PRODUCT COMPOSITION PATENT. SUBSTANTIAL NEW
COMPETITION IN THE UNITED STATES COULD ADVERSELY AFFECT OUR BUSINESS.
Glyphosate, the active ingredient in Roundup(R), is subject to a patent in the
United States that expires in September 2000. Sales in the United States may
decline as a result of increased competition after the U.S. patent expires. Any
decline in sales would adversely affect our Net Commission under the Roundup
Marketing Agreement and therefore our financial results. Such a decline could
also trigger Monsanto's regional termination right under the Roundup Marketing
Agreement. See "The Transactions -- Roundup Marketing Agreement -- Termination."
Furthermore, our methylene-urea product composition patent which covers Scotts
Turf Builder(R), Scotts Turf Builder(R) Plus 2(TM) with Weed Control and Scotts
Turf Builder(R) with Halts(R) Crabgrass Preventer, is due to expire in July
2001. Any decline in sales of Turf Builder(R) products after the expiration of
the methylene-urea product composition patent could adversely affect our
financial results.
CONTROL BY SIGNIFICANT SHAREHOLDERS -- THE INTERESTS OF THE FORMER MIRACLE-GRO
SHAREHOLDERS COULD CONFLICT WITH THOSE OF THE OTHER SHAREHOLDERS OR THE HOLDERS
OF THE NOTES.
The former shareholders of Miracle-Gro Products, Inc. (the "Miracle-Gro
Shareholders") (through the Hagedorn Partnership, L.P.) beneficially own
approximately 42% of the outstanding common shares of the Company on a fully
diluted basis. While the merger transactions involving Scotts and Miracle-Gro
Products, Inc. placed voting restrictions on the Miracle-Gro Shareholders
through May 19, 2000, the Miracle-Gro Shareholders have the right to designate
three members of the Company's Board of Directors and have the ability to veto
significant corporate actions by the Company. In addition, after May 19, 2000,
the Miracle-Gro Shareholders will be able to vote their shares without
restriction and will be able to significantly control the election of directors
and the approval of other actions requiring the approval of the Company's
shareholders. The interests of the Miracle-Gro Shareholders could conflict with
those of the Company's other shareholders or the holders of the Notes.
EFFECT OF SEASONALITY -- OUR HISTORICAL SEASONALITY COULD IMPAIR OUR ABILITY TO
MAKE INTEREST PAYMENTS ON THE NOTES.
Because our products are used primarily in the Spring and Summer, our business
is highly seasonal. For the past two fiscal years, approximately 72% of our
sales have occurred in the combined second and third fiscal quarters. Our
working capital needs, and correspondingly our borrowings, peak near the end of
our first fiscal quarter during which we generate fewer revenues while incurring
expenditures in preparation for the Spring selling season. If cash on hand and
revenues are insufficient to cover payments due on the Notes and if, at that
time, we are unable to draw on our New Credit Facility, this seasonality could
adversely affect our ability to make interest payments as required by the Notes.
Adverse weather conditions could heighten this risk. See " -- Effect of Weather
Conditions."
EFFECT OF WEATHER CONDITIONS -- ADVERSE WEATHER CONDITIONS COULD ADVERSELY
IMPACT OUR FINANCIAL RESULTS.
16
<PAGE> 20
Weather conditions in North America and Europe have a significant impact on the
timing of sales in the Spring selling season and overall annual sales. Periods
of wet weather can slow fertilizer sales, while periods of dry, hot weather can
decrease pesticide sales. In addition, an abnormally cold Spring throughout
North America and/or Europe could adversely affect both fertilizer and
pesticides sales and therefore our financial results.
ENVIRONMENTAL REGULATION -- COMPLIANCE WITH ENVIRONMENTAL AND OTHER PUBLIC
HEALTH REGULATIONS COULD RESULT IN THE EXPENDITURE OF SIGNIFICANT CAPITAL
RESOURCES.
Local, state, federal and foreign laws and regulations relating to environmental
matters affect us in several ways. All products containing pesticides must be
registered with the United States Environmental Protection Agency (and in many
cases, similar state and/or foreign agencies) before they can be sold. The
inability to obtain or the cancellation of any such registration could have an
adverse effect on us. The severity of the effect would depend on which products
were involved, whether another product could be substituted and whether our
competitors were similarly affected. We attempt to anticipate regulatory
developments and maintain registrations of, and access to, substitute chemicals,
but we may not always be able to avoid or minimize these risks.
Regulations regarding the use of certain pesticide and fertilizer products 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. In addition, with the RPJ and
Ortho Acquisition, we have acquired many new pesticide product lines that are
subject to additional regulations. Even if we are able to comply with all such
regulations and obtain all necessary registrations, we cannot assure that our
products, particularly pesticide products, will not cause injury to the
environment or to people under all circumstances. The costs of compliance,
remediation or products liability have adversely affected our operating results
in the past and could materially affect our future quarterly or annual operating
results.
ADDRESSING YEAR 2000 ISSUES -- OUR FAILURE, OR THE FAILURE OF OUR THIRD PARTY
SUPPLIERS OR RETAILER CUSTOMERS, TO ADDRESS INFORMATION TECHNOLOGY ISSUES
RELATED TO THE YEAR 2000 COULD ADVERSELY AFFECT OUR OPERATIONS.
Like other business entities, we must address the ability of our computer
software applications and other business systems (e.g., embedded microchips) to
properly identify the year 2000 due to a commonly used programming convention of
using only two digits to identify a year. Unless modified or replaced, these
systems could fail or create erroneous results when referencing the Year 2000.
While we are assessing the relevant issues related to the Year 2000 problem and
have implemented a readiness program to mitigate the possibility of business
interruption or other risks, we cannot be sure that we will have adequately
addressed the issue, particularly with respect to our recent and pending
acquisitions. Moreover, we rely on third party suppliers for finished goods, raw
materials, water, other utilities, transportation and a variety of other key
services. If one or more of these suppliers fail to address the Year 2000
problem adequately, such suppliers' operations could be interrupted. This
interruption, in turn, could adversely affect our operations. In addition, the
failure of our retailer customers adequately to address the Year 2000 problem
could adversely affect our financial results.
EFFECT OF NEW EUROPEAN CURRENCY -- THE IMPLEMENTATION OF THE EURO CURRENCY IN
CERTAIN EUROPEAN COUNTRIES BETWEEN 1999 AND 2002 COULD ADVERSELY AFFECT US.
In January 1999, the "euro" was introduced in certain Economic and Monetary
Union ("EMU") countries. During 2002, all EMU countries are expected to be
operating with the euro as their single currency. Uncertainty exists as to the
effects the euro currency will have on the marketplace. Additionally, the
European Commission has not yet defined and finalized all of the rules and
regulations with regard to the euro currency. We are still assessing the impact
the EMU formation and euro implementation will have on our internal systems and
the sale of our products. We expect to take appropriate actions based on the
results of such assessment. However, we have not yet
17
<PAGE> 21
determined the cost related to addressing this issue and there can be no
assurance that this issue and its related costs will not have a materially
adverse effect on us or our operating results and financial condition.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS -- OUR SIGNIFICANT INTERNATIONAL
OPERATIONS MAKE US MORE SUSCEPTIBLE TO FLUCTUATIONS IN CURRENCY EXCHANGE RATES
AND TO THE COSTS OF INTERNATIONAL REGULATION.
We currently operate manufacturing, sales and service facilities outside of
North America and particularly in the United Kingdom, Germany and France. Our
international operations have increased with the acquisitions of Levington,
Miracle Garden and RPJ and the Roundup Marketing Agreement and will increase
further through the Ortho Acquisition. In fiscal 1998, international sales
accounted for approximately 18% of our total sales, or approximately 23% on a
pro forma basis. Therefore, we are subject to risks associated with operations
in foreign countries, including fluctuations in currency exchange rates, the
imposition of limitations on conversion of foreign currencies into dollars or
remittance of dividends and other payments by foreign subsidiaries. Many foreign
countries have tended to suffer from inflation more than the United States. In
addition, by operating in a large number of countries, we incur additional costs
of compliance with local regulations. We have attempted to hedge some of our
currency exchange rate risks, including by borrowing in local currencies, but
such hedges do not eliminate the risk completely. The costs related to our
international operations could adversely affect our operations and financial
results in the future.
NOT ALL SUBSIDIARIES ARE GUARANTORS -- YOUR RIGHT TO RECEIVE PAYMENTS ON THE
NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR NON-GUARANTOR SUBSIDIARIES
DECLARES BANKRUPTCY, LIQUIDATES OR REORGANIZES.
Some but not all of our subsidiaries will guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of the non-guarantor
subsidiaries, holders of their indebtedness and their trade creditors will
generally be entitled to payment of their claims from the assets of those
subsidiaries before any assets are made available for distribution to us.
Assuming we had completed the Transactions and the New Credit Facility and the
offering of the Original Notes on April 3, 1999, the Notes would have been
effectively junior to $______ million of current operating liabilities,
including trade payables, of these non-guarantor subsidiaries. The non-guarantor
subsidiaries generated approximately 19% (or 23% on a pro forma basis) of our
consolidated revenues in the year ended September 30, 1998 and held
approximately 26% (or 25% on a pro forma basis) of our consolidated assets as of
September 30, 1998.
FINANCING A CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE CHANGE OF CONTROL OFFER REQUIRED BY THE
INDENTURE.
Upon the occurrence of certain specific kinds of change of control events, we
will be required to offer to repurchase all outstanding Notes. However, it is
possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of Notes or that restrictions in our New
Credit Facility will not allow such repurchases. In addition, important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
indenture. See "Description of Notes -- Repurchase at the Option of Holders."
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID THE NOTES AND THE GUARANTEES AND REQUIRE
NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM THE COMPANY OR THE SUBSIDIARY
GUARANTORS.
Under the federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, the Notes and the subsidiary guarantees could be voided, or
claims in respect of the Notes or the subsidiary guarantees could be
subordinated to all other debts of the Company or any subsidiary guarantor if,
among other things, the Company or such subsidiary guarantor, at the time it
incurred the indebtedness evidenced by the Notes or its subsidiary guarantee
received less than reasonably equivalent value or fair consideration for the
incurrence of such indebtedness, and:
18
<PAGE> 22
- was insolvent or rendered insolvent by reason of such incurrence; or
- was engaged in a business or transaction for which the Company's or
such subsidiary guarantor's remaining assets constituted unreasonably
small capital; or
- intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by the Company or such subsidiary guarantor pursuant to
the Notes or a subsidiary guarantee could be voided and required to be returned
to the Company or such subsidiary guarantor, or to a fund for the benefit of the
creditors of the Company or such subsidiary guarantor.
The measures of insolvency for purposes of these fraudulent transfer laws will
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, the Company or a
subsidiary guarantor would be considered insolvent if:
- the sum of its debts, including contingent liabilities, were greater
than the fair salable value of all of its assets; or
- if the present fair salable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
- it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history and
other factors, the Company and each subsidiary guarantor believes that, after
giving effect to the indebtedness incurred in connection with the offering of
the Original Notes and the establishment of the New Credit Facility, it will not
be insolvent, will not have unreasonably small capital for the business in which
it is engaged and will not have incurred debts beyond its ability to pay such
debts as they mature. There can be no assurance, however, as to what standard a
court would apply in making such determinations or that a court would agree with
our or the subsidiary guarantors' conclusions in this regard.
NO PRIOR MARKET FOR NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING MARKET
WILL DEVELOP FOR THE NOTES.
The Notes are a new issue of securities with no established trading market and
will not be listed on any securities exchange. We have been informed by the
initial purchasers of the Original Notes that they intend to make a market in
the Notes. However, they may cease their market-making at any time. In addition,
the liquidity of the trading market in the Notes, and the market price quoted
for the Notes, may be adversely affected by changes in the overall market for
high yield securities and by changes in our financial performance or prospects
or in the prospects for companies in our industry generally. As a result, you
cannot be sure that an active trading market will develop for the Notes.
19
<PAGE> 23
THE TRANSACTIONS
The following description is a summary of the material provisions of the RPJ
Acquisition, the Ortho Acquisition and the Roundup Marketing Agreement
(collectively, the "Transactions"). We have tried to summarize the key
contractual provisions with respect to each of these Transactions. However, we
urge you to read the following documents to fully understand each of the
Transactions:
- the Master Contract dated as of October 7, 1998 between Scotts and
Rhone-Poulenc regarding the RPJ Acquisition (the "RPJ Agreement");
- the Ortho Agreement; and
- the Roundup Marketing Agreement.
We have not included the definitions of many of the defined terms contained in
the RPJ Agreement, the Ortho Agreement or the Roundup Marketing Agreement, and
we urge you to refer to such agreements for the definitions of capitalized terms
in the following summary. Copies of the RPJ Agreement, the Ortho Agreement and
the Roundup Marketing Agreement are available as set forth below under
"Incorporation of Specified Documents by Reference."
RPJ ACQUISITION
In October 1998, the Company, through its subsidiaries, entered into the RPJ
Acquisition. The RPJ Acquisition consisted of the purchase from various
affiliates of Rhone-Poulenc Agro of: (i) the shares of Rhone-Poulenc Jardin SAS;
(ii) the shares of Celaflor GmbH.; (iii) the shares of Celaflor
Handelsgesellschaft m.b.H. and (iv) the home and garden business of
Rhone-Poulenc Agro S.A. (collectively, "RPJ"). The total consideration paid for
the RPJ Acquisition was approximately 1.2 billion French Francs, or
approximately $216 million, including 156 million French Francs, or
approximately $36 million on a present value basis, payable over the next four
years. RPJ is continental Europe's largest producer of consumer lawn and garden
products. It manufactures and sells a full line of consumer lawn and garden
pesticides, fertilizers and growing media in France, Germany, the Benelux
countries, Austria, Italy and Spain. Leading brands include KB(R),
Fertiligene(R), Celaflor(R) and Nexa Lotte(R).
ORTHO ACQUISITION
On November 13, 1998, we entered into the Ortho Agreement with Monsanto and
agreed to acquire substantially all of the non-Roundup assets of the Solaris
Division of Monsanto for $300 million, subject to adjustment depending on the
level of normalized working capital as of the closing date. These assets include
the Ortho(R), Green Cross(R), White Swan(R) and Defender(R) product lines, as
well as formulation facilities in Fort Madison, Iowa and Corwen, U.K. We closed
the Ortho Acquisition on January 21, 1999. As of such date, the working capital
adjustment was $39.9 million. The parties are still in the process of
determining the final working capital adjustment, which may be greater than or
less than $39.9 million.
The Ortho Agreement includes various customary representations and warranties of
the parties for transactions of this type and contains customary, limited
carve-outs for materiality, knowledge and disclosed information. However, the
indemnification provisions limit our total exposure to assumed liabilities,
disputes with the Ortho's distributor and breaches of representation to $5
million in the aggregate.
Pursuant to the Ortho Agreement, we made offers to all but a very limited number
of Ortho employees who work primarily in the Ortho business. We also agreed to
pay severance costs for U.S. employees based on Monsanto's severance policy. In
return, Monsanto agreed to reimburse us for half of the costs of such
termination payments, up to a maximum of $5 million.
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<PAGE> 24
In connection with the Ortho Acquisition, Scotts and Monsanto agreed to enter
into a supply agreement covering the supply of glyphosate to Scotts for use in
non-Roundup(R) products that contain glyphosate and that were sold to Scotts in
the Ortho Acquisition. The agreement guarantees Scotts with a long-term supply
of glyphosate at a price competitive with that obtainable in the open market
both now and after glyphosate ceases to be patented in the United States.
ROUNDUP TRANSACTION
On September 30, 1998, we entered the Roundup Marketing Agreement. Pursuant to
the Roundup Marketing Agreement, we became Monsanto's exclusive agent for the
marketing and distribution of consumer Roundup(R) products in the consumer lawn
and garden market within the United States and other specified countries,
including Australia, Austria, Canada, France, Germany and the United Kingdom
(the "Included Markets"). In addition, if Monsanto develops new products
containing glyphosate, the active ingredient in Roundup(R), or other
non-selective herbicides, we have specified rights to market such products as
well in the consumer lawn and garden market.
Under the Roundup Marketing Agreement, we and Monsanto will jointly develop
global consumer and trade marketing programs for Roundup(R), and we have assumed
responsibility for sales support, merchandising, distribution and logistics. We
have already taken responsibility for these functions in North America with a
longer transition expected in Europe and Australia. Monsanto will continue to
own the consumer Roundup business and will provide significant oversight of its
brand. In addition, Monsanto will continue to own and operate the agricultural
Roundup business. A Steering Committee comprised of two Scotts designees and two
Monsanto designees will have ultimate oversight over the consumer Roundup
business. In the event of a deadlock, the president of Monsanto's Agricultural
("Ag") division is entitled to the tie-breaking vote.
COMMISSION STRUCTURE
We will be compensated based on the success of the consumer Roundup business in
the Included Markets. In addition to recovering our out-of-pocket costs on a
fully burdened basis, we will receive a graduated commission to the extent that
the earnings before interest and taxes of the consumer Roundup business in the
Included Markets ("Program EBIT") exceed certain thresholds. To the extent that
Program EBIT is less than the First Commission Threshold set forth below, we
will not receive any Commission. Our Net Commission will be equal to the
Commission set forth in the following chart less the Contribution Payment we are
required to make, as described below. The Net Commission is the amount that we
will actually recognize on our income statements.
The commission structure is as follows:
<TABLE>
<CAPTION>
IF PROGRAM EBIT IS BETWEEN
THE FIRST AND SECOND IF PROGRAM EBIT IS GREATER
COMMISSION THRESHOLDS THE THAN SECOND COMMISSION
COMMISSION EQUALS THE THRESHOLD THE COMMISSION
FOLLOWING PERCENTAGE OF THE EQUALS THE FOLLOWING AMOUNT
FIRST SECOND DIFFERENCE BETWEEN PROGRAM PLUS 50% OF THE AMOUNT OF
COMMISSION COMMISSION EBIT AND THE PROGRAM EBIT
YEAR THRESHOLD THRESHOLD FIRST COMMISSION THRESHOLD ABOVE $80 MILLION
---- --------- --------- -------------------------- -----------------
<S> <C> <C> <C> <C>
1999-2000...... $30,000,000 $80,000,000 46% $23,000,000
2001........... $31,250,000 $80,000,000 44% $21,450,000
2002........... $32,531,250 $80,000,000 40% $18,987,500
2003........... $33,844,531 $80,000,000 40% $18,462,188
2004........... $35,190,645 $80,000,000 40% $17,923,742
2005........... $36,570,411 $80,000,000 40% $17,377,836
2006........... $37,984,471 $80,000,000 40% $16,806,212
2007........... $39,434,288 $80,000,000 40% $16,226,285
2008........... $40,920,145 $80,000,000 40% $15,631,942
2009+.......... $30,000,000 $80,000,000 40% $20,000,000
</TABLE>
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<PAGE> 25
Program EBIT for the 1999 Program Year will be increased by $15 million for
purposes of calculating our commission.
Under the Roundup Marketing Agreement, we are required to make an annual fixed
Contribution Payment to Monsanto. Nominally, this Contribution Payment will be
$20 million per Program Year. However, we are not required to make any
Contribution Payment in the 1999 Program Year, and the Contribution Payments for
the 2000 and 2001 Program Years will be $5 million and $15 million,
respectively. Scotts and Monsanto have agreed to defer the difference between
the $20 million nominal Contribution Payment and the actual Contribution Payment
in the first three Program Years under the Roundup Marketing Agreement.
Beginning with the 2003 Program Year and extending through the 2018 Program
Year, we must make a Contribution Payment of $25 million per Program Year until
Monsanto recovers the $40 million deferred in the first three Program Years plus
interest of 8% per year. In addition, during the 2003 through 2008 Program Year
period, we will apply 50% of the amount by which our Net Commission exceeds
certain levels toward the reimbursement of the $40 million deferral.
Specifically, we will apply toward the deferral 50% of the amount by which our
Net Commission exceeds:
<TABLE>
<CAPTION>
YEAR NET COMMISSION LEVEL
- ---- --------------------
<S> <C>
2001................................................................. $32,500,000
2002................................................................. $28,100,000
2003................................................................. $26,700,000
2004................................................................. $30,500,000
2005................................................................. $34,600,000
2006................................................................. $38,900,000
2007................................................................. $43,500,000
2008................................................................. $49,000,000
</TABLE>
TERM
The Roundup Marketing Agreement has no definite term with respect to all
Included Markets other than European Union countries. However, as set forth
below, for a period of 20 years Scotts will be entitled to receive a Termination
Fee in certain circumstances if Monsanto terminates the Roundup Marketing
Agreement upon a Change of Control of Monsanto or the sale of the consumer
Roundup business. With respect to the European Union countries, the initial term
of the Roundup Marketing Agreement extends through September 30, 2005.
Thereafter, the parties may agree to renew the Roundup Marketing Agreement with
respect to such countries through September 30, 2008, 2015 and 2018,
respectively. However, if Monsanto does not agree to any of the extension
periods with respect to the European Union countries, the "First Commission
Threshold" set forth above will become $0 with respect to the remaining Included
Markets.
TERMINATION
Monsanto has the right to terminate the Roundup Marketing Agreement upon an
Event of Default by Scotts or upon a Change of Control of Monsanto or the sale
of the consumer Roundup business, so long as the termination after a Change of
Control of Monsanto or the sale of the Roundup business occurs later than
September 30, 2003. The Events of Default by Scotts that could give rise to
termination by Monsanto include:
- "Material Breach" which is not cured within 90 days after written
notice from Monsanto and which is not remediable by the payment of
damages or by specific performance;
- "Material Fraud" which was engaged in with the intent to deceive
Monsanto and which is not cured, if curable, within 90 days after
written notice from Monsanto;
- "Material Willful Misconduct" which is not cured, if curable, within
90 days after written notice from Monsanto;
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<PAGE> 26
- "Egregious Injury" to the Roundup(R) brand that is not cured, if
curable, within 90 days after notice from Monsanto, unless such
egregious injury resulted from the exercise by Monsanto of its
tie-breaking right with respect to deadlocked actions by the Steering
Committee or was caused primarily by an act or omission of Monsanto;
- Scotts' becoming insolvent;
- the acquisition of Scotts, by merger or asset purchase, or the
acquisition of more than 25% of Scotts' voting securities, in either
case without Monsanto's prior written approval, by a competitor of
Monsanto or by an entity that Monsanto reasonably believes will
materially detract from or diminish Scotts' ability to fulfill its
duties and obligations under the Roundup Marketing Agreement; or
- the assignment by Scotts of all, or substantially all, of its rights
or obligations under the Roundup Marketing Agreement.
In addition, Monsanto may terminate the Roundup Marketing Agreement within the
North America, U.K., France or Rest of the World regions for certain declines of
the consumer Roundup business on a sell-through basis (based on point-of-sale
unit movement at certain of the top-20 Roundup customers in such region).
Specifically, Monsanto may terminate the Roundup Marketing Agreement within a
given region if the sell-through consumer Roundup business declines on a three
Program Year cumulative basis or by more than five percent in two consecutive
Program Years within such region, unless we can demonstrate that the decline was
caused by a severe decline of general economic conditions or a severe decline in
the lawn and garden market in such region rather than by our failure to perform
our duties under the Roundup Marketing Agreement. Monsanto would also not be
able to terminate the Roundup Marketing Agreement if such decline was caused by
Monsanto's exercise of its right to break ties with respect to deadlocked
decisions of the Steering Committee.
We have rights similar to Monsanto's to terminate the Agreement upon a Material
Breach, Material Fraud or Material Misconduct by Monsanto. In addition, we may
terminate the Roundup Marketing Agreement upon a sale of the consumer Roundup
business, although we would lose the Termination Fee set forth below in such
event.
TERMINATION FEE
Except to the extent set forth below, if Monsanto terminates the Roundup
Marketing Agreement upon a Change of Control of Monsanto or the sale of the
consumer Roundup business, we will be entitled to receive a Termination Fee. We
will also be entitled to receive a Termination Fee if we terminate the Roundup
Marketing Agreement upon a Material Breach, Material Fraud or Material Willful
Misconduct by Monsanto. The Termination Fee will be calculated in accordance
with the following schedule:
<TABLE>
<CAPTION>
THE TERMINATION FEE PAYABLE
IF TERMINATION OCCURS PRIOR TO SEPTEMBER 30, TO SCOTTS WILL BE EQUAL TO:
- -------------------------------------------- --------------------------
<S> <C>
2003........................................................... $150,000,000 *
2004........................................................... $140,000,000
2005........................................................... $130,000,000
2006........................................................... $120,000,000
2007........................................................... $110,000,000
2008........................................................... $100,000,000
</TABLE>
- -----------
* Neither Monsanto nor a successor to the consumer Roundup business may
terminate the Roundup Marketing Agreement prior to September 30, 2003 upon
a Change of Control or a sale of the consumer Roundup business. If Monsanto
or a successor were to do so despite such prohibition, the Termination Fee
payable to Scotts would be $185 million.
Between October 1, 2009 and September 30, 2018, if Monsanto terminates the
Roundup Marketing Agreement upon a sale of the consumer Roundup business or if a
successor terminates the Roundup Marketing Agreement
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<PAGE> 27
following a Change of Control of Monsanto, the Termination Fee will be equal to
the greater of (i) a percentage of the portion of the purchase price of the
consumer Roundup business in excess of a specified amount and (ii) $16 million.
In addition, if Monsanto terminates the Roundup Marketing Agreement for any
reason other than Egregious Injury, Material Fraud or Material Willful
Misconduct by Scotts, Monsanto will forfeit recovery of any unpaid portion of
the $40 million deferral of Contribution Payments described above.
SALE OF ROUNDUP
Monsanto has agreed to provide us with notice of any proposed sale of the
consumer Roundup business, allow us to participate in the sale process and
negotiate in good faith with us with respect to such a sale. If the sale is run
as an auction, we will further be entitled to a 15-day exclusive negotiation
period following the submission of all bids to Monsanto. During this period, we
may revise our original bid, but we will not have the right to review the terms
of any other bids.
In the event that we acquire the consumer Roundup business in such a sale, we
will receive credit against the purchase price in the amount of the Termination
Fee that would otherwise have been paid to us upon termination by Monsanto of
the Roundup Marketing Agreement upon such a sale.
If Monsanto decides to sell the consumer Roundup business to another party, we
must let Monsanto know within 30 days after receipt of notice of the purchaser
whether we intend to terminate the Roundup Marketing Agreement and forfeit any
right to a Termination Fee or whether we will agree to perform our obligations
under the Roundup Marketing Agreement on behalf of the purchaser, unless and
until such purchaser terminates us and pays us the applicable Termination Fee.
MARKETING FEE
Upon execution of the Roundup Marketing Agreement, we paid Monsanto a fee of $32
million in consideration for the rights we obtained under the Roundup Marketing
Agreement with respect to North America.
CENTRAL GARDEN
Central Garden & Pet Company ("Central Garden") has been providing distribution,
warehousing and other services to the Monsanto pursuant to an agreement that
will terminate on September 30, 1999. The Roundup Marketing Agreement does not
affect Monsanto's obligations under the agreement with Central Garden. However,
we do not believe that such agreement will materially interfere with our rights
or obligations under the Roundup Marketing Agreement. We are currently in
discussions with Central Garden regarding a continuing relationship between
Central Garden and the consumer Roundup business.
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<PAGE> 28
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the Exchange Notes. The
gross proceeds from the offering of the Original Notes, together with borrowings
under the New Credit Facility, were used (i) to fund the payment to Monsanto for
the Ortho Acquisition; (ii) to repurchase the Company's then outstanding 9 7/8%
Senior Subordinated Notes Due 2004; and (iii) to pay certain fees and expenses.
CAPITALIZATION
The following table sets forth the capitalization of the Company at April 3,
1999 and after giving effect to the offering of the Original Notes, the New
Credit Facility and the Transactions.
<TABLE>
<CAPTION>
AS OF
APRIL 3, 1999
-------------------
ACTUAL PRO FORMA
------ ---------
(IN MILLIONS)
Debt (including current portion) (1):
<S> <C> <C>
New Credit Facility (2):
Revolving Credit Facility......................... $ $
Term Loans........................................
9 7/8% Senior Subordinated Notes due 2004 (3)........
8.625% Notes.........................................
Other debt (4).......................................
Total debt.......................................
Shareholders' equity (5)...................................
Total capitalization.............................
</TABLE>
- ----------------
(1) For a description of the Company's outstanding indebtedness, see
"Description of New Credit Facility."
(2) The New Credit Facility was closed on December 4, 1998. The total
commitment under the New Credit Facility is $1.025 billion.
(3) Approximately 97% of the Company's 9 7/8% Senior Subordinated Notes due
2004 were tendered pursuant to a tender offer that closed simultaneously
with the closing of the offering of the Original Notes. The Company intends
(i) to repurchase the remaining 9 7/8% Senior Subordinated Notes due 2004
or (ii) redeem such notes as soon as reasonably practicable after August 1,
1999, which is the first date the Company is permitted to do so under the
indenture with respect to the 9 7/8% Senior Subordinated Notes due 2004.
The Company and The Chase Manhattan Bank, N.A., as trustee, have entered
into a Fourth Supplemental Indenture dated as of January 15, 1999, that
amends the indenture with for the 9 7/8% Senior Subordinated Notes due 2004
to eliminate substantially all of the significant covenants and related
defaults contained in the indenture.
(4) Consists of foreign subsidiary loans, capital leases and, on a pro forma
basis, RPJ seller notes and $2.5 million of assumed indebtedness of RPJ.
(5) Includes $195 million aggregate liquidation preference of convertible
preferred stock, convertible at $19 per common share, which is callable at
the option of the Company after May 19, 2000.
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<PAGE> 29
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS)
The following pro forma statements of operations are presented as if the
Transactions and the offering of the Original Notes had occurred and the New
Credit Facility was in place on October 1, 1997. The following pro forma balance
sheet gives effect to the Transactions, the New Credit Facility and the offering
of the Original Notes and the use of proceeds therefrom as if they had occurred
on April 3, 1999. The accompanying pro forma information is presented for
illustrative purposes and is not necessarily indicative of the financial
position or results of operations which would actually have been reported had
the above transactions been in effect during the periods presented or which may
be reported in the future. The Unaudited Selected Pro Forma Combined Financial
Data are based upon assumptions that the Company believes are reasonable and
should be read in conjunction with the Company's historical financial statements
and the financial statements of RPJ and Ortho that are incorporated by reference
herein.
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<PAGE> 30
UNAUDITED SELECTED PRO FORMA COMBINED STATEMENT OF INCOME
AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30, 1998
-------------------------------------
SCOTTS RPJ ORTHO OTHER SCOTTS
HISTORICAL RPJ(1) ADJUSTMENTS ORTHO ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------ ----------- ----- ----------- ----------- ---------
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C>
Sales....................... $ 1,113.0 $ 144.3 $ 211.4 $ 46.8(2) $1,526.5
11.0(3)
Cost of sales............... 715.0 75.4 128.8 21.2(2) 948.1
6.7(3)
1.0(4)
--------- -------- ------- ------- -------
Gross profit................ 398.0 68.9 82.6 28.9 578.4
(Income )from Roundup
Marketing Agreement..... (35.0)(5) (35.0)
SG&A........................ 271.6 55.7 59.0 25.6(2) 413.4
1.5(6)
Amortization of goodwill and
other intangibles....... 12.9 2.3 3.5(7) 17.8 (12.3)(8) 1.6(9) 25.8
Restructuring and other 15.4 1.8 -- -- 17.2
charges.....................
Other expense (income), net. 4.0 0.4 -- -- 4.4
--------- -------- --------- ------- ------- ------- -------
Income from operations... 94.1 8.7 (3.5) 5.8 14.1 33.4 152.6
Interest expense............ 32.2 0.2 -- -- 53.9(10) 86.3
--------- -------- --------- ------- ------- ------- -------
Income before income taxes.. 61.9 8.53 (3.5) 5.8 14.1 (20.5) 66.3
Provision for income taxes.. 24.9 5.3 -- -- -- (3.5)(11) 26.7
--------- -------- --------- ------- ------- ------- -------
Income before extraordinary
item........................ $ 37.0 $ 3.2 $ (3.5) $ 5.8 $ 14.1 $ (17.0) $ 39.6
========= ======== ========= ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA (12)................. $ 131.9 $ 13.2 -- $ 27.1 $ 1.8 $ 35.0 $ 209.0
Adjusted EBITDA (13)........ 152.3 15.0 -- 27.1 1.8 35.0 231.2
Cash interest expense....... 31.5 0.2 51.2 81.7
Depreciation and amortization 37.8 4.5 3.5 21.3 (12.3) 1.6 56.4
Capital expenditures........ 41.3 1.0 3.0 45.3
</TABLE>
See Notes to Unaudited Selected Pro Forma Combined Statement of Income and Other
Financial Data.
27
<PAGE> 31
NOTES TO UNAUDITED SELECTED PRO FORMA COMBINED STATEMENT OF INCOME
AND OTHER FINANCIAL DATA
(1) The statement of income data for RPJ have been translated from French
Francs to U.S. Dollars using the average exchange rate for the year ended
September 30, 1998.
(2) Represents the reclassification of certain amounts to conform with the
Company's presentation.
(3) Represents adjustment to sales and cost of sales on certain shipments to
distributors. The Company intends to reflect these shipments as inventory
until such inventory is subsequently shipped to retailer locations. The
adjustment is calculated as follows:
<TABLE>
<S> <C>
Estimated increase in revenue.......................... $ 11.0
Cost of sales as a percentage of sales for the Ortho
business for fiscal 1998.......................... 60.9%
------------
Estimated increase in cost of sales.................... $ 6.7
</TABLE>
(4) Represents estimated increase in cost of sales from change in basis for
Ortho inventory from LIFO to FIFO as described in note 3 to " -- Unaudited
Selected Pro Forma Combined Balance Sheet Data."
(5) Represents the estimated commission that would have been earned for the
1998 Program Year (the twelve months ended September 30, 1998) under the
applicable provisions of the Roundup Marketing Agreement relating to the
calculation of the Company's commission with respect to the first Program
Year (1999), applying such calculation to the unaudited earnings of the
consumer Roundup business for the twelve months ended September 30, 1998.
Therefore, the Contribution Payment for the 1998 Program Year is assumed to
be the same as the Contribution Payment for the 1999 Program Year. See "The
Transactions -- Roundup Marketing Agreement -- Commission Structure."
(6) Reflects the estimated increase in certain administrative costs (e.g.,
legal, payroll, risk management, tax department, human resources,
information systems, etc.) that are considered necessary to support the
Ortho business.
(7) Reflects adjustment to amortization of goodwill and other intangibles
resulting from an allocation of the estimated purchase price of the RPJ
business as follows:
<TABLE>
<S> <C>
Estimated purchase price (including estimated transaction
costs of $7.3 million).................................. $ 216.3
Less amounts allocated to tangible assets and liabilities... (13.1)
----------
Amount allocated to goodwill and other intangibles.......... 203.2
Estimated average useful life (in years).................... 35.0
-----------
5.8
Less amortization included in historical RPJ financial
statements.............................................. 2.3
-----------
$ 3.5
</TABLE>
A valuation of the RPJ business has not been completed as of the date of
this Prospectus. Accordingly, the allocation of the anticipated purchase
price is based on management's estimates and assumes that the book value
fixed assets reasonably approximates their fair value. The excess of the
purchase price over the value of tangible assets generally is assumed to
represent goodwill with an estimated useful life of 50 years, however
certain other intangible assets (e.g., trademarks, patents, etc) may be
identified in the valuation process which have useful lives of less than
40 years. Accordingly, the excess purchase price over the value of
tangible assets is being amortized over an average life of 35 years. The
Company expects that the final allocation of the purchase price will be
completed during the third quarter of fiscal 1999.
(8) Reflects adjustment to amortization of goodwill and other intangibles
resulting from an allocation of the estimated purchase price of the Ortho
business as follows:
29
<PAGE> 32
<TABLE>
<S> <C>
Estimated purchase price (including estimated transaction
costs of $10.0 million)................................. $ 310.0
Less amounts allocated to tangible assets and liabilities... (116.0)
----------
Amount allocated to goodwill and other intangibles.......... 194.0
Estimated average useful life (in years).................... 35.0
-----------
5.5
Less amortization included in historical Ortho financial
statements.............................................. 17.8
-----------
$ (12.3)
</TABLE>
A valuation of the Ortho business has not been completed as of the date
of this Prospectus. Accordingly, the allocation of the anticipated
purchase price is based on management's estimates and assumes that the
book value fixed assets reasonably approximates their fair value. The
excess of the purchase price over the value of tangible assets generally
is assumed to represent goodwill with an estimated useful life of 50
years, however certain other intangible assets (e.g., trademarks,
patents, etc) may be identified in the valuation process which have
useful lives of less than 40 years. Accordingly, the excess purchase
price over the value of tangible assets is being amortized over an
average life of 35 years. The Company expects that the final allocation
of the purchase price will be completed during the third or fourth
quarter of fiscal 1999.
In addition, the valuation does not address any adjustment for the level
of normalized working capital as of the closing date of the Ortho
Acquisition. No portion of such adjustment would be amortized. Rather it
will be reflected as an adjustment to working capital. The Company made
an additional payment to Monsanto of $39.9 million on the closing date of
the Ortho Acquisition based on Monsanto's estimate of normalized working
capital. The Company and Monsanto are still in discussions regarding the
actual amount of normalized working capital and expect the issue to be
resolved during second or third quarters of fiscal 1999. See "The
Transactions -- Ortho Acquisition."
(9) Represents amortization over a term of 20 years of the $32.0 million
payment by the Company to Monsanto in connection with the marketing
rights under the Roundup Marketing Agreement.
(10) Represents the net adjustment to interest expense as a result of the
anticipated bank borrowings under the New Credit Facility and the
offering of the Original Notes calculated as follows:
<TABLE>
<S> <C>
Revolving Credit Facility (a)............................... $ 11.6
Pound Sterling Term Loan (b)................................ 10.9
French Franc Term Loan (c).................................. 4.9
Deutschemark Term Loan (d).................................. 3.3
Tranche B Term Loan (e)..................................... 8.2
Tranche C Term Loan (f)..................................... 10.5
8.625% Senior Subordinated Notes due 2009 (g)............... 28.5
RPJ Seller Notes (h)........................................ 2.1
Amortization of rate locks (i).............................. 1.3
Amortization of deferred financing costs (j)................ 3.3
Interest on remaining indebtedness.......................... 1.7
-----------
Pro forma interest expense............................. 86.3
Less interest on refinanced indebtedness.................... 30.7
Less interest on remaining indebtedness..................... 1.7
-----------
Net adjustment......................................... 53.9
</TABLE>
- ------------
(a) Represents interest on floating rate Revolving Credit Facility using an
assumed interest rate of 7.69%.
(b) Represents interest on floating rate Pound Sterling Term Loan using an
assumed interest rate of 9.10%.
(c) Represents interest on floating rate French Franc Term Loan using an
assumed interest rate of 6.06%.
30
<PAGE> 33
(d) Represents interest on floating rate Deutschemark Term Loan using an
assumed interest rate of 5.98%.
(e) Represents interest on floating rate Tranche B Term Loan using an assumed
interest rate of 8.53%.
(f) Represents interest on floating rate Tranche C Term Loan using an assumed
interest rate of 8.78%.
(g) Represents interest on the $330.0 million fixed rate Original Notes.
(h) Represents interest on amounts due the seller of the RPJ business using an
assumed interest rate of 6.00%.
(i) Represents amortization of amounts deferred under treasury rate locks over
a period of 10 years.
(j) Represents amortization of deferred financing costs over a period of 8.1
years.
An increase or decrease of 0.125% in the assumed interest rate would change the
pro forma interest expense on floating rate debt as follows:
<TABLE>
<S> <C>
Revolving Credit Facility.................................. $ 0.2
Pound Sterling Term Loan................................... 0.1
French Franc Term Loan..................................... 0.1
Deutschemark Term Loan..................................... 0.1
Tranche B Term Loan........................................ 0.1
Tranche C Term Loan........................................ 0.2
-----------
$ 0.8
===========
</TABLE>
(11) Represents an estimated provision for income taxes on a combined pro
forma basis using the effective tax rate for the Company on a stand-alone
basis for fiscal 1998 of 40.3%.
(12) "EBITDA" is defined as income from operations, plus depreciation and
amortization. EBITDA is not intended to represent cash flow from
operations as defined by generally accepted accounting principles and
should not be used as an alternative to net income as an indicator of
operating performance or to cash flow as a measure of liquidity. EBITDA
is included in this Prospectus because it is a basis upon which Scotts'
management assesses financial performance. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the
method of calculation.
(13) "Adjusted EBITDA" reflects EBITDA as calculated in note (12) above
adjusted for the effect of the non-recurring restructuring charges taken
by the Company of $20.4 million (or which $15.4 million is included in
restructuring and other charges, $2.9 million is included in cost of
sales and $2.1 million is included in selling, general & administrative)
and RPJ of $1.8 million during the twelve months ended September 30,
1998.
(14) Cash interest expense includes amortization of deferred financing costs and
interest rate locks.
31
<PAGE> 34
UNAUDITED SELECTED PRO FORMA COMBINED STATEMENT OF
INCOME AND OTHER FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED APRIL 3, 1999
------------------------------------------------------------
SCOTTS ORTHO OTHER SCOTTS
HISTORICAL ORTHO ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Sales .........................
Cost of Sales .................
Gross profit...................
Income from marketing agreement
SG&A ...........................
Amortization of goodwill and
other intangibles .............
Restructuring and other charges
Other expense (income) .........
Loss from operations ...........
Interest expense ...............
Income before income taxes .....
Income taxes ...................
Income before extraordinary item
OTHER DATA:
EBITDA (8) .....................
Adjusted EBITDA (9) ............
Cash interest expense (10) .....
Depreciation and amortization ..
Capital expenditures ...........
</TABLE>
- ---------------
(1) Represents the reclassification of certain amounts to conform with the
Company's presentation.
(2) Represents adjustment to sales and cost of sales on certain shipments to
distributors. The Company intends to reflect these shipments as inventory
until such inventory is subsequently shipped to retailer locations. The
adjustment is calculated as follows:
<TABLE>
<S> <C>
Estimated decrease in revenue ....................
Cost of sales as a percentage of sales for the
Ortho business for the six months ended
April 3, 1999 ..................................
Estimated decrease in cost of sales ..............
</TABLE>
(3) Represents estimated increase in cost of sales resulting from change in
basis for Ortho inventory from LIFO to FIFO as described in note 3 to
"-- Unaudited Selected Pro Forma Combined Balance Sheet Data."
32
<PAGE> 35
(4) Reflects the estimated increase in certain administrative costs (e.g.,
legal, payroll, risk management, tax department, human resources,
information systems, etc.) that are considered necessary to support the
Ortho business.
(5) Reflects adjustment to amortization of goodwill and other intangibles
resulting from an allocation of the estimated purchase price of the Ortho
business as follows:
<TABLE>
<S> <C>
Estimated purchase price (including estimated
transaction costs of $___ million)...........
Less amounts allocated to tangible assets and
liabilities..................................
Amount allocated to goodwill and other
intangibles..................................
Estimated average useful life (in quarters)....
Less amortization included in historical Ortho
financial statements.........................
</TABLE>
A valuation of the Ortho business has not been completed as of the date
of this Registration Statement. Accordingly, the allocation of the
anticipated purchase price is based on management's estimates and assumes
that the book value of fixed assets reasonably approximates their fair
value. The excess of the purchase price over the value of tangible assets
generally is assumed to represent goodwill with an estimated useful life
of 40 years, however certain other intangible assets (e.g., trademarks,
patents, etc.) may be identified in the valuation process which have
useful lives of less than 40 years. Accordingly, the excess purchase
price over the value of tangible assets is being amortized over an
average life of 35 years. The Company expects that the final allocation
of the purchase price will be completed during the third or fourth
quarter of fiscal 1999.
33
<PAGE> 36
In addition, the valuation does not address any adjustment for the level
of normalized working capital as of the closing date of the Ortho
Acquisition. No portion of such adjustment would be amortized. Rather it
will be reflected as an adjustment to working capital. The Company has
received an estimate of normalized working capital of $125.9 million from
Monsanto, which estimate resulted in an additional payment to Monsanto of
$39.9 million. The Company and Monsanto are still in discussion regarding
the actual amount of normalized working capital and expect the issue to be
resolved within 60 to 90 days after the closing. See "The Transactions --
Ortho Acquisition."
(6) Represents the net adjustment to interest expense as a result of the
anticipated bank borrowings under the Company's Revolving Credit Facility
and the Notes Offering calculated as follows:
<TABLE>
<S> <C>
Revolving Credit Facility(a)....................
Notes offered hereby(g).........................
Amortization of rate locks(c)...................
Amortization of deferred financing costs(d).....
Interest on remaining indebtedness..............
Pro forma interest expense...................
Less interest on refinanced indebtedness........
Less interest on remaining indebtedness.........
Net adjustment...............................
</TABLE>
- ---------------
(a) Represents interest on floating rate Revolving Credit Facility using an
assumed average interest rate of 8.25%.
(b) Represents interest on the $330.0 million fixed rate Notes offered
hereby.
(c) Represents amortization of amounts deferred under treasury rate locks
over a period of 10 years.
(d) Represents amortization of deferred financing costs over a period of
8.1 years.
34
<PAGE> 37
(7) Represents an estimated provision for income taxes on a combined pro forma
basis using the effective tax rate for the Company on a stand-alone basis
for fiscal 1998 of 40.0%.
(8) "EBITDA" is defined as income from operations, plus depreciation and
amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
used as an alternative to net income as an indicator of operating
performance or to cash flow as a measure of liquidity. EBITDA is included
in this Offering Memorandum because it is a basis upon which Scotts'
management assesses financial performance. While EBITDA is frequently used
as a measure of operations and the ability to meet debt service
requirements, it is not necessarily comparable to other similarly titled
captions of other companies due to potential inconsistencies in the method
of calculation.
(9) "Adjusted EBITDA" reflects EBITDA as calculated in note (8) above adjusted
for the effect of the restructuring and other charges taken by the Company.
(10) Cash interest expense excludes amortization of deferred financing costs and
interest rate locks.
35
<PAGE> 38
UNAUDITED SELECTED PRO FORMA COMBINED
BALANCE SHEET DATA
<TABLE>
<CAPTION>
As of April 3, 1999
----------------------------------------------------------
Scotts Ortho Other Scotts
Historical Ortho Adjustments Adjustments Pro Forma
---------- ----- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash
Accounts receivable
Inventory
Other current assets
Total current assets
Property, plant and
equipment, net
Goodwill and other
intangibles, net
Other assets
Total assets
LIABILITY AND EQUITY
Current portion of
long-term debt
Accounts payable
Accrued liabilities
Total current liabilities
Long-term debt, net of
current portion
Other long-term liabilities
Total liabilities
Preferred stock
Common shares
Capital in excess of par
Retained earnings
Divisional equity
Cumulative foreign currency
translation account
Treasury stock
Net assets to be sold
Total equity
Total liabilities
and equity
</TABLE>
36
<PAGE> 39
(1) Represents adjustment to restate inventory and eliminate accounts receivable
for the estimated impact of the Company's anticipated revenue recognition
policy as described in note 3 to "-- Unaudited Selected Pro Forma Combined
Statement of Income and Other Financial Data".
<TABLE>
<S> <C>
Ortho shipments included in accounts receivable.............
Gross profit margin as a % of sales for the Ortho business
for the six months ended April 3, 1999....................
Gross profit on shipments that would not be recognized under
the anticipated revenue recognition policy................
Amount reinstated to inventory..............................
</TABLE>
- ---------------
(a) The tax effect of the gross profit that would not be recognized under the
Company's anticipated revenue recognition policy is reflected as a reduction
of the Company's current income tax liability using an assumed tax rate of
40.0%. The remaining amount, net of the tax effect, is reflected as a
reduction of retained earnings.
(2) Represents adjustment to convert LIFO basis inventory in historical Ortho
financial statements to the FIFO basis which management anticipates adopting
for Ortho inventory upon acquisition.
(3) Reflects net adjustment to goodwill and other intangibles as a result of the
Ortho Acquisition as follows:
<TABLE>
<S> <C>
Net amount of purchase price allocated to goodwill and other
intangibles (see note 8 to " -- Unaudited Selected Pro
Forma Combined Statement of Income and Other Financial
Data")....................................................
Goodwill and other intangibles included in historical Ortho
balance sheet.............................................
Pro forma adjustment...................................
</TABLE>
(4) Represents the transaction costs related to the initial offering of the
Notes.
36
<PAGE> 40
(5) The following table summarizes the sources and uses of cash in connection
with the Ortho Acquisition and the Notes Offering:
<TABLE>
<S> <C>
Sources:
Revolving Credit Facility..............................
Notes .................................................
Total sources........................................
Uses:
Ortho Acquisition (a).....................................
Repayment of existing 9 7/8% Senior
Subordinated Notes (b)...................................
Transaction costs (c).....................................
Total uses...........................................
</TABLE>
- ---------------
(a) Excludes any adjustment for the level of normalized working capital as
of the closing date of the Ortho Acquisition. See "The
Transactions -- Ortho Acquisition."
(b) Includes redemption of 97.1% of the currently outstanding 9 7/8% Senior
Subordinated Notes at a redemption premium of 107.258% and accrued
interest of $4.5 million. The difference between the estimated amount
to be paid to retire this portion of these notes and their carrying
value ($95.0 million, net of unamortized discount of $0.4 million and
bond issuances costs of $1.7 million) represents an extraordinary loss
on the retirement and is reflected as a reduction in retained earnings,
net of tax. The estimated tax effect is reflected as a reduction in the
Company's current income tax liability.
(c) Transaction costs include costs in connection with the Notes offering
($10.5 million), and costs in connection with the Ortho Acquisition ($8
million).
(6) Reflects the elimination of historical equity of the Ortho businesses.
37
<PAGE> 41
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
We have derived the historical financial data included in the following summary
financial data from the Company's audited and unaudited consolidated financial
statements which are incorporated by reference herein. You should read the
following information in conjunction with the Consolidated Financial Statements
of the Company and the Notes thereto, and the information contained in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," all of which are incorporated by reference in this Prospectus.
Results for the six months ended April 3, 1999 are not necessarily indicative
of the results to be expected for the full fiscal year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, --------------------
------------------------ APRIL 4, APRIL 3,
1994 1995(1) 1996 1997(2) 1998(3) 1998 1999
---- ------- ---- ------- ------- -------- --------
(DOLLARS IN MILLIONS)
OPERATING DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Sales................................ $ 606.3 $ 731.1 $ 750.4 $ 899.3 $ 1,113.0 $ $
Cost of sales........................ 404.1 498.8 512.4 573.6 715.0
--------- --------- --------- --------- ---------
Gross profit..................... 202.2 232.3 238.0 325.7 398.0
Advertising and promotion (4)........ 64.5 69.2 83.9 104.4
Selling, general and administrative.. 116.6 130.5 167.2
Amortization of goodwill and other
intangibles...................... 3.6 6.0 8.8 10.2 12.9
Restructuring and other charges...... -- -- 17.7 -- 15.4
Other expense (income), net.......... (1.4) (4.4) (0.6) 6.3 4.0
---------- --------- --------- --------- ---------
Income from operations............... 59.3 60.9 26.3 94.8 94.1
Interest expense..................... 17.9 13.9 25.0 25.2 32.2
--------- --------- --------- --------- ---------
Income before income taxes........... 41.8 36.3 1.3 69.6 61.9
Income taxes......................... 17.9 13.9 3.8 30.1 24.9
--------- --------- --------- --------- ---------
Net income (loss) before extraordinary
item............................. 23.9 22.4 (2.5) 39.5 37.0
Extraordinary loss on early extinguish-
ment to debt, net................ 1.0 -- -- -- 0.7
--------- --------- --------- --------- ---------
Net income (loss).................... $ 22.9 $ 18.8 $ (2.5) $ 39.5 $ 36.3
========= ========= ========= ========= =========
Preferred stock dividends............ $ -- $ 3.6 $ 9.8 $ 9.8 $ 9.8
Income (loss) applicable to common
shareholders.................... $ 22.9 $ 18.8 $ (12.3) $ 29.7 $ 26.5
========= ========= ========= ========= =========
OTHER DATA:
EBITDA (5)........................... $ 81.2 $ 86.6 $ 55.6 $ 125.2 $ 131.9
Adjusted EBITDA (6).................. 81.2 86.6 73.3 125.2 152.3
Depreciation and amortization (7).... 21.9 25.7 29.3 30.4 37.8
Capital expenditures................. 33.4 23.6 18.2 28.6 41.3
Ratio of earnings to fixed charges... 2.9x 2.2x 1.0x 3.3x 4.2x
BALANCE SHEET DATA (END OF PERIOD):
Working capital...................... $ 140.6 $ 227.0 $ 181.0 $ 146.5 $ 135.3
Total assets......................... 528.6 809.0 731.7 787.6 1,035.2
Total debt........................... 247.3 272.5 225.3 221.3 372.5
Shareholders' equity (8) 168.3 380.8 364.3 389.2 403.9
</TABLE>
38
<PAGE> 42
- ----------------
(1) For the 1995 fiscal year, certain reclassifications have been made to
conform the presentation with that of subsequent periods.
(2) Includes results from Miracle Garden from January 1, 1997.
(3) Includes results from Levington Group Limited from December 1997 and
EarthGro from February 1998.
(4) For the 1994 fiscal year, advertising and promotion expenses were not
separately identified but were included in selling, general and
administrative expenses.
(5) "EBITDA" is defined as income from operations, plus depreciation and
amortization. EBITDA is not intended to represent cash flow from operations
as defined by generally accepted accounting principles and should not be
used as an alternative to net income as an indicator of operating
performance or to cash flow as a measure of liquidity. While EBITDA is
frequently used as a measure of operations and the ability to meet debt
service requirements, it is not necessarily comparable to other similarly
titled captions of other companies due to potential inconsistencies in the
method of calculation.
(6) "Adjusted EBITDA" reflects EBITDA as calculated in note (5) above adjusted
for the effect of the non-recurring charges taken by the Company of $17.7
million during the fiscal year ended September 30, 1996, $20.4 million (of
which $15.4 million is included in restructuring and other charges, $2.9
million is included in cost of sales and $2.1 million is included in
selling, general & administrative) during the fiscal year ended September
30, 1998 and $1.4 million for the six months ended April 3, 1999.
(7) Depreciation and amortization excludes amortization of deferred financing
costs and debt discount.
(8) Includes $195 million aggregate liquidation preference of convertible
preferred stock, convertible at $19 per common share, which is callable at
the option of the Company after May 19, 2000.
39
<PAGE> 43
DESCRIPTION OF NEW CREDIT FACILITY
The following description is a summary of material provisions of the New Credit
Facility. It does not restate the New Credit Facility in its entirety. We urge
you to read the New Credit Facility because it, and not this description, define
the terms of our other material outstanding indebtedness. We have not included
the definitions of many of the defined terms contained in the New Credit
Facility, and we urge you to refer to such document for the definitions of
capitalized terms in the following summary. Copies of the New Credit Facility is
available as set forth under "Incorporation of Specified Documents by
Reference."
On December 4, 1998, Scotts and certain of our subsidiaries entered into a new
Credit Agreement (the "New Credit Facility"). The New Credit Facility
establishes aggregate financing for Scotts and certain of our subsidiaries which
are designated (either at closing or in the future) as co-borrowers ("Subsidiary
Borrowers") in the aggregate principal amount of $1.025 billion. The credit
financing under the New Credit Facility is provided by a lending syndicate group
consisting of approximately thirty lenders worldwide, with The Chase Manhattan
Bank serving as Administrative Agent. At the time of the closing of the New
Credit Facility, the then-existing indebtedness of the Company and its
subsidiaries under the previous credit agreement was refinanced and repaid using
proceeds from the New Credit Facility.
AMOUNT OF ADDITIONAL CREDIT AVAILABLE
The New Credit Facility provides for aggregate total senior secured credit
financing in the principal amount of up to $1.025 billion, consisting of term
loan facilities in the aggregate amount of $525 million, and a revolving credit
facility in the amount of $500 million (collectively, the "Loans"). Proceeds of
the Loans were used in part to finance the RPJ Transaction and a portion of the
purchase price of the Ortho Acquisition, as well as to refinance the
indebtedness of the Company and its subsidiaries under its previous credit
facility. A portion of the revolving credit facility will also be used to
finance our continuing operations and for permitted acquisitions of up to $100
million.
SPECIFIC CREDIT FACILITIES
The Term Loan Facilities consist of three tranches. The first, the Tranche A
Term Loan Facility, consists of a 6-1/2 year term loan facility in an aggregate
approximate principal amount equal to $265 million, which is divided into three
sub-tranches of French Francs, German Deutschemarks and British Pounds Sterling.
The Tranche A Term Loans are to be repaid in quarterly principal installments
over a 6-1/2 year period. The Tranche B Term Loan Facility consists of a 7-1/2
year term loan facility in an aggregate principal amount equal to $140 million,
which is to be repaid in nominal quarterly installments for the first 6-1/2
years and in substantial quarterly installments in the final year. The Tranche C
Term Loan Facility consists of an 8-1/2 year term loan facility in an aggregate
principal amount equal to $120 million, which is to be repaid in nominal
quarterly installments for the first 7-1/2 years and in substantial quarterly
installments in the final year. The Term Loans were disbursed in a single
drawing on the Closing Date.
The Revolving Credit Facility consists of Revolving Credit Loans in the amount
of up to $500 million, which is available on a revolving basis for a term of
6-1/2 years. A portion of the Revolving Credit Facility not to exceed $100
million is available for the issuance of letters of credit. Additionally, a
portion of the Revolving Credit Facility not to exceed $30 million is available
from Chase or Credit Lyonnais for swing line loans on same-day notice. A portion
of the Revolving Credit Facility not to exceed $225 million is available for
borrowing in optional currencies, including German Deutschemarks, British Pound
Sterling, French Francs, Belgian Francs, Italian Lira and other specified
currencies, provided that the outstanding Revolving Credit Loans in optional
currencies other than British Pounds Sterling does not exceed $120 million. The
outstanding principal amount of all Revolving Credit Loans may not exceed $150
million for at least 30 consecutive days during any calendar year.
PREPAYMENTS
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Loans may be prepaid and commitments may be reduced in certain specified minimum
amounts, and prepayment fees will be payable with respect to optional
prepayments. Optional prepayments of the Term Loans shall be applied pro rata to
the three tranches thereof ratably to the respective installments thereof. As
long as any Tranche A Term Loans are outstanding, each holder of Tranche B Term
Loans and Tranche C Term Loans shall have the right to refuse all or any portion
of such prepayment allocated to it, and the amount so refused will be applied to
repay the Tranche A Term Loans. Optional prepayments of the Term Loans may not
be reborrowed.
The New Credit Facility also provides for mandatory prepayments in certain
specified events and in certain specified percentages, including (a) 50% of the
net proceeds of any sale or issuance of equity and 100% of the net proceeds of
any incurrence of indebtedness, subject to certain specified exceptions, (b)
100% of the net proceeds of any sale or other disposition of any assets, subject
to certain exceptions, and (c) 75% of excess cash flow, subject to reductions as
specified if certain Leverage Ratios are met.
INTEREST
A pricing grid establishes various interest rate options on the Revolving Credit
Facility and the Tranche A Loans, the Tranche B Term Loans and the Tranche C
Term Loans, respectively, and is based upon the Leverage Ratio as determined by
the consolidated financial statements of the Company and its Subsidiaries. The
interest rate options include a LIBOR option, and a base rate determined by a
calculation which takes into effect the Prime Rate, the Base CD Rate, and the
Federal Funds Effective Rate in effect as of any date of determination.
GUARANTIES
The Company executed an unconditional guaranty (the "Scotts Guaranty") of all of
the indebtedness and obligations under the New Credit Facility incurred by the
Company and all of the Subsidiary Borrowers. Additionally, most of the domestic
direct and indirect subsidiaries of the Company executed a guaranty of the
Scotts Guaranty. Offshore indirect subsidiaries of the Company did not execute
any guaranties under the New Credit Facility.
COLLATERAL
The Company and all of its domestic subsidiaries pledged substantially all of
their personal property assets to secure the indebtedness and obligations under
the New Credit Facility. Additionally, the Company and its domestic subsidiaries
pledged any real property assets having a value in excess of $500,000. The
Company and its domestic subsidiaries pledged primarily all of their
intellectual property assets as well. The Company and its direct and indirect
subsidiaries also pledged primarily all of the stock which each such entity
owned in its own respective subsidiaries, except to the extent where any such
pledge was limited by laws of a foreign country, or would have resulted in
adverse tax consequences to the Company or any of its Subsidiaries.
COVENANTS
The New Credit Facility contains standard negative covenants, including
covenants which impose limitations on the ability of the Company and its
Subsidiaries to, among other things, (a) place liens on property, or incur
contingent obligations, (b) sell all or substantially all of their assets, and
(c) make any fundamental changes, or acquisitions, investments, loans or
advances, except for acquisitions in an amount not to exceed $100 million
without consent. The New Credit Facility also contains financial covenants
consisting of the maintenance of a specified Leverage Ratio, a specified
Consolidated Net Worth, and an Interest Coverage Ratio, over the life of the New
Credit Facility. These financial covenants are based upon operating performance
levels in effect throughout the term of the New Credit Facility.
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<PAGE> 45
THE EXCHANGE OFFER
GENERAL
Pursuant to the Exchange Offer, we will offer to the holders of Original Notes
who are able to make the representations described below the opportunity to
exchange their Original Notes for Exchange Notes. We may be required to file a
shelf registration statement with the Commission to cover resales of Original
Notes in the following circumstances:
- if we are not permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or
Commission policy; or
- if any holder of Original Notes notifies us within the specified
time period that (A) due to a change in law or policy the holder
is not entitled to participate in the Exchange Offer, (B) due to
a change in law or policy the holder may not resell the Exchange
Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and this Prospectus is not appropriate or
available for a resale by the holder or (C) the holder is a
broker-dealer and owns Original Notes acquired directly from us
or one of our affiliates.
If we are required to file a shelf registration statement, we will use our
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Commission.
For purposes of this discussion, "Transfer Restricted Notes" means each Original
Note until:
- the date on which the holder of the Original Note receives an
Exchange Note in the Exchange Offer;
- in the case of broker-dealers, the date on which an Exchange Note
held by the broker-dealer is sold to a purchaser who receives
from the broker-dealer a copy of this Prospectus;
- the date on which an Original Note has been effectively
registered under the Securities Act and disposed of in accordance
with a shelf registration statement; or
- the date on which an Original Note is distributed to the public
pursuant to Rule 144 under the Securities Act.
Under existing Commission interpretations, the Exchange Notes would, in general,
be freely transferable after the Exchange Offer without further registration
under the Securities Act. In the case of broker-dealers participating in the
Exchange Offer, a prospectus meeting the requirements of the Securities Act must
be delivered upon resale of the Exchange Notes by the broker-dealer. For 180
days after consummation of the Exchange Offer, we have agreed to make available
a prospectus meeting the requirements of the Securities Act to any broker-dealer
for use in connection with any resale of any Exchange Notes acquired in the
Exchange Offer. A broker-dealer which delivers a prospectus to purchasers in
connection with resales will be subject to certain of the civil liability
provisions under the Securities Act and will be bound by the provisions of the
Registration Rights Agreement (including certain indemnification rights and
obligations).
Each holder of the Original Notes who wishes to receive Exchange Notes in the
Exchange Offer will be required to make the following representations:
- any Exchange Notes to be received by the holder will be acquired
in the ordinary course of its business;
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<PAGE> 46
- the holder has no arrangement with any person to participate in
the distribution of the Exchange Notes; and
- the holder is not an "affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an affiliate, it will
comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable.
If the holder is not a broker-dealer, it will also be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the
Exchange Notes. If the holder is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Original Notes that were acquired as a
result of market-making activities or other trading activities, it will be
required to acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes.
Unless the Exchange Offer would not be permitted by applicable law or Commission
policy, we have agreed to use our reasonable best efforts to have the
Registration Statement of which this Prospectus is a part declared effective by
the Commission on or prior to 270 days after the closing of the offering of the
Original Notes. We will commence the Exchange Offer and use reasonable best
efforts to issue, on or prior to 30 business days after the date on which the
Exchange Offer registration statement was declared effective by the Commission,
Exchange Notes in exchange for all Original Notes tendered prior thereto in the
Exchange Offer. If necessary, the Company will file a shelf registration
statement prior to 30 days after such filing obligation arises and to cause the
shelf registration statement to be declared effective by the Commission on or
prior to 90 days after such obligation arises. The Company will use its
reasonable best efforts to keep any shelf registration statement continuously
effective, supplemented and amended until the second anniversary of the closing
of the offering of the Original Notes or such shorter period that will terminate
when all the Transfer Restricted Notes covered by the shelf registration
statement have been sold pursuant thereto
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes which are not exchanged for Exchange Notes pursuant to the
Exchange Offer and are not included in a resale prospectus will remain Transfer
Restricted Notes. Transfer Restricted Notes may be offered, sold or otherwise
transferred prior to the date which is two years after the later of the date of
original issue and the last date that the Company or any affiliate of the
Company was the owner of the Transfer Restricted Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) for so long as the Original Notes are eligible for
resale pursuant to Rule 144A, to a person the owner reasonably believes is a
qualified institutional buyer that purchases for its own account or for the
account of a qualified institutional buyer to whom notice is given that the
transfer is being made in reliance to Rule 144A, (d) to an "accredited investor"
within the meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule
501 under the Securities Act that is purchasing for his own account or for the
account of such an "accredited investor" in each case in a minimum of Original
Notes with a purchase price of $500,000, or (c) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
its property or the property of such investor account or accounts be at all
times within its or their control. These restrictions on resale will not apply
after the Resale Restriction Termination Date. If any resale or other transfer
of the Original Notes is proposed to be made pursuant to clause (d) above prior
to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee to the Company and the Trustee, which shall provide,
among other things, that the transferee is an "accredited investor" within the
meaning of subparagraph (1), (2), (3) or (7) of paragraph (a) of Rule 501 under
the Securities Act and that it is acquiring the Original Notes for investment
purposes and not for distribution in violation of the Securities Act. Prior to
any offer, sale or other transfer of Original Notes prior to the Resale
Restriction Termination Date pursuant to clauses (d) or (e) above, the issuer
and the Trustee may require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to each of them.
TERMS OF THE EXCHANGE OFFER
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<PAGE> 47
Upon the terms and subject to the conditions set forth in this Prospectus and in
the Letter of Transmittal, the Company will accept any and all Original Notes
validly tendered and not withdrawn prior to the Expiration Date. The Company
will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000
principal amount of Original Notes accepted in the Exchange Offer. Holders may
tender some or all of their Original Notes pursuant to the Exchange Offer.
However, Original Notes may be tendered only in integral multiples of $1,000
principal amount.
The form and terms of the Exchange Notes are the same as the form and terms of
the Original Notes, except that (i) the Exchange Notes have been registered
under the Securities Act and therefore will not bear legends restricting their
transfer pursuant to the Securities Act, and (ii) the holders of Exchange Notes
will not be entitled to rights under the Registration Rights Agreement (except
under certain limited circumstances). The Exchange Notes will evidence the same
debt as the Original Notes (which they replace), and will be issued under, and
be entitled to the benefits of, the Indenture.
Solely for reasons of administration (and for no other purpose) the Company has
fixed the close of business on , 1999 as the record date for the
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially. Only a registered holder
of Original Notes (or the holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered holders of the Original Notes entitled to participate in the Exchange
Offer.
Holders of the Original Notes do not have any appraisal or dissenters' rights
under the General Corporation Law of Ohio or under the Indenture in connection
with the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the applicable requirements of the Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Original Notes
when, as and if it has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of the
Original Notes for purposes of receiving the Exchange Notes.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be returned
without expense to the tendering holder thereof as promptly as practicable after
the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Original
Notes pursuant to the Exchange Offer. We will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer. See
"-- Fees and Expenses."
EXPIRATION DATE; EXTENSION; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time on , 1999,
unless the Company extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which such Exchange
Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, prior to 9:00 a.m., New York City time, on the next
Business Day after the previously scheduled Expiration Date.
We reserve the right, in our sole discretion, (i) to delay accepting any
Original Notes, (ii) extend the Exchange Offer, (iii) if the condition set forth
below under "-- Conditions of the Exchange Offer" shall not have been
satisfied, to terminate the Exchange Offer, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (iv) to amend the
terms of the Exchange Offer in any manner. Any delay in acceptance,
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<PAGE> 48
extension, termination or amendment will be followed as promptly as practicable
by a public announcement. If we determine that the Exchange Offer is amended in
a manner that would constitute a material change, we will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders of the Original Notes, and the Exchange Offer will be
extended for a period of five to ten business days, as required by law,
depending upon the significance of the amendment and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
Without limiting the manner in which we may choose to make public announcement
of any delay, extension, termination or amendment of its Exchange Offer, we
shall not have an obligation to publish, advertise, or otherwise communicate any
such public announcement, other than by making a timely release thereof to the
Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, have the signatures thereon guaranteed if
required by the Letter of Transmittal, and mail or otherwise deliver the Letter
of Transmittal to the Exchange Agent at the address set forth below under " --
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for the Original Notes must be received by the Exchange Agent
along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Original Notes into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date, or
(iii) the holder must comply with the guaranteed delivery procedures described
below. To be tendered effectively, the Letter of Transmittal and all other
required documents must be received by the Exchange Agent at the address set
forth below under " -- Exchange Agent" prior to the Expiration Date.
The tender by a holder will constitute an agreement between the holder and us in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal applicable to such Exchange Offer.
THE METHOD OF DELIVERY OF THE ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER DOCUMENTS TO BE DELIVERED TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE APPLICABLE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO
THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf. If the beneficial
owner wishes to tender on the owner's behalf, the owner must, prior to
completing and executing the Letter of Transmittal and delivering the owner's
Original Notes, either make appropriate arrangements to register ownership of
the Original Notes in the beneficial owner's name or obtain a properly completed
bond power from the registered holder. The transfer of registered ownership may
take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may
be, must be guaranteed by an Eligible Institution (as defined below) unless the
Original Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Delivery Instructions" on the
Letter of Transmittal designated for such Original Discount Notes, or (ii) for
the account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to be
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<PAGE> 49
guaranteed, such guarantee must be by a participant in a recognized signature
guarantee program within the meaning of Rule 17Ad-15 under the Exchange Act (an
"Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Original Notes listed therein, such Original Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes, with signature guaranteed by an Eligible Institution.
If a Letter of Transmittal or any Original Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should indicate their status when signing, and evidence satisfactory to
the Company, as applicable, of their authority to so act must be submitted with
the Letter of Transmittal designated for such Original Notes.
All questions as to the validity, form, eligibility (including time of receipt),
acceptance and withdrawal of tendered Original Notes will be determined by us in
our sole discretion, which determination will be final and binding. We reserve
the absolute right to reject any and all Original Notes not properly tendered or
any Original Notes the acceptance of which would, in the opinion of our counsel,
be unlawful. We also reserve the right to waive any defects, irregularities or
conditions of tender as to particular Original Notes. The interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) by us will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Original
Notes must be cured within such time as we shall determine. Although we intend
to notify holders of defects or irregularities with respect to tenders of
Original Notes issued by them, neither we, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Original Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Original Notes received by the
Exchange Agent that are not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if Original Notes are submitted
in a principal amount greater than the principal amount of Original Notes being
tendered by such tendering holder, such unaccepted or non-exchanged Original
Notes will be returned by the Exchange Agent to the tendering holders (or, in
the case of Original Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described below, such unaccepted or non-exchanged Original
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility), unless otherwise provided in the Letter of Transmittal designated for
such Original Notes, as soon as practicable following the applicable Expiration
Date.
By tendering Original Notes in the Exchange Offer, each registered holder will
represent to us that, among other things:
- the Exchange Notes to be acquired by the holder and any
beneficial owner(s) of such Original Notes ("Beneficial
Owner(s)") in connection with the Exchange Offer are being
acquired by the holder and any Beneficial Owner(s) in the
ordinary course of business of the holder and any Beneficial
Owner(s) for the holder's own account, for investment and not
with a view to or for sale in connection with any distribution of
the Exchange Notes;
- the holder and each Beneficial Owner are not participating, do
not intend to participate, and have no arrangement or
understanding with any person to participate, in a distribution
of the Exchange Notes;
- the holder and each Beneficial Owner acknowledge and agree that
(x) any person participating in an Exchange Offer for the purpose
of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction
with respect to the Exchange Notes acquired by such person and
cannot rely on the position of the staff of the Commission set
forth in no-action letters that are discussed herein under " --
Resales of the Exchange Notes," and (y) any broker-dealer that
receives Exchange Notes for its own account in exchange for
Original Notes pursuant to an Exchange Offer, where such Original
Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must
deliver a prospectus in connection with any resale of such
Exchange Notes (see "Plan of
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Distribution") but by so acknowledging, the holder shall not be
deemed to admit that, by delivering a prospectus, it is an
"underwriter" within the meaning of the Securities Act;
- neither the holder nor any Beneficial Owner is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company
except as otherwise disclosed to us in writing; and
- the holder and each Beneficial Owner understands that a secondary
resale transaction described in the third clause above should be
covered by an effective registration statement containing the
selling securityholder information required by Item 507 of
Regulation S-K of the Commission.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect to
the Original Notes at the Book-Entry Transfer Facility, for purposes of the
Exchange Offer, within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Original Notes by causing the
Book-Entry Transfer Facility to transfer such Original Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Original Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal, with any required
signature guarantees and any other documents, must be transmitted to and
received by the Exchange Agent at the address set forth below under " --
Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery
procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (x) whose Original Notes are
not immediately available, or (y) who cannot deliver their Original Notes, the
Letter of Transmittal or any other required documents to the Exchange Agent
prior to the applicable Expiration Date, may effect a tender if:
- the tender is made through an Eligible Institution;
- prior to the applicable Expiration Date, the Exchange Agent
receives from such Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail, hand
delivery or facsimile transmission) setting forth the name and
address of the Holder, the certificate number(s) of such Original
Notes and the principal amount of the Original Notes being
tendered, stating that the tender is being made thereby and
guaranteeing that, within five business days after the applicable
Expiration Date, the applicable Letter of Transmittal together
with the certificate(s) representing the Original Notes (or a
Book-Entry Confirmation) and any other documents required by the
applicable Letter of Transmittal will be delivered by the
Eligible Institution to the Exchange Agent; and
- such properly completed and executed Letter of Transmittal, as
well as the certificate(s) representing all tendered Original
Notes in proper form for transfer (or a Book-Entry Confirmation)
and all other documents required by the Letter of Transmittal are
received by the Exchange Agent within five business days after
the applicable Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes pursuant to an
Exchange Offer may be withdrawn at any time prior to the Expiration Date.
To be effective, a written or facsimile transmission notice of withdrawal must
be received by the Exchange Agent at its address prior to the Expiration Date.
Any notice of withdrawal must:
- specify the name of the person who deposited the Original Notes
to be withdrawn (the "Depositor");
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<PAGE> 51
- identify the Original Notes to be withdrawn (including the
certificate number or numbers and aggregate principal amount of
such Original Notes); and
- be signed by the holder in the same manner as the original
signature on the applicable Letter of Transmittal (including any
required signature guarantees).
We will determine all questions as to the validity, form and eligibility
(including time of receipt) of notices of withdrawal in our sole discretion,
which determination shall be final and binding on all parties. Any Original
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no Exchange Notes will be issued with respect thereto
unless the Original Notes so withdrawn are retendered. Properly withdrawn
Original Notes may be retendered by following one of the procedures described
above under " -- Procedures for Tendering" at any time prior to the applicable
Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the prior
termination of the Exchange Offer, or which have been validly withdrawn, will be
returned to the holder thereof (unless otherwise provided in the Letter of
Transmittal), as soon as possible following the Expiration Date or, if so
requested in the notice of withdrawal, promptly after receipt by the issuer of
the Original Notes of notice of withdrawal without cost to such holder.
CONDITIONS OF THE EXCHANGE OFFER
The Exchange Offer is subject to the condition that the Exchange Offer, or the
making of any exchange by a holder, does not violate applicable law or any
applicable interpretation of the staff of the Commission. If there has been a
change in Commission policy such that there is a substantial question whether
the Exchange Offer is permitted by applicable federal law, we have agreed to
seek a no-action letter or other favorable decision from the Commission allowing
us to consummate the Exchange Offer.
If we determine that the Exchange Offer is not permitted by applicable Federal
law, we may terminate the Exchange Offer. In connection therewith we may:
- refuse to accept any Original Notes and return any Original Notes
that have been tendered by the holders thereof;
- extend the Exchange Offer and retain all Original Notes tendered
prior to the Expiration Date of the Exchange Offer, subject to
the rights of such holders of tendered Original Notes to withdraw
their tendered Original Notes; or
- waive such termination event with respect to the Exchange Offer
and accept all properly tendered Original Notes that have not
been withdrawn.
If such waiver constitutes a material change in the Exchange Offer, we will
disclose such change by means of a supplement to this Prospectus that will be
distributed to each registered holder of Original Notes, and we will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders of the Original Notes, if the Exchange Offer would otherwise expire
during such period.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as "Exchange Agent" for
the Exchange Offer. Questions and requests for assistance, requests for
additional copies of the Prospectus or of the Letter of Transmittal and other
documents should be directed to the Exchange Agent addressed as follows:
By Registered or Certified Mail or Hand or Overnight Delivery:
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State Street Bank and Trust Company
Two International Place
Fourth Floor
Boston, MA 02110
Attention: _________, Corporate Trust Department
Facsimile Transmissions: 617-664-3290
Confirm by Telephone: 617-664-5587
(ELIGIBLE INSTITUTIONS ONLY)
Delivery to other than the above addresses or facsimile numbers will not
constitute a valid delivery.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation is
being made by mail; however, additional solicitation may be made by telegraph,
telephone or in person by officers and regular employees of the Company and its
affiliates.
No dealer-manager has been retained in connection with the Exchange Offer and no
payments will be made to brokers, dealers or others soliciting acceptance of the
Exchange Offer. However, reasonable and customary fees will be paid to the
Exchange Agent for its service and it will be reimbursed for its reasonable
out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will be
paid by the Company and are estimated in the aggregate to be approximately
$ . Such expenses include fees and expenses of the Exchange Agent and the
Trustee under the Indenture, accounting and legal fees and printing costs, among
others. We will pay all transfer taxes, if any, applicable to the exchange of
the Original Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Original Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The carrying values of the Original Notes are not expected to be materially
different from the fair value of the Exchange Notes at the time of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. The
expenses of the Exchange Offer will be amortized over the term of the Exchange
Notes.
RESALES OF THE EXCHANGE NOTES; PLAN OF DISTRIBUTION
Based on no-action letters issued by the staff of the Commission to third
parties and provided that the holder is acquiring the Exchange Notes in its
ordinary course of business and is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, we believe the Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Original Notes may be offered for resale, resold and
otherwise transferred by any holder thereof , with the following exceptions:
- broker-dealers who purchased Original Notes directly from the
Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act, or
- "affiliates" of the Company within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act.
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Holders of Original Notes wishing to accept the Exchange Offer must represent to
us that such conditions have been met. In the event that our belief is
inaccurate, holders of Exchange Notes who transfer Exchange Notes in violation
of the prospectus delivery provisions of the Securities Act and without an
exemption from registration thereunder may incur liability under the Securities
Act. We do not assume or indemnify holders against such liability.
All resales must be made in compliance with applicable state securities or "blue
sky" laws. Such compliance may require that the Exchange Notes be registered or
qualified in a particular state or that the resales be made by or through a
licensed broker-dealer, unless exemptions from these requirements are available.
We assume no responsibility with regard to compliance with such requirements.
EACH AFFILIATE OF THE COMPANY MUST ACKNOWLEDGE THAT SUCH PERSON WILL COMPLY WITH
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT TO
THE EXTENT APPLICABLE. EACH BROKER-DEALER THAT RECEIVES EXCHANGE NOTES IN
EXCHANGE FOR ORIGINAL NOTES HELD FOR ITS OWN ACCOUNT, AS A RESULT OF
MARKET-MAKING OR OTHER TRADING ACTIVITIES, MUST ACKNOWLEDGE THAT IT WILL DELIVER
A PROSPECTUS IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES. ALTHOUGH A
BROKER-DEALER MAY BE AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT,
THE LETTER OF TRANSMITTAL STATES THAT BY SO ACKNOWLEDGING AND BY DELIVERING A
PROSPECTUS, A BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN
"UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT. THIS PROSPECTUS, AS IT
MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A BROKER-DEALER
IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL
NOTES.
OTHER
We may seek to acquire untendered Original Notes, to the extent permitted by
applicable law, in open market or privately negotiated transactions, through
subsequent exchange offers or otherwise. We have no present plans to acquire any
Original Notes that are not tendered in the Exchange Offer or to file a
registration statement to permit resales of any untendered Original Notes.
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description under the
subheading "Certain Definitions." In this description, the word "Company" refers
only to The Scotts Company and not to any of its subsidiaries.
The Company issued the Original Notes, and will issue the Exchange Notes, under
the Indenture dated as of January 21, 1999 (the "Indenture") among itself, the
Guarantors and State Street Bank and Trust Company, as trustee (the "Trustee").
References to the Notes include both the Original Notes and the Exchange Notes.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act").
The following description is a summary of the material provisions of the
Indenture and the Registration Rights Agreement, including the definitions
therein of certain terms used below. It does not restate those agreements in
their entirety. We urge you to read the Indenture and the Registration Rights
Agreement because they, and not this description, define your rights as holders
of these Notes. Copies of the Indenture and the Registration Rights Agreement
are available as set forth below under "Additional Information."
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
The Notes
The Exchange Notes will be issued solely in exchange for an equal principal
amount of Original Notes pursuant to the Exchange Offer. The Exchange Notes will
evidence the same debt as the Original Notes and both series of Notes
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<PAGE> 54
will be entitled to the benefits of the Indenture and treated as a single class
of debt securities. The terms of the Exchange Notes will be the same as the
Original Notes, except that:
- the Exchange Notes will be registered under the Securities Act
and, therefore, will not bear legends restricting transfer; and
- the Exchange Notes will not be entitled to the benefits of the
Registration Rights Agreement.
Holders of Original Notes who do not exchange their Original Notes for Exchange
Notes will vote together with holders of the Exchange Notes for all relevant
purposes under the Indenture.
All of the Notes:
- are general obligations of the Company;
- are subordinated in right of payment to all existing and future
Senior Debt of the Company; and
- are senior in right of payment to any future junior subordinated
Indebtedness of the Company.
THE GUARANTEES
These Notes will be guaranteed by all of the existing and future Wholly Owned
Domestic Restricted Subsidiaries and Significant Domestic Restricted
Subsidiaries of the Company.
The Guarantees of these Notes:
- are general obligations of each Guarantor;
- are subordinated in right of payment to all existing and future
Senior Debt of each Guarantor; and
- are senior in right of payment to any future junior subordinated
Indebtedness of each Guarantor.
Assuming we had completed the offering of the Original Notes as of April 3,
1999, and that the Transactions and the Credit Facility had been completed on
that date, the Company and the Guarantors would have had total Senior Debt of
approximately $_______ million. As indicated above and as discussed in detail
below under the subheading "Subordination," payments on the Notes and under the
Guarantees will be subordinated to the payment of Senior Debt. The Indenture
permits us and the Guarantors to incur additional Senior Debt.
As of the date hereof, all of our subsidiaries are "Restricted Subsidiaries."
However, under the circumstances described below under the subheading "Certain
Covenants -- Restricted Payments," we are permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries are not
subject to many of the restrictive covenants in the Indenture. Unrestricted
Subsidiaries will not guarantee these Notes.
Not all of our "Restricted Subsidiaries" guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of these non-guarantor
subsidiaries, these non-guarantor subsidiaries will pay the holders of their
debt and their trade creditors before they will be able to distribute any of
their assets to us. The non-guarantor subsidiaries generated approximately 19%
(or 23% on a pro forma basis) of our consolidated revenues for the year ended
September 30, 1998 and held approximately 26% (or 25% on a pro forma basis) of
our consolidated assets as of September 30, 1998. See note 21 to our
Consolidated Financial Statements that are incorporated by reference for more
detail about the division of our consolidated revenues and assets between our
guarantor and non-guarantor subsidiaries.
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PRINCIPAL, MATURITY AND INTEREST
The Indenture provides that the Company may issue Notes with a maximum aggregate
principal amount of up to $400 million, of which $330 million is represented by
the Notes. The Notes are issued only in denominations of $1,000 and integral
multiples of $1,000. The Notes will mature on January 15, 2009.
Interest on the Notes will accrue at the rate of 8.625% per annum and is payable
semi-annually in arrears on January 15 and July 15, commencing on July 15, 1999.
The Company will make each interest payment to the Holders of record of the
Notes on the immediately preceding January 1 and July 1.
Interest on the Notes will accrue from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a Holder has given wire transfer instructions to the Company, the Company
will make all principal, premium and interest and Liquidated Damages, if any,
payments on the Notes owned by such Holder in accordance with those
instructions. All other payments on these Notes will be made at the office or
agency of the Paying Agent and Registrar within the City and State of New York
unless the Company elects to make interest payments by check mailed to the
Holders at their address set forth in the register of Holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee is currently the Paying Agent and Registrar. The Company may change
the Paying Agent or Registrar without prior notice to the Holders of the Notes,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture. The
Registrar and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture.
The Company is not required to transfer or exchange any Note selected for
redemption. Also, the Company is not required to transfer or exchange any Note
for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
SUBSIDIARY GUARANTEES
The Guarantors jointly and severally guarantee the Company's obligations under
the Notes. Each Subsidiary Guarantee is subordinated to the prior payment in
full of all Senior Debt of that Guarantor. The obligations of each Guarantor
under its Subsidiary Guarantee are limited as necessary to prevent that
Subsidiary Guarantee from constituting a fraudulent conveyance under applicable
law. See "Risk Factors -- Fraudulent Conveyance Matters."
A Guarantor may not sell or otherwise dispose of all or substantially all of its
assets, or consolidate with or merge with or into (whether or not such Guarantor
is the surviving Person), another Person unless:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
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(2) either:
(a) the Person acquiring the property in any such sale or disposition
or the Person formed by or surviving any such consolidation or
merger assumes all the obligations of that Guarantor under its
Subsidiary Guarantee pursuant to a supplemental indenture
satisfactory to the Trustee; or
(b) the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture.
The Subsidiary Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation), if the Company applies the Net Proceeds of
that sale or other disposition, in accordance with the applicable
provisions of the Indenture; or
(2) in connection with any sale of all of the capital stock of a
Guarantor, if the Company applies the Net Proceeds of that sale in
accordance with the applicable provisions of the Indenture; or
(3) if the Company designates any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "Repurchase at the Option of Holders -- Asset Sales."
Notwithstanding the foregoing, any Guarantor may sell or otherwise dispose of
all or substantially all of its assets to, or consolidate with or merge into,
the Company or another Guarantor, upon the consummation of which the Subsidiary
Guarantee of such Guarantor shall be released.
SUBORDINATION
The payment of principal, premium, interest and Liquidated Damages, if any, on
the Notes will be subordinated to the prior payment in full of all Senior Debt
of the Company.
The holders of Senior Debt will be entitled to receive payment in full of all
Obligations due in respect of Senior Debt (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Senior Debt) before the Holders of Notes will be entitled to receive any payment
with respect to the Notes (except that Holders of Notes may receive and retain
Permitted Junior Securities and payments made from the trust described under
"Legal Defeasance and Covenant Defeasance"), in the event of any distribution to
creditors of the Company:
(1) in a liquidation or dissolution of the Company;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Company or its property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the Company's assets and liabilities.
The Company also may not make any payment in respect of the Notes (except in
Permitted Junior Securities or from the trust described under " -- Legal
Defeasance and Covenant Defeasance") if:
(1) payment default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
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(2) any other default occurs and is continuing on Designated Senior Debt
that permits holders of the Designated Senior Debt to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment
Blockage Notice") from the Company or the holders of any Designated
Senior Debt.
Payments on the Notes may and shall be resumed:
(1) in the case of a payment default, upon the date on which such default
is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until:
(1) 360 days have elapsed since the effectiveness of the immediately prior
Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest and
Liquidated Damages, if any, on the Notes that have come due have been
paid in full in cash.
No nonpayment default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
The Company must promptly notify holders of Senior Debt if payment of the Notes
is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of a
bankruptcy, liquidation or reorganization of the Company, Holders of these Notes
may recover less ratably than creditors of the Company who are holders of Senior
Debt. See "Risk Factors -- Subordination."
OPTIONAL REDEMPTION
During the first 36 months after the Issue Date, the Company may on any one or
more occasions redeem up to 35% of the aggregate principal amount of Notes
originally issued under the Indenture at a redemption price of 108.625% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of one or
more public equity offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and
(2) the redemption must occur within 90 days of the date of the closing of
the public equity offering.
Except pursuant to the preceding paragraph, the Notes will not be redeemable at
the Company's option prior to January 15, 2004.
After January 15, 2004, the Company may redeem all or a part of these Notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest thereon, if any, to the applicable redemption date, if redeemed
during the twelve-month period beginning on January 15 of the years indicated
below:
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<TABLE>
<CAPTION>
Year Percentage
<S> <C> <C>
2004.......................................................... 104.313%
2005.......................................................... 102.875%
2006.......................................................... 101.438%
2007 and thereafter........................................... 100.00%
</TABLE>
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each Holder of Notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to the Change of
Control Offer. In the Change of Control Offer, the Company will offer a Change
of Control Payment in cash equal to 101% of the aggregate principal amount of
Notes repurchased plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase. Within 30 days following any Change of
Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the Change of Control Payment Date specified in such
notice, pursuant to the procedures required by the Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent lawful:
(1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered; and
(3) deliver or cause to be delivered to the Trustee the Notes so accepted
together with an Officers' Certificate stating the aggregate principal
amount of Notes or portions thereof being purchased by the Company.
The Paying Agent will promptly mail to each Holder of Notes so tendered the
Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of Notes required by this covenant. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Company to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
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The Company's outstanding Senior Debt currently prohibits the Company from
purchasing any Notes, and also provides that certain change of control events
with respect to the Company would constitute a default under the agreements
governing the Senior Debt. Any future credit agreements or other agreements
relating to Senior Debt to which the Company becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when the Company is prohibited from purchasing Notes, the Company could seek the
consent of its senior lenders to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing Notes. In such case, the Company's failure to
purchase tendered Notes would constitute an Event of Default under the Indenture
which would, in turn, likely constitute a default under such Senior Debt. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of the Company and its
Subsidiaries taken as a whole to another Person or group may be uncertain.
ASSET SALES
The Company will not, and will not permit any of its Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal
to the fair market value of the assets or Equity Interests issued or
sold or otherwise disposed of, as determined in good faith by the
Company's Board of Directors; and
(2) either:
(a) the Company (or the Restricted Subsidiary, as the case may be)
issues Equity Interests or transfers assets in an exchange in
connection with which the Company receives an opinion of counsel
that such exchange should qualify under the provisions of Section
351 or Section 368 of the United States Internal Revenue Code of
1986, as amended; or
(b) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash:
(i) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Subsidiary Guarantee) that are assumed by
the transferee of any such assets; and
(ii) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee
that within 90 days are converted by the Company or such
Restricted Subsidiary into cash (to the extent of the cash
received in that conversion).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale, the
Company may apply such Net Proceeds at its option:
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(1) to repay Senior Debt (and to effect a corresponding commitment reduction if
such Senior Debt is revolving credit borrowings);
(2) to acquire all or substantially all of the assets of, or a majority of the
Voting Stock of, another Related Business;
(3) to make a capital expenditure; and/or
(4) to acquire other long-term assets that are used or useful in a Related
Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the preceding paragraph will constitute Excess Proceeds. When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will make an Asset
Sale Offer to all Holders of Notes and all holders of other Indebtedness that is
pari passu with the Notes containing provisions similar to those set forth in
the Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets to purchase the maximum principal amount of Notes and such other
pari passu Indebtedness that may be purchased out of the Excess Proceeds. The
offer price in any Asset Sale Offer will be equal to 100% of principal amount
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
purchase, and will be payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by the Indenture. If the aggregate
principal amount of Notes and such other pari passu Indebtedness tendered into
such Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the Notes and such other pari passu Indebtedness to be purchased on a pro
rata basis as set forth below. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, the Trustee will
select Notes for redemption as follows:
(1) if the Notes are listed, in compliance with the requirements of the
principal national securities exchange on which the Notes are listed;
or
(2) if the Notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee shall deem fair and appropriate.
No Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on Notes or portions of them called for redemption.
IMPORTANT COVENANTS
RESTRICTED PAYMENTS
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly:
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(1) declare or pay any dividend or make any other payment or distribution
on account of the Company's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the
Company's Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company);
(2) purchase, redeem or otherwise acquire or retire for value (including,
without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company, in each case held by Persons
other than the Company or a Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Subsidiary Guarantees, except a
payment of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred
to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of the covenant described below under the caption " --
Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted
Payments permitted by clause (2), (3), (4) or (5) of the next
succeeding paragraph), is less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of the Company for the period
(taken as one accounting period) from January 3, 1999 to the end
of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit); plus
(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Company that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of the Company); plus
(c) to the extent that any Restricted Investment that was made after
the date of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (i) the cash return of capital
with respect to such Restricted Investment (less the cost of
disposition, if any) and (ii) the initial amount of such
Restricted Investment; plus
(d) $25 million.
So long as no Default has occurred and is continuing or would be caused thereby,
the preceding provision will not prohibit:
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(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture;
(2) the redemption, repurchase, retirement, defeasance or other acquisition
(including the payment of any accrued and unpaid interest, premium or
consent fee, if any, in connection therewith) of the Company's 9 7/8%
Senior Subordinated Notes due 2004 or of any of the Notes or Exchange
Notes;
(3) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness of the Company or any of its
Restricted Subsidiaries or any Equity Interests of the Company or any
of its Restricted Subsidiaries in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, Equity Interests of the
Company (other than Disqualified Stock); provided that the amount of
any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (3) (b) of the preceding paragraph;
(4) the redemption, repurchase, retirement, defeasance or other acquisition
of subordinated Indebtedness or Disqualified Stock of the Company or
any of its Restricted Subsidiaries with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness;
(5) the payment of any dividend by the Company to holders of its Class A
Convertible Preferred Stock; and
(6) the repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any Restricted Subsidiary of
the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $5.0 million in any
twelve-month period.
The amount of all Restricted Payments (other than cash) shall be the fair market
value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined in good faith by the Board of Directors whose
resolution with respect thereto shall be delivered to the Trustee. Not later
than the date of making any Restricted Payment other than payments pursuant to
paragraphs (2), (3), (4), (5) or (6) of this covenant, the Company shall deliver
to the Trustee an Officers' Certificate stating that such Restricted Payment is
permitted and setting forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed.
Notwithstanding the foregoing, if any payment is made pursuant to the second
paragraph of this covenant and at the time of such payment there was a Default
(other than any Default caused thereby) that had occurred and was continuing,
then such payment shall not cause a Default under this covenant if the
pre-existing Default shall have been cured or waived prior to such Default
becoming an Event of Default.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if the designation would not cause a Default. All
outstanding Investments owned by the Company and its Restricted Subsidiaries in
the designated Unrestricted Subsidiary will be treated as an Investment made at
the time of the designation and will reduce the amount available for Restricted
Payments under the first paragraph of this covenant or Permitted Investments, as
applicable. All such outstanding Investments will be treated as Restricted
Investments equal to the fair market value of such Investments at the time of
the designation. The designation will not be permitted if such Restricted
Payment would not be permitted at that time and if such Restricted Subsidiary
does not otherwise meet the definition of an Unrestricted Subsidiary. The Board
of Directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if that redesignation would not cause a Default.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect to
(collectively, "incur") any Indebtedness (including Acquired Debt), and the
Company will not issue any Disqualified Stock and will not permit any of its
Restricted Subsidiaries that is not a Guarantor to issue any shares of preferred
stock; provided, however, that the Company and any Restricted Subsidiary may
incur Indebtedness (including Acquired Debt) or issue Disqualified Stock, and
the Company's Restricted Subsidiaries may issue preferred stock, if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred or such
Disqualified Stock or preferred stock is issued would have been at least 2.0 to
1.0, determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom) as if the additional Indebtedness had been incurred, or
the Disqualified Stock or preferred stock had been issued, as the case may be,
at the beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness and letters of credit under the Credit Facility in an
aggregate principal amount (with letters of credit being deemed to have
a principal amount equal to the maximum potential liability of the
Company and its Restricted Subsidiaries thereunder) not to exceed an
amount equal to $1.125 billion, including all Permitted Refinancing
Indebtedness incurred pursuant to clause (5) of this paragraph to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (1), less the aggregate amount of all Net Proceeds of Asset
Sales applied by the Company or any of its Restricted Subsidiaries to
repay term Indebtedness under the Credit Facility or to reduce
commitments with respect to revolving credit borrowings under the
Credit Facility pursuant to the covenant described above under the
caption "Repurchase at the Option of Holders -- Asset Sales";
(2) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the Notes, the Subsidiary Guarantees, the Exchange Notes
and the Guarantees thereof;
(4) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case, incurred for
the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in
the business of the Company or such Restricted Subsidiary, or in
respect of a sale and leaseback transaction, in an aggregate principal
amount, including all Permitted Refinancing Indebtedness incurred
pursuant to clause (5) of this paragraph to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (4), not to
exceed $20.0 million at any time outstanding;
(5) the incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace, Indebtedness (other
than intercompany Indebtedness) that is either Existing Indebtedness or
that was permitted to be incurred by the Indenture;
(6) the incurrence by the Company or any of its Restricted Subsidiaries of
intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the obligor on such
Indebtedness, and such Indebtedness is held by a Restricted
Subsidiary that is not a Guarantor, such Indebtedness must be
expressly subordinated
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to the prior payment in full in cash of all Obligations with
respect to the Notes, in the case of the Company, or the
Subsidiary Guarantee of such Guarantor, in the case of a
Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary thereof and (ii) any sale
or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary, as the
case may be, that was not permitted by this clause (6);
(7) the incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging (1) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding or (2) exchange rate risk or raw materials price risk;
(8) the guarantee by the Company or any of its Restricted Subsidiaries of
Indebtedness of the Company or a Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this
covenant;
(9) the shares of Class A Convertible Preferred Stock outstanding as of the
date of the Indenture;
(10)the incurrence by any of the Company's Foreign Subsidiaries of
Indebtedness in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred pursuant to clause (5) of this
paragraph to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (10), not to exceed $60.0 million at any time
outstanding;
(11)the incurrence by a Securitization Entity of Indebtedness in a
Qualified Securitization Transaction that is Non-Recourse Debt with
respect to the Company and its other Restricted Subsidiaries (except
for Standard Securitization Undertakings); and
(12)the incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to exceed $40.0
million.
For purposes of determining compliance with this "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (12) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, the Company will be permitted
to classify such item of Indebtedness on the date of its incurrence (or later
reclassify such Indebtedness in whole or in part) in any manner that complies
with this covenant. In addition, the accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be treated as an incurrence of
Indebtedness; provided, in each such case, that the amount thereof is included
in Fixed Charges of the Company as accrued. Notwithstanding the foregoing, any
Indebtedness outstanding pursuant to the Credit Facility on the date of the
Indenture will be deemed to have been incurred pursuant to clause (1) of the
definition of Permitted Debt.
NO SENIOR SUBORDINATED DEBT
The Company will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment to
any Senior Debt of the Company and senior in any respect in right of payment to
the Notes. No Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any
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Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of such Guarantor and senior in any respect in right of payment to such
Guarantor's Subsidiary Guarantee.
LIENS
The Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, (1) assign or convey any right to receive income on any asset now
owned or hereafter acquired or (2) create, incur, assume or suffer to exist any
Lien of any kind securing Indebtedness, Attributable Debt or trade payables on
any asset now owned or hereafter acquired or on any income or profits therefrom
except Permitted Liens, unless the Notes and the Guarantees, as applicable, are
either (i) secured by a Lien on such property, assets, income or profits that is
senior in priority to the Lien securing such other Obligations, if such
Obligations are subordinated in right of payment to the Notes and/or the
Guarantees or (ii) equally and ratably secured by a Lien on such property,
assets, income or profits with the Lien securing such other Obligations, if such
Obligations are pari passu in right of payment with the Notes.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
encumbrance or restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock to
the Company or any of the Company's Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to the Company or any of the
Company Restricted Subsidiaries;
(2) make loans or advances to the Company or any of the Company's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any of the
Company's Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the Indenture and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing
Indebtedness, as in effect on the date of the Indenture;
(2) the Indenture, the Notes and the Guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such acquisition), which encumbrance or restriction is not applicable
to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of the Indenture to be incurred;
(5) customary non-assignment provisions in leases, licenses, contracts and
other agreements entered into in the ordinary course of business and
consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary course
of business that impose restrictions on the property so acquired of the
nature described in clause (3) of the preceding paragraph;
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(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred pursuant
to the provisions of the covenant described above under the caption "
-- Liens" that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien;
(10)provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(11)customary provisions under Indebtedness of any Foreign Subsidiary
permitted to be incurred under the Indenture;
(12)restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business; and
(13)restrictions created in connection with a Qualified Securitization
Transaction.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not, directly or indirectly: (1) consolidate or merge with or
into another Person (whether or not the Company is the surviving corporation);
or (2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) the Company is the surviving corporation; or (b) the Person
formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, conveyance or
other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes, the Indenture and
the Registration Rights Agreement pursuant to agreements reasonably
satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger entered into solely for the purpose of
reincorporating the Company or any Restricted Subsidiary in another
jurisdiction, the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company) will, on the date
of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be permitted to incur
at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
described above under the caption " -- Incurrence of Indebtedness and
Issuance of Preferred Stock."
In addition, the Company may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its
Wholly-Owned Restricted Subsidiaries.
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TRANSACTIONS WITH AFFILIATES
The Company will not, and will not permit any of its Restricted Subsidiaries to,
make any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $3.0 million, a resolution of the Board of Directors set forth
in an Officers' Certificate certifying that such Affiliate
Transaction complies with this covenant and that such Affiliate
Transaction has been approved by a majority of the disinterested
members of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess
of $10.0 million, an opinion as to the fairness to the Holders of
such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm of national
standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment, consulting or similar agreement (including any loan,
but not any forgiveness thereof) entered into by the Company or any of
its Restricted Subsidiaries in the ordinary course of business or any
payment of directors' and officers' insurance premiums;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not otherwise
Affiliates of the Company;
(4) dividends on or any repurchases of any shares of any series or class of
equity securities of the Company;
(5) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption " -- Restricted Payments."
(6) any merger between or among the Company or any of its Restricted
Subsidiaries solely for the purpose of reincorporating the Company or
such Restricted Subsidiary in another jurisdiction for tax purposes;
and
(7) transactions in connection with a Qualified Securitization Transaction
or an industrial revenue bond financing.
ADDITIONAL SUBSIDIARY GUARANTEES
If, after the date of the Indenture, the Company or any of its Wholly Owned
Domestic Restricted Subsidiaries acquires or creates another Wholly Owned
Domestic Restricted Subsidiary or a Significant Domestic Restricted Subsidiary,
including any other Domestic Restricted Subsidiary that at any time becomes a
Wholly Owned Domestic Restricted Subsidiary or a Significant Domestic Restricted
Subsidiary, then that newly acquired or created Wholly Owned Domestic Restricted
Subsidiary or Significant Domestic Restricted Subsidiary will, within 10
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Business Days of the date on which it was acquired or created, execute a
supplemental indenture or other instrument evidencing its Subsidiary Guarantee,
in either case in form satisfactory to the Trustee, and deliver an Opinion of
Counsel to the Trustee.
SALE AND LEASEBACK TRANSACTIONS
The Company will not, and will not permit any of its Restricted Subsidiaries to,
enter into any sale and leaseback transaction; provided that the Company and any
Restricted Subsidiary may enter into a sale and leaseback transaction if:
(1) the Company or such Restricted Subsidiary, as applicable, could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Fixed Charge
Coverage Ratio test in the first paragraph of the covenant described
above under the caption " -- Incurrence of Additional Indebtedness and
Issuance of Preferred Stock" and (b) incurred a Lien to secure such
Indebtedness pursuant to the covenant described above under the caption
" -- Liens"; provided that the Lien to secure such Indebtedness does
not extend to or cover any assets of the Company or such Restricted
Subsidiary other than the assets which are the subject of the sale and
leaseback transaction;
(2) the gross cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the Board of Directors, of the property that is the subject of such
sale and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction
in compliance with, the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales."
PAYMENTS FOR CONSENT
The Company will not, and will not permit any of its Subsidiaries to, directly
or indirectly, pay or cause to be paid any consideration to or for the benefit
of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless
such consideration is offered to be paid and is paid to all Holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any Notes are outstanding,
the Company will furnish to the Holders of Notes, within the time periods
specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by the Company's
certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such
reports.
In addition, whether or not required by the Commission, the Company will file a
copy of all of the information and reports referred to in clauses (1) and (2)
above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
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EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes, whether or not
prohibited by the subordination provisions of the Indenture;
(2) default in payment when due of the principal of or premium, if any, on
the Notes, whether or not prohibited by the subordination provisions of
the Indenture;
(3) failure by the Company or any of its Subsidiaries for 30 days after
notice to comply with the provisions described under the captions
"Repurchase at the Option of Holders -- Change of Control," "Repurchase
at the Option of Holders -- Asset Sales," "Certain Covenants --
Restricted Payments" or "Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock";
(4) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of the other agreements in the Indenture;
(5) default under any mortgage, indenture or instrument under which there
may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, if
that default:
(a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or
the maturity of which has been so accelerated, aggregates $10.0
million or more;
(6) failure by the Company or any of its Subsidiaries to pay final
judgments aggregating in excess of $10.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Subsidiary Guarantee(s) of
any Guarantor that is a Significant Subsidiary or of any group of
Guarantors that collectively would constitute a Significant Subsidiary
shall be held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect or any
Guarantor that is a Significant Subsidiary or any group of Guarantors
that collectively would constitute a Significant Subsidiary, or any
Person acting on behalf of any such Guarantor or group of Guarantors,
shall deny or disaffirm the obligations of each such Guarantor under
its Subsidiary Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to the Company
or any of its Significant Subsidiaries.
In the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Subsidiary that is a Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
immediately without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the then outstanding Notes may declare all the Notes to be
due and payable immediately.
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Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes.
In the case of any Event of Default occurring by reason of any willful action or
inaction taken or not taken by or on behalf of the Company with the intention of
avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to the optional redemption
provisions of the Indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes. If an Event of Default occurs prior to January 15, 2004, by reason
of any willful action (or inaction) taken (or not taken) by or on behalf of the
Company with the intention of avoiding the prohibition on redemption of the
Notes prior to January 15, 2004, then the premium specified in the Indenture
shall also become immediately due and payable to the extent permitted by law
upon the acceleration of the Notes.
The Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture. Upon becoming aware of any Default or Event of
Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company or
any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, the Indenture, the Subsidiary
Guarantees, the Registration Rights Agreement Agreements or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of Notes by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes. The
waiver may not be effective to waive liabilities under the federal securities
laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Subsidiary Guarantees ("Legal
Defeasance") except for:
(1) the rights of Holders of outstanding Notes to receive payments in
respect of the principal of, premium, if any, and interest and
Liquidated Damages, if any, on such Notes when such payments are due
from the trust referred to below;
(2) the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
the Company's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
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In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest and Liquidated Damages, if any, on
the outstanding Notes on the stated maturity or on the applicable
redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the
date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would
have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit (other than a Default or Event
of Default resulting from the borrowing of funds to be applied to such
deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the Indenture) to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of Counsel to
the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent relating
to the Legal Defeasance or the Covenant Defeasance have been complied
with.
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AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note or
alter the provisions with respect to the redemption of the Notes (other
than provisions relating to the covenants described above under the
caption "Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
Note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any Note payable in money other than that stated in the Notes;
(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments
of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under the
caption "Repurchase at the Option of Holders"); or
(8) make any change in the preceding amendment and waiver provisions,
except as set forth below.
In addition, any amendment to, or waiver of, the provisions of the Indenture
relating to subordination that adversely affect the rights of the Holders of the
Notes will require the consent of the Holders of at least 75% in aggregate
principal amount of Notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of Notes, the
Company and the Trustee may amend or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of the Company's obligations to Holders
of Notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets;
(4) to make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder;
(5) to add any Person as a Guarantor; and
(6) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
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If the Trustee becomes a creditor of the Company or any Guarantor, the Indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that in case an Event of Default shall occur
and be continuing, the Trustee will be required, in the exercise of its power,
to use the degree of care of a prudent man in the conduct of his own affairs.
Subject to such provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request of any Holder of
Notes, unless such Holder shall have offered to the Trustee security and
indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the Indenture
and Registration Rights Agreement without charge by writing to The Scotts
Company, 14111 Scottslawn Road, Marysville, Ohio 43041, Attention: Treasurer.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, Notes were, and will be, issued in registered, global
form in minimum denominations of $1,000 and integral multiples of $1,000 in
excess thereof.
The Original Notes are represented by two permanent Notes in registered, global
form without interest coupons (the "Original Global Notes"), and the Exchange
Notes will be represented by two, permanent Notes in registered, global form
without interest coupons (the "Exchange Global Notes" and, together with the
Original Global Notes, the "Global Notes"). The Original Global Notes are, and
the Exchange Global Notes will be, registered in the name of The Depository
Trust Company ("DTC"), in New York, New York, or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
Except as set forth below, the Global Notes may be transferred, in whole and not
in part, only to another nominee of DTC or to a successor of DTC or its nominee.
Beneficial interests in the Global Notes may not be exchanged for Notes in
certificated form except in the limited circumstances described below. See " --
Exchange of Book-Entry Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of Certificated Notes
(as defined below). In addition, transfers of beneficial interests in the Global
Notes will be subject to the applicable rules and procedures of DTC and its
direct or indirect participants (including, if applicable, those of Euroclear
and Cedel), which may change from time to time.
Initially, the Trustee will act as Paying Agent and Registrar. The Notes may be
presented for registration of transfer and exchange at the offices of the
Registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC, Euroclear and
Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement systems
and are subject to changes by them from time to time. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.
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DTC has advised the Company that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of its Participants. The Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to other entities such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
(collectively, the "Indirect Participants"). Persons who are not Participants
may beneficially own securities held by or on behalf of DTC only through the
Participants or the Indirect Participants. The ownership interests in, and
transfers of ownership interests in, each security held by or on behalf of DTC
are recorded on the records of the Participants and Indirect Participants.
DTC has also advised the Company that, pursuant to procedures established by it
ownership of interests in the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by DTC (with
respect to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial interest in the Global
Notes).
All interests in a Global Note, including those held through Euroclear or Cedel,
may be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or Cedel may also be subject to the procedures and
requirements of such systems. The laws of some states require that certain
persons take physical delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a Global Note to
such persons will be limited to that extent. Because DTC can act only on behalf
of Participants, which in turn act on behalf of Indirect Participants and
certain banks, the ability of a person having beneficial interests in a Global
Note to pledge such interests to persons or entities that do not participate in
the DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTEREST IN THE GLOBAL NOTES WILL NOT HAVE
NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF NOTES IN
CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR "HOLDERS"
THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and premium, if any, Liquidated
Damages, if any, and interest on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the persons in whose names the Notes, including the Global
Notes, are registered as the owners thereof for the purpose of receiving such
payments and for any and all other purposes whatsoever. Consequently, neither
the Company, the Trustee nor any agent of the Company or the Trustee has or will
have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any of
its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in the principal amount of beneficial interest in the relevant security
as shown on the records of DTC unless DTC has reason to believe it will not
receive payment on such payment date.
Payments by the Participants and the Indirect Participants to the beneficial
owners of Notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the Trustee or the
Company. Neither the Company nor the Trustee will be liable for any delay by DTC
or any of its Participants in identifying the beneficial owners of the
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Notes, and the Company and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee for all purposes.
Except for trades involving only Euroclear and Cedel participants, interest in
the Global Notes are expected to be eligible to trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests will,
therefore, settle in immediately available funds, subject in all cases to the
rules and procedures of DTC and its Participants. See " --Same Day Settlement
and Payment."
Transfers between Participants in DTC will be effected in accordance with DTC's
procedures, and will be settled in same day funds, and transfers between
participants in Euroclear and Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the Notes
described herein, cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Cedel participants, on the other hand, will be
effected through DTC in accordance with DTC's rules on behalf of Euroclear or
Cedel, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Cedel, as the case may be, by the counterparty in such system in accordance with
the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by delivering
or receiving interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for same-day funds
settlement applicable to DTC. Euroclear participants and Cedel participants may
not deliver instructions directly to the depositories for Euroclear or Cedel.
DTC has advised the Company that it will take any action permitted to be taken
by a Holder of Notes only at the direction of one or more Participants to whose
account DTC has credited the interests in the Global Notes and only in respect
of such portion of the aggregate principal amount of the Notes as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC reserves the right to exchange the
Global Notes for Notes in certificated form, and to distribute such Notes to its
Participants.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Original Global Notes among
Participants in DTC, Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC,
Euroclear or Cedel or their respective participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive Notes in registered certificated
form ("Certificated Notes") if:
(1) DTC:
(a) notifies the Company that it is unwilling or unable to continue as
depositary for the Global Notes and the Company thereupon fails to
appoint a successor depositary; or
(b) has ceased to be a clearing agency registered under the Exchange
Act;
(2) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the Notes.
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In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon request but only upon prior written notice given to the
Trustee by or on behalf of DTC in accordance with the Indenture. In all cases,
Certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures) and will bear the applicable restrictive legend
referred to in "Transfer Restrictions," unless the Company determines otherwise
in compliance with applicable law.
EXCHANGE OF CERTIFICATED NOTES FOR BOOK-ENTRY NOTES
Notes issued in certificated form may not be exchanged for beneficial interests
in any Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such Notes. See "Transfer Restrictions."
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by the
Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Notes in
certificated form, the Company will make all payments of principal, premium, if
any, interest and Liquidated Damages, if any, by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each such Holder's registered
address. The Notes represented by the Global Notes are expected to be eligible
to trade in the PORTAL market and to trade in DTC's Same-Day Funds Settlement
System, and any permitted secondary market trading activity in such Notes will,
therefore, be required by DTC to be settled in immediately available funds. The
Company expects that secondary trading in any certificated Notes will also be
settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Cedel
participant purchasing an interest in a Global Note from a Participant in DTC
will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
In connection with the offering of the Original Notes, the Company, the
Guarantors and Salomon Smith Barney Inc. entered into the Registration Rights
Agreement. Pursuant to the Registration Rights Agreement, the Company agreed to
file with the Commission the Registration Statement of which this Prospectus is
a part. Upon the effectiveness of the Registration Statement of which this
Prospectus is a part, Holders of Transfer Restricted Securities pursuant to the
Exchange Offer who are able to make certain representations will have the
opportunity to exchange their Transfer Restricted Securities for Exchange Notes.
The Company will file with the Commission a Shelf Registration Statement to
cover resales of the Notes by Holders who satisfy certain conditions relating to
the provision of information in connection with the Shelf Registration Statement
if:
(1) the Company is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the
Exchange Offer is not permitted by applicable law or Commission policy;
or
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(2) any Holder of Transfer Restricted Securities notifies the Company prior
to the 20th day following consummation of the Exchange Offer that:
(a) it is prohibited by law or Commission policy from participating in
the Exchange Offer; or
(b) that it may not resell the Exchange Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and
the prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales; or
(c) that it is a broker-dealer and owns Notes acquired directly from
the Company or an affiliate of the Company.
The Company will use its reasonable best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each Note
until:
(1) the date on which such Note has been exchanged by a person other than a
broker-dealer for an Exchange Note in the Exchange Offer;
(2) following the exchange by a broker-dealer in the Exchange Offer of a
Note for an Exchange Note, the date on which such Exchange Note is sold
to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange
Offer Registration Statement;
(3) the date on which the resale of such Note has been effectively
registered under the Securities Act and such Note has been disposed of
in accordance with the Shelf Registration Statement; or
(4) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Act.
The Registration Rights Agreement provides that:
(1) the Company will file an Exchange Offer Registration Statement with the
Commission on or prior to 90 days after the Closing Date;
(2) the Company will use its reasonable best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or
prior to 270 days after the Closing Date;
(3) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use
its reasonable best efforts to issue on or prior to 30 business days
after the date on which the Exchange Offer Registration Statement was
declared effective by the Commission, Exchange Notes in exchange for
all Notes tendered prior thereto in the Exchange Offer; and
(4) if obligated to file the Shelf Registration Statement, the Company will
use its reasonable best efforts to file the Shelf Registration
Statement with the Commission on or prior to 30 days after such filing
obligation arises and to cause the Shelf Registration to be declared
effective by the Commission on or prior to 90 days after such
obligation arises.
The Company will pay Liquidated Damages to each Holder of Transfer Restricted
Securities if:
(1) the Company fails to file any of the Registration Statements required
by the Registration Rights Agreement on or before the date specified
for such filing;
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(2) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness
(the "Effectiveness Target Date");
(3) the Company fails to consummate the Exchange Offer within 30 business
days of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective
or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights (each such
event referred to in clauses (1) through (4) above a "Registration
Default").
The amount of Liquidated Damages will be $.05 per week per $1,000 principal
amount of Notes held by each Holder, with respect to the first 90-day period
immediately following the occurrence of the first Registration Default.
Liquidated Damages will increase by $.05 per week per $1,000 principal amount of
Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages for all
Registration Defaults of $.50 per week per $1,000 principal amount of Notes. All
accrued Liquidated Damages will be paid by the Company on each Damages Payment
Date to the Global Note Holder by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference is
made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other Person
is merged with or into or became a Subsidiary of such specified Person,
whether or not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 25% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole
will be governed by the provisions of the Indenture described above
under the caption " --Change of Control" and/or the provisions
described above under the caption " --Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant; and
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(2) the issuance of Equity Interests by any of the Company's Restricted
Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $2.5 million;
or (b) results in net proceeds to the Company and its Subsidiaries of
less than $2.5 million;
(2) a transfer of assets (a) between or among the Company and its Wholly
Owned Restricted Subsidiaries, (b) by a Restricted Subsidiary to the
Company or any of its Wholly Owned Restricted Subsidiaries or (c) by
the Company or any of its Wholly Owned Restricted Subsidiaries to any
Restricted Subsidiary of the Company that is not a Wholly Owned
Restricted Subsidiary if, in the case of this clause (c), the Company
or the Wholly Owned Restricted Subsidiary, as the case may be, either
retains title to or ownership of the assets being transferred or
receives consideration at the time of such transfer at least equal to
the fair market value of the transferred assets;
(3) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to a Wholly Owned Restricted Subsidiary;
(4) the sale, transfer or discount of any receivables to lenders under any
Credit Facilities or to special purpose entities formed to borrow from
lenders under Credit Facilities against such receivables;
(5) a sale of assets (other than assets specified in any other clause of
this paragraph) by the Company or any of its Restricted Subsidiaries
prior to September 30, 2002, provided that (a) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at
the time of each such sale at least equal to the fair market value of
the assets sold and (b) the aggregate fair market value of all such
assets sold in any fiscal year shall not exceed an amount equal to:
(i) for the Company's fiscal year ended September 30, 1999,
$25,000,000, and
(ii) for each of the Company's fiscal years ended September 30, 2000,
2001 and 2002, an amount equal to the sum of $25,000,000 plus the
difference between (A) $25,000,000 and (B) the aggregate
consideration received by the Company and its Restricted
Subsidiaries for all sales of assets (excluding assets specified
in any other clause of this paragraph) during the previous fiscal
year;
(6) a Restricted Payment that is permitted by the covenant described above
under the caption " -- Restricted Payments"; and
(7) a disposition of inventory in the ordinary course of business or a
disposition of obsolete equipment or equipment that is no longer useful
in the conduct of the business of the Company and its Restricted
Subsidiaries and that is disposed of in the ordinary course of
business.
"Attributable Debt" in respect of a sale and leaseback transaction means, at the
time of determination, the present value of the obligation of the lessee for net
rental payments during the remaining term of the lease included in such sale and
leaseback transaction including any period for which such lease has been
extended or may, at the option of the lessor, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest implicit
in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
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"Capital Lease Obligation" means, at the time any determination thereof is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company, partnership
or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than six
months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities of
six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits,
in each case, with any lender party to the Credit Facility or with any
domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company
and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(3) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" (as
defined above), other than the Principals and their Related Parties,
becomes the Beneficial Owner, directly or indirectly, of more than 30%
of the Voting Stock of the Company, measured by voting power rather
than number of shares;
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(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or
(5) the consolidation or merger of the Company with or into any Person, or
the consolidation or merger of any Person with or into the Company, in
any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged
for cash, securities or other property, excluding any such transaction
where the Voting Stock of the Company outstanding immediately prior to
such transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock
of such surviving or transferee Person (immediately after giving effect
to such issuance).
"Class A Convertible Preferred Stock" means 195,000 shares of the Company's 5%
Class A Convertible Preferred Stock, liquidation preference $1,000 per share,
outstanding as of the Issue Date, which is redeemable at the option of the
Company at any time after May 19, 2000.
"Consolidated Cash Flow" means, with respect to any Person for any period, the
Consolidated Net Income of such Person for such period plus, without
duplication:
(1) an amount equal to any extraordinary gain or loss plus any net gain or
loss realized in connection with an Asset Sale or any other sale,
lease, conveyance or other disposition of any assets or rights (other
than sales of inventory in the ordinary course of business) in a single
transaction or in a series of related transactions that involves assets
or rights having an aggregate fair market value equal to or greater
than $2.5 million, in any such case to the extent such gains or losses
were excluded in computing such Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net
Income; plus
(3) consolidated net interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed
interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any, pursuant to
Hedging Obligations but excluding amortization of debt issuance costs),
to the extent that any such expense was deducted in computing such
Consolidated Net Income; plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period), other non-cash expenses (excluding
any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of
a prepaid cash expense that was paid in a prior period) and, in the
case of the Company and its Restricted Subsidiaries, restructuring
charges recorded in the Company's fourth fiscal quarter of fiscal 1998
in an amount not to exceed $20.4 million in the aggregate, of such
Person and its Restricted Subsidiaries for such period to the extent
that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such period,
other than items that were accrued in the ordinary course of business,
in each case, on a consolidated basis and determined in accordance with
GAAP.
Notwithstanding the preceding, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Restricted Subsidiary of the Company shall be added to Consolidated
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Net Income to compute Consolidated Cash Flow of the Company only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividended to the Company by such Restricted Subsidiary without prior
approval (that has not been obtained), pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders
(other than restrictions in effect on the Issue Date and other than restrictions
that are created or exist in compliance with the covenant under the caption
"Dividends and Other Payment Restrictions Affecting Subsidiaries").
"Consolidated Net Income" means, with respect to any specified Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted
Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders (other
than restrictions in effect on the Issue Date and other than
restrictions that are created or exist in compliance with the covenant
under the caption "Dividends and Other Payment Restrictions Affecting
Subsidiaries");
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) the Net Income (but not loss) of any Unrestricted Subsidiary shall be
excluded, whether or not distributed to the specified Person or one of
its Subsidiaries;
(5) restructuring charges and write-offs recorded prior to the first
anniversary of the date of the Indenture, in an aggregate amount not to
exceed $12.5 million, shall be excluded; and
(6) the cumulative effect of a change in accounting principles shall be
excluded.
"Continuing Directors" means, as of any date of determination, any member of the
Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of the Indenture;
or
(2) nominated for election or elected to such Board of Directors with the
approval of a majority of the Continuing Directors who were members of
such Board at the time of such nomination or election.
"Credit Facility" means, with respect to the Company or any of its Restricted
Subsidiaries:
(1) that certain Credit Facility, dated as of December 4, 1998, by and
among the Company, certain of the Company's Subsidiaries, the lenders
party thereto, the Chase Manhattan Bank, as Administrative Agent,
Salomon Smith Barney Inc., as Syndication Agent, Credit Lyonnais
Chicago Branch, as Co-Documentation Agent and NBD Bank, as
Co-Documentation Agent providing for up to $500.0 million of revolving
credit borrowings and $525.0 million in term loans, in each case
including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or
refinanced from time to time; and
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(2) one or more debt facilities or commercial paper facilities, in each
case with banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the giving of
notice or both would be, an Event of Default.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit Facility; and
(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $10.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms
of any security into which it is convertible, or for which it is exchangeable,
in each case at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature. Notwithstanding the preceding sentence, any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a change of control or an asset sale shall not constitute
Disqualified Stock.
"Domestic Restricted Subsidiary" means, with respect to the Company, any
Restricted Subsidiary that was formed under the laws of the United States of
America or any State thereof.
"Equity Interests" means Capital Stock and all warrants, options or other rights
to acquire Capital Stock (but excluding any debt security that is convertible
into, or exchangeable for, Capital Stock).
"Exclusive Agency and Marketing Agreement" means the Exclusive Agency and
Marketing Agreement between the Company and Monsanto Company, dated as of
September 30, 1998 (as amended and restated as of November 11, 1998) as the same
may be amended, modified, restated, extended, renewed or replaced from time to
time.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries (in addition to Indebtedness under the Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(1) the consolidated net interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued, including,
without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging Obligations,
but excluding amortization of debt issuance costs and other non-cash
amortization; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon;
plus
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(4) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable
solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person for
such period. In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than
revolving credit borrowings) or issues or redeems preferred stock subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of its
Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period
and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (3) of the proviso set forth in the
definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only
to the extent that the obligations giving rise to such Fixed Charges
will not be obligations of the specified Person or any of its
Restricted Subsidiaries following the Calculation Date.
"Foreign Subsidiary" means, with respect to the Company, any Subsidiary that
does not meet the definition of a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means:
(1) each Wholly Owned Domestic Restricted Subsidiary of the Company on the
date of the Indenture; and
(2) any other Subsidiary of the Company that executes a Subsidiary
Guarantee in accordance with the provisions of the Indenture;
and their respective successors and assigns.
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"Hedging Obligations" means, with respect to any Person, the obligations of such
Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements or exchange rate or raw materials price
risk agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates, in each case pursuant to any
Credit Facilities permitted pursuant to the covenant under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock."
"Indebtedness" means, with respect to any specified Person, without duplication,
any indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes, without duplication, all Indebtedness of others secured
by a Lien on any asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person) and, to the extent not otherwise included,
the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such Person
in other Persons (including Affiliates) in the forms of direct or indirect loans
(including guarantees of Indebtedness or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of the covenant described
above under the caption "Certain Covenants -- Restricted Payments."
"Issue Date" means the date of first issuance of the Notes under the Indenture.
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"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Net Income" means, with respect to any Person, the net income (loss) of such
Person and its Restricted Subsidiaries, determined in accordance with GAAP and
before any reduction in respect of preferred stock dividends, excluding,
however:
(1) any gain or loss, together with any related provision for taxes on such
gain or loss, realized in connection with: (a) any Asset Sale or any
other sale, lease, conveyance or other disposition of any assets or
rights (other than sales of inventory in the ordinary course of
business) in a single transaction or in a series of related
transactions that involves assets or rights having an aggregate fair
market value equal to or greater than $2.5 million; or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person
or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision for
taxes on such extraordinary gain or loss; and
(3) any non-cash expenses attributable to grants or exercises of employee
stock options.
"Net Proceeds" means the aggregate cash proceeds received by the Company or any
of its Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of the direct costs relating to
such Asset Sale, including, without limitation, legal, accounting and investment
banking fees, and sales commissions, and any relocation expenses incurred as a
result thereof, taxes paid or payable as a result thereof, in each case after
taking into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets
that were the subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted Subsidiaries
(a) provides credit support of any kind (including any undertaking,
agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder
of any other Indebtedness (other than the Notes) of the Company or any
of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees, indemnifications,
reimbursements, damages and other liabilities payable under the documentation
governing any Indebtedness.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted Subsidiary of the
Company;
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(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the Company; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company;
(6) investments in accounts or notes receivable acquired in the ordinary
course of business;
(7) the designation of one or more Subsidiaries of the Company whose assets
and operations are exclusively related to the professional business
segment of the Company;
(8) any payment by the Company or any of its Restricted Subsidiaries
pursuant to the Exclusive Agency and Marketing Agreement; and
(9) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (9) that are at any time
outstanding, not to exceed $50.0 million.
"Permitted Junior Securities" means: (1) Equity Interests in the Company or any
Guarantor; or (2) debt securities of the Company or any Guarantor that are
subordinated to all Senior Debt and any debt securities issued in exchange for
Senior Debt to substantially the same extent as, or to a greater extent than,
the Notes and the Subsidiary Guarantees are subordinated to Senior Debt pursuant
to Article 10 of the Indenture.
"Permitted Liens" means:
(1) Liens securing Senior Debt that was permitted by the terms of the
Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary
of the Company; provided that such Liens were not entered into in
contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with
the Company or the Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were
not entered into in contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
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(6) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock"
covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date of the Indenture;
(8) Liens on Assets of Guarantors to secure Senior Debt of such Guarantor
that was permitted by the Indenture to be incurred;
(9) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(10)Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding; and
(11)Liens on assets of Unrestricted Subsidiaries that secure Non Recourse
Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount
of (or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith including premiums paid, if any, to the holders thereof);
(2) such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity
of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes,
such Permitted Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and is subordinated in right of
payment to, the Notes on terms at least as favorable to the Holders of
Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness shall not be incurred by a Restricted Subsidiary that
is not a Guarantor to refinance debt of the Company or a Guarantor.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust or
unincorporated organization (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"Principals" means the Hagedorn Partnership, L.P., and any Partner or Affiliate
thereof or of such Partner.
"Qualified Securitization Transaction" means any transaction or series of
transactions pursuant to which the Company or any of its Restricted Subsidiaries
may sell, convey or otherwise transfer to (a) a Securitization Entity (in the
case of a transfer by the Company or any of its Restricted Subsidiaries) and (b)
any other Person (in case of a transfer by a Securitization Entity), or may
grant a security interest in, any accounts receivable or equipment (whether now
existing or arising or acquired in the future) of the Company or any of its
Restricted Subsidiaries, and any assets related thereto including, without
limitation, all collateral securing such accounts receivable and
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equipment, all contracts and contract rights and all Guarantees or other
obligations in respect of such accounts receivable and equipment, proceeds of
such accounts receivable and equipment and other assets (including contract
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable and equipment.
"Related Business" means the business conducted (or proposed to be conducted) by
the Company and its Subsidiaries as of the Issue Date and any and all businesses
that in the good faith judgment of the Board of Directors of the Company are
reasonably related thereto.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, 80% or more owned Subsidiary, or spouse or
immediate family member (in the case of an individual) of such
Principal; or
(2) any trust, corporation, partnership or other entity, the beneficiaries,
stockholders, partners, owners or Persons beneficially holding an 80%
or more controlling interest of which consist of such Principal and/or
such other Persons referred to in the immediately preceding clause (1).
"Restricted Investment" means an Investment other than a Permitted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person
that is not an Unrestricted Subsidiary.
"Securitization Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company makes an
Investment and to which the Company or any Subsidiary of the Company transfers
accounts receivable or equipment and related assets) that engages in no
activities other than in connection with the financing of accounts receivable or
equipment and that is a Securitization Entity (a) no portion of the Indebtedness
or any other Obligations (contingent or otherwise) of which (i) is guaranteed by
the Company or any Restricted Subsidiary of the Company (excluding guarantees of
Obligations (other than the principal of, and interest on, Indebtedness))
pursuant to Standard Securitization Undertakings, (ii) is recourse to or
obligates the Company or any Restricted Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Restricted Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the satisfaction
thereof, other than pursuant to Standard Securitization Undertakings, (b) with
which neither the Company nor any Restricted Subsidiary of the Company has any
material contract, agreement, arrangement or understanding other than on terms
no less favorable to the Company or such Restricted Subsidiary than those that
might be obtained at the time from Persons that are not Affiliates of the
Company, other than fees payable in the ordinary course of business in
connection with servicing receivables of such entity, and (c) to which neither
the Company nor any Restricted Subsidiary of the Company has any obligation to
maintain or preserve such entity's financial condition or cause such entity to
achieve certain levels of operating results.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all Hedging
Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred by the Company under
the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with
or subordinated in right of payment to the Notes or the Subsidiary
Guarantees; and
(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will not
include:
(1) any liability for federal, state, local or other taxes owed or owing by
the Company;
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(2) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the Indenture.
"Significant Domestic Restricted Subsidiary" means any Domestic Restricted
Subsidiary, other than any Wholly Owned Domestic Restricted Subsidiary, that
both is a Significant Subsidiary of the Company and guarantees or otherwise
provides direct credit support for any Senior Debt of the Company.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company that are reasonably customary in an accounts receivable or equipment
transaction.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or
more of the other Subsidiaries of that Person (or a combination
thereof); and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as of
the Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to January 15, 2004;
provided, however, that if the period from the Redemption Date to January 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or understanding
with the Company or any Restricted Subsidiary of the Company unless the
terms of any such agreement, contract, arrangement or understanding are
no less favorable to the Company or such Restricted Subsidiary than
those that might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the Company nor any of its
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or
preserve such
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Person's financial condition or to cause such Person to achieve any
specified of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.
Any designation of a Subsidiary of the Company as an Unrestricted Subsidiary
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the caption
"Certain Covenants -- Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant.
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
the covenant described under the caption "Certain Covenants -- Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period; and (2) no Default or Event of Default would be in existence
following such designation.
If a Guarantor is designated as an Unrestricted Subsidiary, the Subsidiary
Guarantee of that Guarantor shall be released. If an Unrestricted Subsidiary
becomes a Restricted Subsidiary, such Restricted Subsidiary shall become a
Guarantor in accordance with the terms of the Indenture.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness at
any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of each
then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Domestic Restricted Subsidiary" means, with respect to the
Company, any Domestic Restricted Subsidiary that meets the definition of a
Wholly Owned Restricted Subsidiary.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted Subsidiary
of such Person all of the outstanding Capital Stock or other ownership interests
of which (other than directors' qualifying shares) shall at the time be owned by
such Person and/or by one or more Wholly Owned Restricted Subsidiaries of such
Person.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a general discussion of certain U.S. federal income tax
consequences of the Exchange Offer. This discussion is based on the current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations, judicial authority and administrative rulings
and practice. This discussion is
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generally limited to the tax consequences to Holders that hold the Exchange
Notes as capital assets (within the meaning of Section 1221 of the Code). There
can be no assurance that the Internal Revenue Service (the "Service") will not
take a contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set forth
herein. Any changes or interpretations may or may not be retroactive and could
affect the tax consequences to Holders. Some Holders, including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States, may be subject to special rules not discussed below.
For U.S. federal income tax purposes, the exchange of Original Notes for
Exchange Notes pursuant to the Exchange Offer should not be treated as a taxable
transaction for federal income tax purposes. As a result, there should be no
federal income tax consequences to Holders exchanging Original Notes for
Exchange Notes pursuant to the Exchange Offer. A Holder should have the same
adjusted basis and holding period in an Exchange Note as it had in an Original
Note immediately prior to the exchange.
THE FOREGOING DISCUSSION IS BASED ON THE PROVISIONS OF THE CODE, REGULATIONS,
TREASURY REGULATIONS, RULINGS AND JUDICIAL DECISIONS NOW IN EFFECT, ALL OF WHICH
ARE SUBJECT TO CHANGE. ANY CHANGES MAY BE APPLIED RETROACTIVELY IN A MANNER THAT
COULD ADVERSELY AFFECT HOLDERS EXCHANGING NOTES. EACH HOLDER OF ORIGINAL NOTES
SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO IT,
INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS,
OF EXCHANGING ORIGINAL NOTES FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER.
LEGAL MATTERS
Certain legal matters relating to the Exchange Offer are being passed upon for
the Company by Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio, counsel for
the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
The audited consolidated financial statements of The Scotts Company and its
Subsidiaries as of September 30, 1997 and 1998 and for the years ended September
30, 1996, 1997 and 1998 incorporated by reference in this Prospectus have been
audited by PricewaterhouseCoopers LLP, independent certified public accountants,
as indicated in their report with respect thereto and incorporated by reference
herein.
The audited combined financial statements of Rhone-Poulenc Jardin as of December
31, 1997 and for the year then ended incorporated by reference in this
Prospectus have been audited by Coopers & Lybrand, independent certified public
accountants, as indicated in their report with respect thereto and incorporated
by reference herein.
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$330,000,000
THE SCOTTS COMPANY
8.625% SENIOR SUBORDINATED NOTES DUE 2009
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
[LOGO]
PROSPECTUS
, 1999
<PAGE> 94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Division (E) of Section 1701.13 of the Ohio Revised Code governs
indemnification by a corporation and provides as follows:
(E)(1) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative, other than
an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee, member, manager, or
agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, associate, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust or
other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, if
he had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, he had reasonable cause
to believe that his conduct was unlawful.
(2) A corporation may indemnify or agree to indemnify any
person who was or is a party, or is threatened to be made a party, to
any threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee, member, manager,
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, member, manager,
or agent of another corporation, domestic or foreign, nonprofit or for
profit, a limited liability company, or a partnership, joint venture,
trust, or other enterprise, against expenses, including attorney's
fees, actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall
be made in respect of any of the following:
(a) Any claim, issue, or matter as to which such
person is adjudged to be liable for negligence or misconduct
in the performance of his duty to the corporation unless, and
only to the extent that, the court of common pleas or the
court in which such action or suit was brought determines,
upon application, that, despite the adjudication of liability,
but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such
expenses as the court of common pleas or such other court
shall deem proper;
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(b) Any action or suit in which the only liability
asserted against a director is pursuant to section 1701.95 of
the Revised Code.
(3) To the extent that a director, trustee, officer, employee,
member, manager, or agent has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses,
including attorney's fees, actually and reasonably incurred by him in
connection with the action suit or proceeding.
(4) Any indemnification under division (E)(1) or (2) of this
section, unless ordered by a court, shall be made by the corporation
only as authorized in the specific case, upon a determination that
indemnification of the director, trustee, officer, employee, member,
manager, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in division (E)(1) or (2) of
this section. Such determination shall be made as follows:
(a) By a majority vote of a quorum consisting of
directors of the indemnifying corporation who were not and are
not parties to or threatened by the action, suit, or
proceeding referred to in division (E)(1) or (2) of this
section;
(b) If the quorum described in division (E)(4)(a) of
this section is not obtainable or if a majority vote of a
quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney,
or a firm having associated with it an attorney, who has been
retained by or who has performed services for the corporation
or any person to be indemnified within the past five years;
(c) By the shareholders; or
(d) By the court of common pleas or the court in
which such action, suit or proceeding referred to in division
(E)(1) or (2) of this section was brought.
Any determination made by the disinterested directors under
division (E)(4)(a) or by independent legal counsel under division
(E)(4)(b) of this section shall be promptly communicated to the person
who threatened or brought the action or suit by or in the right of the
corporation under division (E)(2) of this section, and, within ten days
after receipt of such notification, such person shall have the right to
petition the court of common pleas or the court in which such action or
suit was brought to review the reasonableness of such determination.
(5)(a) Unless at the time of a director's act or omission that
is the subject of an action, suit, or proceeding referred to in
division (E)(1) or (2) of this section, the articles or the regulations
of a corporation state, by specific reference to this division, that
the provisions of this division do not apply to the corporation and
unless the only liability asserted against a director in an action,
suit, or proceeding referred to in division (E)(1) or (2) of this
section is pursuant to section 1701.95 of the Revised Code, expenses,
including attorney's fees, incurred by a director in defending the
action, suit, or proceeding shall be paid by the corporation as they
are incurred, in advance of the final disposition of the action, suit,
or proceeding, upon receipt of an undertaking by or on behalf of the
director in which he agrees to both of the following:
(i) Repay such amount if it is proved by
clear and convincing evidence in a court of competent
jurisdiction that his action or failure to act
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involved an act or omission undertaken with
deliberate intent to cause injury to the corporation
or undertaken with reckless disregard for the best
interests of the corporation;
(ii) Reasonably cooperate with the
corporation concerning the action, suit, or
proceeding.
(b) Expenses, including attorney's fees, incurred by
a director, trustee, officer, employee, member, manager, or
agent in defending any action, suit, or proceeding referred to
in division (E)(1) or (2) of this section, may be paid by the
corporation as they are incurred, in advance of the final
disposition of the action, suit, or proceeding, as authorized
by the directors in the specific case, upon receipt of an
undertaking by or on behalf of the director, trustee, officer,
employee, member, manager, or agent to repay such amount, if
it ultimately is determined that he is not entitled to be
indemnified by the corporation.
(6) The indemnification authorized by this section shall not
be exclusive of, and shall be in addition to, any other rights granted
to those seeking indemnification under the articles, the regulations,
any agreement, a vote of shareholders or disinterested directors, or
otherwise, both as to action in their official capacities and as to
action in another capacity while holding their offices or positions,
and shall continue as to a person who has ceased to be a director,
trustee, officer, employee, member, manager, or agent and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
(7) A corporation may purchase and maintain insurance or
furnish similar protection, including, but not limited to, trust funds,
letters of credit, or self-insurance, on behalf of or for any person
who is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as
a director, trustee, officer, employee, member, manager, or agent of
another corporation, domestic or foreign, nonprofit or for profit, a
limited liability company, or a partnership, joint venture, trust, or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify
him against such liability under this section. Insurance may be
purchased from or maintained with a person in which the corporation has
a financial interest.
(8) The authority of a corporation to indemnify persons
pursuant to division (E)(1) or (2) of this section does not limit the
payment of expenses as they are incurred, indemnification, insurance,
or other protection that may be provided pursuant to divisions (E)(5),
(6), and (7) of this section. Divisions (E)(1) and (2) of this section
do not create any obligation to repay or return payments made by the
corporation pursuant to division (E)(5), (6), or (7).
(9) As used in division (E) of this section, "corporation"
includes all constituent entities in a consolidation or merger and the
new or surviving corporation, so that any person who is or was a
director, officer, employee, trustee, member, manager, or agent of such
a constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee, member,
manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, shall stand in the same
position under this section with respect to the new or surviving
corporation as he would if he had served the new or
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surviving corporation in the same capacity.
Section 5.01 of the Registrant's Code of Regulations governs
indemnification by Registrant and provides as follows:
SECTION 5.01. Mandatory Indemnification. The corporation shall
indemnify any officer or director of the corporation who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any
action threatened or instituted by or in the right of the corporation),
by reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, member, manager
or agent of another corporation (domestic or foreign, nonprofit or for
profit), limited liability company, partnership, joint venture, trust
or other enterprise, against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he
had no reasonable cause to believe his conduct was unlawful. A person
claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for
indemnification, to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal matter, to have had
no reasonable cause to believe his conduct was unlawful, and the
termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
In addition, the Registrant currently provides insurance coverage to
its directors and officers against certain liabilities which might be incurred
by them in such capacity.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
Exhibit
No. Description
--- -----------
4 Indenture dated as January 20, 1999 between The Scotts Company
and State Street Bank and Trust Company, as trustee
5 * Opinion of Vorys, Sater, Seymour and Pease LLP
23.1* Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2* Consent of Coopers & Lybrand, Independent Accountants
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Exhibit
No. Description
--- -----------
23.3* Consent of Vorys, Sater, Seymour and Pease LLP (included in
Exhibit 5)
24 Powers of Attorney (included on signature page)
25 Form T-1 - Statement of Eligibility of Trustee
99 Letter of Transmittal
- -----
* To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
None
ITEM 22. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes as follows: that prior
to any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 145, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted against the registrant by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(4) The undersigned Registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Registration Statement on Form S-4 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Columbus, State of Ohio, on April 19, 1999.
THE SCOTTS COMPANY
By /s/ CHARLES M. BERGER
---------------------------------
CHARLES M. BERGER
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of The Scotts Company. (the
"Company"), and each of us, do hereby constitute and appoint Jean H. Mordo and
G. Robert Lucas, or either of them, our true and lawful attorneys and agents,
each with full power of substitution, to do any and all acts and things in our
name and on our behalf in our capacities as directors and officers of the
Company and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys or agents, or any of them, may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with the filing of this
Registration Statement on Form S-4, including specifically but without
limitation, power and authority to sign for us or any of us in our names in the
capacities indicated below for the Company, any and all amendments (including
post-effective amendments) to such Registration Statement; and we do hereby
ratify and confirm all that said attorneys and agents, or their substitute or
substitutes, or any of them, shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ CHARLES M. BERGER Chairman of the Board, President April 19, 1999
- ------------------------------------ and CEO
CHARLES M. BERGER (Principal Executive Officer)
/s/ JEAN H. MORDO Executive Vice President and CFO April 19, 1999
- ----------------------------------- (Principal Financial and
JEAN H. MORDO Accounting Officer)
JAMES B. BEARD Director April 19, 1999
- -----------------------------------
JAMES B. BEARD
JOSEPH P. FLANNERY Director April 19, 1999
- -----------------------------------
JOSEPH P. FLANNERY
HORACE HAGEDORN Director April 19, 1999
- -----------------------------------
HORACE HAGEDORN
/s/ JAMES H. HAGEDORN Director April 19, 1999
- -----------------------------------
JAMES H. HAGEDORN
ALBERT E. HARRIS Director April 19, 1999
- -----------------------------------
ALBERT E. HARRIS
</TABLE>
II-6
<PAGE> 100
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ JOHN KENLON Director April 19, 1999
- -----------------------------------
JOHN KENLON
KAREN G. MILLS Director April 19, 1999
- -----------------------------------
KAREN G. MILLS
/s/ PATRICK J. NORTON Director April 19, 1999
- -----------------------------------
PATRICK J. NORTON
/s/ JOHN M. SULLIVAN Director April 19, 1999
- -----------------------------------
JOHN M. SULLIVAN
/s/ L. JACK VAN FOSSEN Director April 19, 1999
- -----------------------------------
L. JACK VAN FOSSEN
JOHN WALKER, PH.D. Director April 19, 1999
- -----------------------------------
JOHN WALKER, PH.D.
</TABLE>
II-7
<PAGE> 101
INDEX TO EXHIBITS
Exhibit
No. Description
--- -----------
4 Indenture dated as January 20, 1999 between The Scotts Company
and State Street Bank and Trust Company, as trustee
5* Opinion of Vorys, Sater, Seymour and Pease LLP
23.1* Consent of PricewaterhouseCoopers LLP, Independent Accountants
23.2* Consent of Coopers & Lybrand, Independent Accountants
23.3* Consent of Vorys, Sater, Seymour and Pease LLP (included in
Exhibit 5)
24 Powers of Attorney (included on signature page)
25 Form T-1 - Statement of Eligibility of Trustee
99 Letter of Transmittal
- ------
* To be filed by amendment.
II-8
<PAGE> 1
EXHIBIT 4
EXECUTION COPY
================================================================================
THE SCOTTS COMPANY
$400,000,000
SERIES A AND SERIES B
8.625% SENIOR SUBORDINATED NOTES DUE 2009
INDENTURE
----------------------------
Dated as of January 21, 1999
----------------------------
STATE STREET BANK AND TRUST COMPANY
Trustee
--------------
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act Section Indenture Section
<S> <C>
310 (a)(1).......................................................................................7.10
(a)(2) ..........................................................................................7.10
(a)(3)...........................................................................................N.A.
(a)(4)...........................................................................................N.A.
(a)(5)...........................................................................................7.10
(b)..............................................................................................7.10
(c)..............................................................................................N.A.
311(a)...........................................................................................7.11
(b)..............................................................................................7.11
(i)(c)...........................................................................................N.A.
312 (a)..........................................................................................2.05
(b)..............................................................................................13.03
(c)..............................................................................................13.03
313(a)...........................................................................................7.06
(b)(2)...........................................................................................7.07
(c)..............................................................................................7.06; 13.02
(d)..............................................................................................7.06
314(a)...........................................................................................4.03; 13.02
(c)(1)...........................................................................................13.04
(c)(2)...........................................................................................13.04
(c)(3)...........................................................................................N.A.
(e)..............................................................................................13.05
(f)..............................................................................................N.A.
315 (a)..........................................................................................7.01
(b)..............................................................................................7.05; 13.02
(A)(c)...........................................................................................7.01
(d)..............................................................................................7.01
(e)..............................................................................................6.11
316 (a)(last sentence)...........................................................................2.09
(a)(1)(A)........................................................................................6.05
(a)(1)(B)........................................................................................6.04
(a)(2)...........................................................................................N.A.
(b)..............................................................................................6.07
(c)..............................................................................................2.12
317 (a)(1).......................................................................................6.08
(a)(2)...........................................................................................6.09
(b)..............................................................................................2.04
318 (a)..........................................................................................13.01
(b)..............................................................................................N.A.
(c)..............................................................................................12.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE.............................................................1
SECTION 1.01. DEFINITIONS......................................................................................1
SECTION 1.02. OTHER DEFINITIONS...............................................................................21
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS.................................................................22
SECTION 1.04. RULES OF CONSTRUCTION...........................................................................22
ARTICLE 2. THE NOTES.............................................................................................23
SECTION 2.01. FORM AND DATING.................................................................................23
SECTION 2.02. EXECUTION AND AUTHENTICATION....................................................................24
SECTION 2.03. REGISTRAR AND PAYING AGENT......................................................................25
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.............................................................25
SECTION 2.05. HOLDER LISTS....................................................................................25
SECTION 2.06. TRANSFER AND EXCHANGE...........................................................................26
SECTION 2.07. REPLACEMENT NOTES...............................................................................38
SECTION 2.08. OUTSTANDING NOTES...............................................................................38
SECTION 2.09. TREASURY NOTES..................................................................................38
SECTION 2.10. TEMPORARY NOTES.................................................................................39
SECTION 2.11. CANCELLATION....................................................................................39
SECTION 2.12. DEFAULTED INTEREST..............................................................................39
SECTION 2.13. CUSIP NUMBERS...................................................................................39
ARTICLE 3. REDEMPTION AND PREPAYMENT.............................................................................40
SECTION 3.01. NOTICES TO TRUSTEE..............................................................................40
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED...............................................................40
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 3.03. NOTICE OF REDEMPTION............................................................................40
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION..................................................................41
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.....................................................................41
SECTION 3.06. NOTES REDEEMED IN PART..........................................................................42
SECTION 3.07. OPTIONAL REDEMPTION.............................................................................42
SECTION 3.08. MANDATORY REDEMPTION............................................................................42
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.............................................42
ARTICLE 4. COVENANTS.............................................................................................44
SECTION 4.01. PAYMENT OF NOTES................................................................................44
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.................................................................45
SECTION 4.03. REPORTS.........................................................................................45
SECTION 4.04. COMPLIANCE CERTIFICATE..........................................................................45
SECTION 4.05. TAXES...........................................................................................46
SECTION 4.06. STAY, EXTENSION AND USURY LAWS..................................................................46
SECTION 4.07. RESTRICTED PAYMENTS.............................................................................47
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES..................................49
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK......................................51
SECTION 4.10. ASSET SALES.....................................................................................53
SECTION 4.11. TRANSACTIONS WITH AFFILIATES....................................................................54
SECTION 4.12. LIENS...........................................................................................55
SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS................................................................56
SECTION 4.14. CORPORATE EXISTENCE.............................................................................56
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL......................................................56
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.....................................................................57
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES................................................................57
SECTION 4.18. PAYMENTS FOR CONSENT............................................................................58
ARTICLE 5. SUCCESSORS............................................................................................58
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS........................................................58
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED...............................................................59
ARTICLE 6. DEFAULTS AND REMEDIES.................................................................................59
SECTION 6.01. EVENTS OF DEFAULT...............................................................................59
SECTION 6.02. ACCELERATION....................................................................................60
SECTION 6.03. OTHER REMEDIES..................................................................................61
SECTION 6.04. WAIVER OF PAST DEFAULTS.........................................................................61
SECTION 6.05. CONTROL BY MAJORITY.............................................................................62
SECTION 6.06. LIMITATION ON SUITS.............................................................................62
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT...................................................62
SECTION 6.08. COLLECTION SUIT BY TRUSTEE......................................................................63
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM................................................................63
SECTION 6.10. PRIORITIES......................................................................................63
SECTION 6.11. UNDERTAKING FOR COSTS...........................................................................64
ARTICLE 7. TRUSTEE...............................................................................................64
SECTION 7.01. DUTIES OF TRUSTEE...............................................................................64
SECTION 7.02. RIGHTS OF TRUSTEE...............................................................................65
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE....................................................................66
SECTION 7.04. TRUSTEE'S DISCLAIMER............................................................................66
SECTION 7.05. NOTICE OF DEFAULTS..............................................................................66
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES......................................................66
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
SECTION 7.07. COMPENSATION AND INDEMNITY......................................................................67
SECTION 7.08. REPLACEMENT OF TRUSTEE..........................................................................68
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC................................................................69
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION...................................................................69
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...............................................69
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE..............................................................69
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE........................................69
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE..................................................................69
SECTION 8.03. COVENANT DEFEASANCE.............................................................................70
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE......................................................70
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER MISCELLANEOUS
PROVISIONS....................................................................................71
SECTION 8.06. REPAYMENT TO COMPANY............................................................................72
SECTION 8.07. REINSTATEMENT...................................................................................72
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER......................................................................73
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.............................................................73
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES................................................................73
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.............................................................75
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS...............................................................75
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES................................................................75
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.................................................................75
ARTICLE 10. SUBORDINATION........................................................................................76
SECTION 10.01. AGREEMENT TO SUBORDINATE.......................................................................76
SECTION 10.02. CERTAIN DEFINITIONS............................................................................76
</TABLE>
iv
<PAGE> 7
<TABLE>
<S> <C>
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY...........................................................77
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT..............................................................77
SECTION 10.05. ACCELERATION OF NOTES..........................................................................78
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER............................................................78
SECTION 10.07. NOTICE BY COMPANY..............................................................................79
SECTION 10.08. SUBROGATION....................................................................................79
SECTION 10.09. RELATIVE RIGHTS................................................................................79
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY...................................................79
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.......................................................80
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.............................................................80
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION..........................................................80
SECTION 10.14. TRUSTEE'S COMPENSATION NOT PREJUDICED..........................................................80
ARTICLE 11. SUBSIDIARY GUARANTEES................................................................................81
SECTION 11.01. SUBSIDIARY GUARANTEE...........................................................................81
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE..........................................................82
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY..............................................................82
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.................................................82
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.............................................83
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS..............................................................83
ARTICLE 12. SATISFACTION AND DISCHARGE...........................................................................84
SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE........................................................84
SECTION 12.02. APPLICATION OF TRUST MONEY.....................................................................85
ARTICLE 13. MISCELLANEOUS........................................................................................85
SECTION 13.01. TRUST INDENTURE ACT CONTROLS...................................................................85
</TABLE>
v
<PAGE> 8
<TABLE>
<S> <C>
SECTION 13.02. NOTICES........................................................................................85
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES..................................87
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.............................................87
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION..................................................87
SECTION 13.06. RULES BY TRUSTEE AND AGENTS....................................................................87
SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS.......................88
SECTION 13.08. GOVERNING LAW..................................................................................88
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS..................................................88
SECTION 13.10. SUCCESSORS.....................................................................................88
SECTION 13.11. SEVERABILITY...................................................................................88
SECTION 13.12. COUNTERPART ORIGINALS..........................................................................88
SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC...............................................................88
</TABLE>
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
vi
<PAGE> 9
INDENTURE dated as of January 21, 1999 by and among The Scotts
Company, an Ohio corporation (the "Company"), the Guarantors named on the
signature pages hereto and State Street Bank and Trust Company, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows
for the benefit of each other and for the equal and ratable benefit of the
Holders of the 8.625% Series A Senior Subordinated Notes due 2009 (the "Series A
Notes") and the 8.625% Series B Senior Subordinated Notes due 2009 (the "Series
B Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the
time such other Person is merged with or into or became a Subsidiary of such
specified Person, whether or not such Indebtedness is incurred in connection
with, or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any
asset acquired by such specified Person.
"Additional Notes" means up to $100.0 million in aggregate
principal amount of Notes (other than the Initial Notes) issued under this
Indenture in accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that beneficial ownership of 25%
or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and "under
common control with" shall have correlative meanings.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and CEDEL that apply to such transfer or
exchange.
<PAGE> 10
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition
of any assets or rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of Section 4.15 hereof and/or the provisions of Section 5.01 hereof and not by
the provisions of Section 4.10 hereof; and
(2) the issuance of Equity Interests by any of the
Company's Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not
be deemed to be Asset Sales:
(1) any single transaction or series of related
transactions that: (a) involves assets having a fair market value of less than
$2.5 million; or (b) results in net proceeds to the Company and its Subsidiaries
of less than $2.5 million;
(2) a transfer of assets (a) between or among the
Company and its Wholly Owned Restricted Subsidiaries, (b) by a Restricted
Subsidiary to the Company or any of its Wholly Owned Restricted Subsidiaries or
(c) by the Company or any of its Wholly Owned Restricted Subsidiaries to any
Restricted Subsidiary of the Company that is not a Wholly Owned Restricted
Subsidiary if, in the case of this clause (c), the Company or the Wholly Owned
Restricted Subsidiary, as the case may be, either retains title to or ownership
of the assets being transferred or receives consideration at the time of such
transfer at least equal to the fair market value of the transferred assets;
(3) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to a Wholly Owned Restricted Subsidiary;
(4) the sale, transfer or discount of any receivables
to lenders under any Credit Facilities or to special purpose entities formed to
borrow from lenders under Credit Facilities against such receivables;
(5) a sale of assets (other than assets specified in
any other clause of this paragraph) by the Company or any of its Restricted
Subsidiaries prior to September 30, 2002, provided that (a) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
each such sale at least equal to the fair market value of the assets sold and
(b) the aggregate fair market value of all such assets sold in any fiscal year
shall not exceed an amount equal to:
(i) for the Company's fiscal year ended
September 30, 1999, $25,000,000, and
(ii) for each of the Company's fiscal years
ended September 30, 2000, 2001 and 2002, an amount equal to the sum of
$25,000,000 plus the difference between (A) $25,000,000 and (B) the aggregate
consideration received by the Company and its Restricted Subsidiaries for all
sales of assets (excluding assets specified in any other clause of this
paragraph) during the previous fiscal year;
2
<PAGE> 11
(6) a Restricted Payment that is permitted by Section
4.07 hereof; and
(7) a disposition of inventory in the ordinary course
of business or a disposition of obsolete equipment or equipment that is no
longer useful in the conduct of the business of the Company and its Restricted
Subsidiaries and that is disposed of in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction including any period
for which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal to
the rate of interest implicit in such transaction, determined in accordance with
GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in
Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as such term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition.
"Board of Directors" means the Board of Directors of the
Company, or any authorized committee of the Board of Directors.
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease that would at that time be required to be capitalized on a balance
sheet in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers
on a Person the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
3
<PAGE> 12
(1) United States dollars;
(2) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition;
(3) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any lender party to the Credit Facility or with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (2)
and (3) above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having the highest rating
obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation
and in each case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (1) through
(5) of this definition.
"CEDEL" means CEDEL Bank, SA.
"Change of Control" means the occurrence of any of the
following:
(1) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of the
Company and its Restricted Subsidiaries taken as a whole to any "person" (as
such term is used in Section 13(d)(3) of the Exchange Act) other than a
Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to the
liquidation or dissolution of the Company;
(3) the consummation of any transaction (including,
without limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than 30%
of the Voting Stock of the Company, measured by voting power rather than number
of shares;
(4) the first day on which a majority of the members
of the Board of Directors are not Continuing Directors; or
(5) the consolidation or merger of the Company with
or into any Person, or the consolidation or merger of any Person with or into
the Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged
4
<PAGE> 13
for cash, securities or other property, excluding any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance).
"Class A Convertible Preferred Stock" means 195,000 shares of
the Company's 5% Class A Convertible Preferred Stock, liquidation preference
$1,000 per share, outstanding as of the Issue Date, which is redeemable at the
option of the Company at any time after May 19, 2000.
"Company" means The Scotts Company, and any and all successors
thereto.
"Consolidated Cash Flow" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period plus,
without duplication:
(1) an amount equal to any extraordinary gain or loss
plus any net gain or loss realized in connection with an Asset Sale or any other
sale, lease, conveyance or other disposition of any assets or rights (other than
sales of inventory in the ordinary course of business) in a single transaction
or in a series of related transactions that involves assets or rights having an
aggregate fair market value equal to or greater than $2.5 million, in any such
case to the extent such gains or losses were excluded in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of
such Person and its Restricted Subsidiaries for such period, to the extent that
such provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated net interest expense of such Person
and its Restricted Subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation, amortization of
original issue discount, non-cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments,
if any, pursuant to Hedging Obligations but excluding amortization of debt
issuance costs), to the extent that any such expense was deducted in computing
such Consolidated Net Income; plus
(4) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period), other non-cash expenses
(excluding any such non-cash expense to the extent that it represents an accrual
of or reserve for cash expenses in any future period or amortization of a
prepaid cash expense that was paid in a prior period) and, in the case of the
Company and its Restricted Subsidiaries, restructuring charges recorded in the
Company's fourth fiscal quarter of fiscal 1998 in an amount not to exceed $20.4
million in the aggregate, of such Person and its Restricted Subsidiaries for
such period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing such Consolidated Net Income; minus
5
<PAGE> 14
(5) non-cash items increasing such Consolidated Net
Income for such period, other than items that were accrued in the ordinary
course of business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based
on the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders (other than restrictions in effect on the Issue Date and other
than restrictions that are created or exist in compliance with Section 4.08
hereof).
"Consolidated Net Income" means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that
is not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person or a Restricted Subsidiary
thereof;
(2) the Net Income of any Restricted Subsidiary shall
be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders (other than restrictions in effect on the Issue
Date and other than restrictions that are created or exist in compliance with
Section 4.08 hereof);
(3) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded;
(4) the Net Income (but not loss) of any Unrestricted
Subsidiary shall be excluded, whether or not distributed to the specified Person
or one of its Subsidiaries;
(5) restructuring charges and write-offs recorded
prior to the first anniversary of the date hereof, in an aggregate amount not to
exceed $12.5 million, shall be excluded; and
(6) the cumulative effect of a change in accounting
principles shall be excluded.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors who (i) was a member of such Board of
Directors on the date hereof or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
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<PAGE> 15
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 13.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Credit Facility" means, with respect to the Company or any of
its Restricted Subsidiaries:
(1) that certain Credit Facility, dated as of
December 4, 1998, by and among the Company, certain of the Company's
Subsidiaries, the lenders party thereto, the Chase Manhattan Bank, as
Administrative Agent, Salomon Smith Barney Inc., as Syndication Agent, Credit
Lyonnais Chicago Branch, as Co-Documentation Agent and NBD Bank, as
Co-Documentation Agent providing for up to $500.0 million of revolving credit
borrowings and $525.0 million in term loans, in each case including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time; and
(2) one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof, in
the form of EXHIBIT A-1 hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable, in each case at the option of the holder thereof), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or redeemable at the option of the
holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature. Notwithstanding the preceding
sentence, any Capital Stock that would constitute Disqualified Stock solely
because the holders thereof have the right to require the Company to repurchase
such Capital Stock upon the occurrence of a change of control or an asset sale
shall not constitute Disqualified Stock.
"Domestic Restricted Subsidiary" means, with respect to the
Company, any Restricted Subsidiary that was formed under the laws of the United
States of America or any State thereof.
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<PAGE> 16
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Series B Notes issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Exclusive Agency and Marketing Agreement" means the Exclusive
Agency and Marketing Agreement between the Company and Monsanto Company, dated
as of September 30, 1998 (as amended and restated as of November 11, 1998) as
the same may be amended, modified, restated, extended, renewed or replaced from
time to time.
"Existing Indebtedness" means Indebtedness of the Company and
its Restricted Subsidiaries (in addition to Indebtedness under the Credit
Facility) in existence on the date hereof, until such amounts are repaid.
"fair market value" means, with respect to any asset or
property, the price which could be negotiated in an arm's-length, free market
transaction, for cash, between a willing seller and a willing and able buyer,
neither of whom is under undue pressure or compulsion to complete the
transaction. Unless the TIA otherwise requires, fair market value shall be
determined by the Board of Directors of the Company acting reasonably and in
good faith and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of:
(1) the consolidated net interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, amortization of original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, imputed interest with respect to Attributable Debt, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any, pursuant to Hedging
Obligations, but excluding amortization of debt issuance costs and other
non-cash amortization; plus
(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period; plus
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<PAGE> 17
(3) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, whether or not such Guarantee or Lien is called upon; plus
(4) the product of (a) all dividend payments, whether
or not in cash, on any series of preferred stock of such Person or any of its
Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any
specified Person for any period, the ratio of the Consolidated Cash Flow of such
Person and its Restricted Subsidiaries for such period to the Fixed Charges of
such Person for such period. In the event that the specified Person or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues or redeems
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
(1) acquisitions that have been made by the specified
Person or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (3) of the
proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded; and
(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Foreign Subsidiary" means, with respect to the Company, any
Subsidiary that does not meet the definition of a Domestic Subsidiary.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
9
<PAGE> 18
other statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes, in the form of
EXHIBIT A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means:
(1) each Wholly Owned Domestic Restricted Subsidiary
of the Company on the date hereof; and
(2) any other Subsidiary of the Company that executes
a Subsidiary Guarantee in accordance with the provisions of this Indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements or exchange rate or raw materials
price risk agreements; and
(2) other agreements or arrangements designed to
protect such Person against fluctuations in interest rates, in each case
pursuant to any Credit Facilities permitted pursuant to Section 4.09 hereof.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of EXHIBIT
A-1 hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any specified Person,
without duplication, any indebtedness of such Person, whether or not contingent,
in respect of:
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<PAGE> 19
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than
letters of credit and Hedging Obligations) would appear as a liability upon a
balance sheet of the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" includes, without duplication, all
Indebtedness of others secured by a Lien on any asset of the specified Person
(whether or not such Indebtedness is assumed by the specified Person) and, to
the extent not otherwise included, the Guarantee by such Person of any
indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date
shall be:
(1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $300.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Initial Purchaser" shall have the meaning assigned to such
term in the Offering Memorandum.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the forms
of direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other
11
<PAGE> 20
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means the date of first issuance of the Notes
under this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, or the city in which the principal
corporate trust office of the Trustee is located, or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Liquidated Damages" means all amounts owing pursuant to
Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person and its Restricted Subsidiaries, determined in accordance
with GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain or loss, together with any related
provision for taxes on such gain or loss, realized in connection with: (a) any
Asset Sale or any other sale, lease, conveyance or other disposition of any
assets or rights (other than sales of inventory in the ordinary course of
business) in a single transaction or in a series of related transactions that
involves assets or rights having an aggregate fair market value equal to or
greater than $2.5 million; or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any
related provision for taxes on such extraordinary gain or loss; and
(3) any non-cash expenses attributable to grants or
exercises of employee stock options.
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<PAGE> 21
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax credits
or deductions and any tax sharing arrangements and amounts required to be
applied to the repayment of Indebtedness, other than Senior Debt, secured by a
Lien on the asset or assets that were the subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its
Restricted Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness), (b) is
directly or indirectly liable as a guarantor or otherwise, or (c) constitutes
the lender;
(2) no default with respect to which (including any
rights that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both any
holder of any other Indebtedness (other than the Notes) of the Company or any of
its Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and
(3) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect
to the Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the
preamble to this Indenture.
"Offering" means the offering of the Initial Notes by the
Company.
"Offering Memorandum" means the Offering Memorandum, dated
January 21, 1999, pursuant to which the Initial Notes were offered and sold.
"Officer" means, with respect to the Company or any Guarantor,
any Chairman of the Board, Vice Chairman of the Board, President, Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive
Vice President, Senior Vice President, Vice President, Treasurer or Secretary of
such Person.
"Officers Certificate" means a certificate that meets the
requirements of Section 13.5 and has been signed by two Officers.
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<PAGE> 22
"Opinion of Counsel" means an opinion in form and substance
reasonably satisfactory to the Trustee and from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 13.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear
or CEDEL, a Person who has an account with the Depositary, Euroclear or CEDEL,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and CEDEL).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means:
(1) any Investment in the Company or in a Restricted
Subsidiary of the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted
Subsidiary of the Company; or
(b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof;
(5) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(6) investments in accounts or notes receivable
acquired in the ordinary course of business;
(7) the designation of one or more Subsidiaries of
the Company whose assets and operations are exclusively related to the
professional business segment of the Company;
(8) any payment by the Company or any of its
Restricted Subsidiaries pursuant to the Exclusive Agency and Marketing
Agreement; and
(9) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes
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<PAGE> 23
in value), when taken together with all other Investments made pursuant to this
clause (9) that are at any time outstanding, not to exceed $50.0 million.
"Permitted Liens" means:
(1) Liens securing Senior Debt that was permitted by
the terms of this Indenture to be incurred;
(2) Liens in favor of the Company or the Guarantors;
(3) Liens on property of a Person existing at the
time such Person is merged with or into or consolidated with the Company or any
Subsidiary of the Company; provided that such Liens were not entered into in
contemplation of such merger or consolidation and do not extend to any assets
other than those of the Person merged into or consolidated with the Company or
the Subsidiary;
(4) Liens on property existing at the time of
acquisition thereof by the Company or any Subsidiary of the Company, provided
that such Liens were not entered into in contemplation of such acquisition;
(5) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business;
(6) Liens to secure Indebtedness (including Capital
Lease Obligations) permitted by clause (4) of the second paragraph of Section
4.09 hereof covering only the assets acquired with such Indebtedness;
(7) Liens existing on the date hereof;
(8) Liens on Assets of Guarantors to secure Senior
Debt of such Guarantor that was permitted by this Indenture to be incurred;
(9) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(10) Liens incurred in the ordinary course of
business of the Company or any Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding; and
(11) Liens on assets of Unrestricted Subsidiaries
that secure Non Recourse Debt of Unrestricted Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of
the Company or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend,
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<PAGE> 24
refinance, renew, replace, defease or refund other Indebtedness of the Company
or any of its Restricted Subsidiaries (other than intercompany Indebtedness);
provided that:
(1) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith including premiums paid, if any, to the holders thereof);
(2) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
(3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness shall not be incurred by a
Restricted Subsidiary that is not a Guarantor to refinance debt of the Company
or a Guarantor.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust or
unincorporated organization (including any subdivision or ongoing business of
any such entity or substantially all of the assets of any such entity,
subdivision or business).
"Principals" means the Hagedorn Partnership, L.P., and any
Partner or Affiliate thereof or of such Partner.
"Private Placement Legend" means the legend set forth in
Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Qualified Securitization Transaction" means any transaction
or series of transactions pursuant to which the Company or any of its Restricted
Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization
Entity (in the case of a transfer by the Company or any of its Restricted
Subsidiaries) and (b) any other Person (in case of a transfer by a
Securitization Entity), or may grant a security interest in, any accounts
receivable or equipment (whether now existing or arising or acquired in the
future) of the Company or any of its Restricted Subsidiaries, and any assets
related thereto including, without limitation, all collateral securing such
accounts receivable and equipment, all contracts and contract rights and all
Guarantees or other obligations in respect of such accounts receivable and
equipment, proceeds of such accounts receivable and equipment and other assets
(including contract
16
<PAGE> 25
rights) which are customarily transferred or in respect of which security
interests are customarily granted in connection with asset securitization
transactions involving accounts receivable and equipment.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Regulation S Temporary
Global Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global
Note in the form of EXHIBIT A-1 hereto bearing the Global Note Legend and the
Private Placement Legend and deposited with or on behalf of and registered in
the name of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global
Note in the form of EXHIBIT A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Business" means the business conducted (or proposed
to be conducted) by the Company and its Subsidiaries as of the Issue Date and
any and all businesses that in the good faith judgment of the Board of Directors
of the Company are reasonably related thereto.
"Related Party" with respect to any Principal means:
(1) any controlling stockholder, 80% or more owned
Subsidiary, or spouse or immediate family member (in the case of an individual)
of such Principal; or
(2) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Administration of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
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"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of
the referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securitization Entity" means a Wholly Owned Subsidiary of the
Company (or another Person in which the Company or any Subsidiary of the Company
makes an Investment and to which the Company or any Subsidiary of the Company
transfers accounts receivable or equipment and related assets) that engages in
no activities other than in connection with the financing of accounts receivable
or equipment and that is a Securitization Entity (a) no portion of the
Indebtedness or any other Obligations (contingent or otherwise) of which (i) is
guaranteed by the Company or any Restricted Subsidiary of the Company (excluding
guarantees of Obligations (other than the principal of, and interest on,
Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is
recourse to or obligates the Company or any Restricted Subsidiary of the Company
in any way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any Restricted Subsidiary of
the Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any Restricted Subsidiary
of the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing receivables of such entity, and
(c) to which neither the Company nor any Restricted Subsidiary of the Company
has any obligation to maintain or preserve such entity's financial condition or
cause such entity to achieve certain levels of operating results.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
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"Significant Domestic Restricted Subsidiary" means any
Domestic Restricted Subsidiary, other than any Wholly Owned Domestic Restricted
Subsidiary, that both is a Significant Subsidiary of the Company and guarantees
or otherwise provides direct credit support for any Senior Debt of the Company.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company that are reasonably customary in an accounts
receivable or equipment transaction.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the subordinated Guarantee by
each Guarantor of the Company's payment obligations under this Indenture and the
Notes, executed pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C sections
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of the Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to January 15, 2004;
provided, however, that if the period from the Redemption Date to January 15,
2004 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
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<PAGE> 28
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Global Note" means a permanent global Note in
the form of EXHIBIT A-1 attached hereto that bears the Global Note Legend and
that has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company;
(3) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests or (b) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and
(4) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries.
Any designation of a Subsidiary of the Company as an
Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date pursuant to Section 4.09 hereof, the Company shall be
in default of such covenant. The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted pursuant to Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
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<PAGE> 29
If a Guarantor is designated as an Unrestricted Subsidiary,
the Subsidiary Guarantee of that Guarantor shall be released. If an Unrestricted
Subsidiary becomes a Restricted Subsidiary, such Restricted Subsidiary shall
become a Guarantor in accordance with the terms of this Indenture.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund, serial maturity
or other required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such
Indebtedness.
"Wholly Owned Domestic Restricted Subsidiary" means, with
respect to the Company, any Domestic Restricted Subsidiary that meets the
definition of a Wholly Owned Restricted Subsidiary.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person and/or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -----------
<S> <C>
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Authentication Order" 2.02
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"Designated Senior Debt" 10.02
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.09
"Offer Period" 3.09
"Paying Agent" 2.03
</TABLE>
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<PAGE> 30
<TABLE>
<S> <C>
"Payment Blockage Notice" 10.04
"Permitted Indebtedness" 4.09
"Permitted Junior Securities" 10.02
"Purchase Date" 3.09
"Redemption Date" 3.07
"Registrar" 2.03
"Representative" 10.02
"Restricted Payments" 4.07
"Revocation" 4.07
"Senior Debt" 10.02
</TABLE>
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the
following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the Notes or the Subsidiary Guarantees means the
Company and the Guarantors, respectively and any successor obligor upon the
Notes and the Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
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<PAGE> 31
(5) provisions apply to successive events and
transactions; and
(6) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of EXHIBITS A-1 and A-2 hereto. The Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company, the Guarantors and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form
of EXHIBITS A-1 or A-2 attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
EXHIBIT A-1 attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be
issued initially in the form of the Regulation S Temporary Global Note, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or the nominee of the Depositary for
the accounts of designated agents holding on behalf of Euroclear or CEDEL Bank,
duly executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
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<PAGE> 32
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and CEDEL Bank certifying that they have received
certification of non-United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will take delivery of a beneficial ownership interest in
a 144A Global Note or an IAI Global Note bearing a Private Placement Legend, all
as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers'
Certificate from the Company. Following the termination of the Restricted
Period, beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication of
Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S
Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
(d) Euroclear and CEDEL Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear
System" and "Terms and Conditions Governing Use of Euroclear" and the "General
Terms and Conditions of CEDEL Bank" and "Customer Handbook" of CEDEL Bank shall
be applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or CEDEL Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed
by two Officers (an "Authentication Order"), authenticate Notes for original
issue up to the aggregate principal amount stated in paragraph 4 of the Notes.
The aggregate principal amount of Notes outstanding at any time may not exceed
such amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Notes. An authenticating agent may authenticate
Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
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<PAGE> 33
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the
Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
The Trustee is authorized to enter into a letter of
representations with DTC in the form provided to the Trustee by the Company and
to act in accordance with such letter.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and will notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA section 312(a). If
the Trustee is not the Registrar, the Company shall furnish to the Trustee at
least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Company shall otherwise comply with TIA section 312(a).
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<PAGE> 34
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary. All
Global Notes will be exchanged by the Company for Definitive Notes if (i) the
Company delivers to the Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and delivers a written notice to such effect to the
Trustee; provided that in no event shall the Regulation S Temporary Global Note
be exchanged by the Company for Definitive Notes prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any certificates
determined by the Company to be required pursuant to Rule 903(c)(3)(ii)(B) under
the Securities Act. Upon the occurrence of either of the preceding events in (i)
or (ii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10 hereof,
shall be authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Note other than as provided
in this Section 2.06(a), however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the
Global Notes.
The transfer and exchange of beneficial interests in the
Global Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial interests
in the Restricted Global Notes shall be subject to restrictions on transfer
comparable to those set forth herein to the extent required by the Securities
Act. Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person (other
than an Initial Purchaser). Beneficial interests in any Unrestricted Global
Note may be transferred to Persons who take delivery thereof in the form of
a beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section
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<PAGE> 35
2.06(b)(i) above, the transferor of such beneficial interest must deliver
to the Depositary either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding
the Person in whose name such Definitive Note shall be registered to effect
the transfer or exchange referred to in (1) above, provided that in no
event shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Temporary Global Note prior to (x)
the expiration of the Restricted Period and (y) the receipt by the
Registrar of any certificates determined by the Company to be required
pursuant to Rule 903 under the Securities Act. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of EXHIBIT B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or
the Regulation S Global Note, then the transferor must deliver a
certificate in the form of EXHIBIT B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor
must deliver a certificate in the form of EXHIBIT B hereto,
including the certifications and certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an
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<PAGE> 36
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal or via the Depositary's book-entry system that it is
not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of EXHIBIT C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such holder
in the form of EXHIBIT B hereto, including the certifications in item
(4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
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(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of EXHIBIT C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904, a certificate to the effect set forth in EXHIBIT
B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in EXHIBIT B hereto, including the
certifications, certificates and Opinion of Counsel required by
item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect
set forth in EXHIBIT B hereto, including the certifications in
item (3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in EXHIBIT B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted
Global Note pursuant to this Section 2.06(c) shall be registered in
such name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange
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for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates determined by the Company to be required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer
pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not
(1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of EXHIBIT C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest to
a Person who shall take delivery thereof in the form of a Definitive
Note that does not bear the Private Placement Legend, a certificate
from such holder in the form of EXHIBIT B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and
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that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the Persons
in whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest pursuant to this Section 2.06(c)(iii)
shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of EXHIBIT
C hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A, a certificate to the effect
set forth in EXHIBIT B hereto, including the certifications in
item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with
Rule 903 or Rule 904, a certificate to the effect set forth in
EXHIBIT B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144, a certificate to the
effect set forth in EXHIBIT B hereto, including the certifications
in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements
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of the Securities Act other than those listed in subparagraphs (B)
through (D) above, a certificate to the effect set forth in
EXHIBIT B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the
effect set forth in EXHIBIT B hereto, including the certifications
in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the
Securities Act, a certificate to the effect set forth in EXHIBIT B
hereto, including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case of
clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (c)
above, the Regulation S Global Note, and in all other cases, the IAI
Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of EXHIBIT C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of EXHIBIT B hereto, including
the certifications in item (4) thereof;
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<PAGE> 41
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive
Notes.
Upon request by a Holder of Definitive Notes and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting Holder shall provide any additional certifications,
documents and information, as applicable, required pursuant to the following
provisions of this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then
the transferor must deliver a certificate in the form of EXHIBIT B
hereto, including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
EXHIBIT B hereto, including the certifications in item (2)
thereof; and
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<PAGE> 42
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in the form of
EXHIBIT B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or
(3) a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of EXHIBIT C hereto, including
the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of EXHIBIT B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such exchange or transfer
is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
(f) Exchange Offer.
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Upon the occurrence of the Exchange Offer in accordance with
the Registration Rights Agreement, the Company shall issue and, upon receipt of
an Authentication Order in accordance with Section 2.02 hereof, the Trustee
shall authenticate (i) one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of the beneficial interests in
the Restricted Global Notes tendered for acceptance by Persons that certify in
the applicable Letters of Transmittal or via the Depositary's book-entry system
that (x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of
all Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (SUBJECT TO
THE DELIVERY OF SUCH EVIDENCE, IF ANY REQUIRED UNDER THE INDENTURE
PURSUANT TO WHICH THIS NOTE IS ISSUED) AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER OR ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
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SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), SUBJECT TO THE RECEIPT
BY THE REGISTRAR OF A CERTIFICATION OF THE TRANSFEROR AND AN OPINION OF
COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTION SET FORTH IN (A)
ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this
Section 2.06 (and all Notes issued in exchange therefor or
substitution thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF
THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT
IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND
THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER
THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY
GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
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At such time as all beneficial interests in a particular
Global Note have been exchanged for Definitive Notes or a particular Global Note
has been redeemed, repurchased or canceled in whole and not in part, each such
Global Note shall be returned to or retained and canceled by the Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Note is exchanged for or transferred to a
Person who will take delivery thereof in the form of a beneficial interest in
another Global Note or for Definitive Notes, the principal amount of Notes
represented by such Global Note shall be reduced accordingly and an endorsement
shall be made on such Global Note by the Trustee or by the Depositary at the
direction of the Trustee to reflect such reduction; and if the beneficial
interest is being exchanged for or transferred to a Person who will take
delivery thereof in the form of a beneficial interest in another Global Note,
such other Global Note shall be increased accordingly and an endorsement shall
be made on such Global Note by the Trustee or by the Depositary at the direction
of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of the mailing of notice of
redemption under Section 3.02 hereof and ending at the close of business on
such day, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part or (c) to register the transfer of or to
exchange a Note between a record date and the next succeeding Interest
Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person
in whose name any Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest on such Notes
and for all other purposes, and none of the Trustee, any Agent or the
Company shall be affected by notice to the contrary.
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(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the
Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements are met. If required by the Trustee or the
Company, an indemnity bond must be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent and any authenticating agent from any loss that any of them may suffer
if a Note is replaced. The Company may charge for its expenses in replacing a
Note.
Every replacement Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Note effected
by the Trustee in accordance with the provisions hereof, and those described in
this Section as not outstanding. Except as set forth in Section 2.09 hereof, a
Note does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser or protected purchaser.
If the principal amount of any Note is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or
an Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or
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indirectly controlling or controlled by or under direct or indirect common
control with the Company, shall be considered as though not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent, only Notes that the Trustee
knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Company considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Company shall prepare
and the Trustee shall, as soon as practicable upon its receipt of an
Authentication Order, authenticate Definitive Notes in exchange for temporary
Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirements of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use CUSIP numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption
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shall not be affected by any defect in or the omission of such numbers. The
Company will promptly notify the Trustee of any change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot
or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or
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<PAGE> 49
Notes in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such
redemption payment, interest on Notes called for redemption ceases to accrue on
and after the redemption date;
(g) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are being redeemed;
and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company
shall deposit with the Trustee or with the Paying Agent money sufficient to pay
the redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
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SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company
shall issue and, upon receipt of the Company's written request, the Trustee
shall, as soon as practicable, authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) The Notes will not be redeemable at the Company's option
prior to January 15, 2004. Thereafter, the Notes will be subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on January 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004................................................................................................... 104.313%
2005................................................................................................... 102.875%
2006................................................................................................... 101.438%
2007 and thereafter.................................................................................... 100.000%
</TABLE>
(b) Notwithstanding the foregoing, during the first 36 months
after the Issue Date, the Company may redeem up to 35% of the aggregate
principal amount of Notes originally issued under this Indenture at a redemption
price of 108.625% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of one or more public equity offerings; provided that at
least 65% of the aggregate principal amount of Notes originally issued under
this Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and
provided, further, that such redemption shall occur within 90 days of the date
of the closing of such public equity offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
or sinking fund payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the
Company shall be required to commence an Asset Sale Offer, it shall follow the
procedures specified below.
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The Asset Sale Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice,
which shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase
Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Company defaults in making such payment,
any Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to
an Asset Sale Offer may only elect to have all of such Note purchased and may
not elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to
any Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election
if the Company, the depositary or the Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a statement
that such Holder is withdrawing his election to have such Note purchased;
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<PAGE> 52
(h) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Offer Amount, the Company shall select the
Notes to be purchased on a pro rata basis (with such adjustments as may be
deemed appropriate by the Company so that only Notes in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company
shall, to the extent lawful, accept for payment, on a pro rata basis to the
extent necessary, the Offer Amount or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount equal to
any unpurchased portion of the Note surrendered. Any Note not so accepted shall
be promptly mailed or delivered by the Company to the Holder thereof. The
Company shall publicly announce the results of the Asset Sale Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest and Liquidated Damages, if any, on the Notes on
the dates and in the manner provided in the Notes. Principal, premium, if any,
and interest and Liquidated Damages, if any, shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
(i) holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest and Liquidated Damages, if any,
then due and (ii) is not prohibited from paying such money to the Holders
pursuant to the terms of this Indenture or the Notes. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
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SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the
City of New York, an office or agency (which may be an office of the Trustee or
an affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of
the Trustee as one such office or agency of the Company in accordance with
Section 2.03 hereof.
SECTION 4.03. REPORTS.
Whether or not required by the SEC, so long as any Notes are
outstanding, the Company shall furnish to the Holders of Notes, within the time
periods specified in the SEC's rules and regulations:
(1) all quarterly and annual financial information
that would be required to be contained in a filing with the SEC on Forms 10-Q
and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on the
annual financial statements by the Company's certified independent accountants;
and
(2) all current reports that would be required to be
filed with the SEC on Form 8-K if the Company were required to file such
reports.
In addition, whether or not required by the SEC, the Company
shall file a copy of all of the information and reports referred to in clauses
(1) and (2) above with the SEC for public availability within the time periods
specified in the SEC's rules and regulations (unless the SEC will not accept
such a filing) and make such information available to securities analysts and
prospective investors upon request.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor shall (to the extent that
such Guarantor is so required under the TIA) deliver to the Trustee within 90
days after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to
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<PAGE> 54
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. For
purposes of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under this Indenture.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.03(a) hereof shall
be accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that the
Company has violated any provisions of Article 4 or Article 5 hereof or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable directly
or indirectly to any Person for any failure to obtain knowledge of any such
violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the
extent that it may lawfully do so) that it shall not at any time insist upon,
plead, or in any manner whatsoever claim or take the benefit or advantage of,
any stay, extension or usury law wherever enacted, now or at any time hereafter
in force, that may affect the covenants or the performance of this Indenture;
and the Company and each of the Guarantors (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
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<PAGE> 55
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other
payment or distribution on account of the Company's Equity Interests (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company) or to the direct or indirect holders of the Company's
Equity Interests in their capacity as such (other than dividends or
distributions payable in Equity Interests (other than Disqualified Stock) of the
Company);
(2) purchase, redeem or otherwise acquire or retire
for value (including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company or any
direct or indirect parent of the Company, in each case held by Persons other
than the Company or a Restricted Subsidiary of the Company;
(3) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or the Subsidiary Guarantees,
except a payment of interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments
and other actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such
Restricted Payment:
(1) no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof; and
(3) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date hereof (excluding Restricted Payments
permitted by clause (2), (3), (4) or (5) of the next succeeding paragraph), is
less than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) from January 3, 1999
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit, less
100% of such deficit); plus
(b) 100% of the aggregate net cash proceeds
received by the Company since the date hereof as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of Disqualified
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<PAGE> 56
Stock or debt securities of the Company that have been converted into or
exchanged for such Equity Interests (other than Equity Interests (or
Disqualified Stock or debt securities) sold to a Subsidiary of the Company);
plus
(c) to the extent that any Restricted
Investment that was made after the date hereof is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if any) and
(ii) the initial amount of such Restricted Investment; plus
(d) $25 million.
So long as no Default has occurred and is continuing or would
be caused thereby, the preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration such payment
would have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement,
defeasance or other acquisition (including the payment of any accrued and unpaid
interest, premium or consent fee, if any, in connection therewith) of the
Company's 9 7/8% Senior Subordinated Notes due 2004 or of any of the Series A
Notes or the Series B Notes;
(3) the redemption, repurchase, retirement,
defeasance or other acquisition of any subordinated Indebtedness of the Company
or any of its Restricted Subsidiaries or any Equity Interests of the Company or
any of its Restricted Subsidiaries in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (3) (b) of the preceding
paragraph;
(4) the redemption, repurchase, retirement,
defeasance or other acquisition of subordinated Indebtedness or Disqualified
Stock of the Company or any of its Restricted Subsidiaries with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness;
(5) the payment of any dividend by the Company to
holders of its Class A Convertible Preferred Stock; and
(6) the repurchase, redemption or other acquisition
or retirement for value of any Equity Interests of the Company or any Restricted
Subsidiary of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement; provided that the aggregate
price paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $5.0 million in any twelve-month period.
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<PAGE> 57
The amount of all Restricted Payments (other than cash) shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined in good faith by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee. Not
later than the date of making any Restricted Payment other than payments
pursuant to paragraphs (2), (3), (4), (5) or (6) of this covenant, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed.
Notwithstanding the foregoing, if any payment is made pursuant
to the second paragraph of this covenant and at the time of such payment there
was a Default (other than any Default caused thereby) that had occurred and was
continuing, then such payment shall not cause a Default under this covenant if
the pre-existing Default shall have been cured or waived prior to such Default
becoming an Event of Default.
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if the designation would not cause a Default.
All outstanding Investments owned by the Company and its Restricted Subsidiaries
in the designated Unrestricted Subsidiary will be treated as an Investment made
at the time of the designation and will reduce the amount available for
Restricted Payments under the first paragraph of this Section 4.07 or Permitted
Investments, as applicable. All such outstanding Investments will be treated as
Restricted Investments equal to the fair market value of such Investments at the
time of the designation. The designation shall not be permitted if such
Restricted Payment would not be permitted at that time and if such Restricted
Subsidiary does not otherwise meet the definition of an Unrestricted Subsidiary.
The Board of Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if that redesignation would not cause a Default.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create or permit to exist or
become effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on
its Capital Stock to the Company or any of the Company's Restricted
Subsidiaries, or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to the Company or any of
the Company Restricted Subsidiaries;
(2) make loans or advances to the Company or any of
the Company's Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the
Company or any of the Company's Restricted Subsidiaries.
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However, the preceding restrictions shall not apply to
encumbrances or restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date
hereof and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in such Existing Indebtedness, as in effect on the date hereof;
(2) this Indenture, the Series A Notes, the
Subsidiary Guarantees, the Series B Notes and the Guarantees thereof;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital
Stock of a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of such acquisition (except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred;
(5) customary non-assignment provisions in leases,
licenses, contracts and other agreements entered into in the ordinary course of
business and consistent with past practices;
(6) purchase money obligations for property acquired
in the ordinary course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition
of a Restricted Subsidiary that restricts distributions by such Restricted
Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that
the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted
to be incurred pursuant to Section 4.12 hereof that limit the right of the
Company or any of its Restricted Subsidiaries to dispose of the assets subject
to such Lien;
(10) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) customary provisions under Indebtedness of any
Foreign Subsidiary permitted to be incurred under this Indenture;
(12) restrictions on cash or other deposits or net
worth imposed by customers under contracts entered into in the ordinary course
of business; and
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(13) restrictions created in connection with a
Qualified Securitization Transaction.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and the Company shall not issue any
Disqualified Stock and shall not permit any of its Restricted Subsidiaries that
is not a Guarantor to issue any shares of preferred stock; provided, however,
that the Company and any Restricted Subsidiary may incur Indebtedness (including
Acquired Debt) or issue Disqualified Stock, and the Company's Restricted
Subsidiaries may issue preferred stock, if the Fixed Charge Coverage Ratio for
the Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock or preferred
stock is issued would have been at least 2.0 to 1.0, determined on a pro forma
basis (including a pro forma application of the net proceeds therefrom) as if
the additional Indebtedness had been incurred, or the Disqualified Stock or
preferred stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and its Restricted
Subsidiaries of Indebtedness and letters of credit under the Credit Facility in
an aggregate principal amount (with letters of credit being deemed to have a
principal amount equal to the maximum potential liability of the Company and its
Restricted Subsidiaries thereunder) not to exceed an amount equal to $1.125
billion, including all Permitted Refinancing Indebtedness incurred pursuant to
clause (5) of this paragraph to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (1), less the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to repay term Indebtedness under the Credit Facility or to reduce
commitments with respect to revolving credit borrowings under the Credit
Facility pursuant to Section 4.10 hereof;
(2) the incurrence by the Company and its Restricted
Subsidiaries of Existing Indebtedness;
(3) the incurrence by the Company and the Guarantors
of Indebtedness represented by the Series A Notes, the Subsidiary Guarantees,
the Series B Notes and the Guarantees thereof;
(4) the incurrence by the Company or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations, in each case,
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, or in respect of a sale
and leaseback transaction, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred pursuant to clause (5) of this
paragraph to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (4), not to exceed $20.0 million at any time outstanding;
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(5) the incurrence by the Company or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace,
Indebtedness (other than intercompany Indebtedness) that is either Existing
Indebtedness or that was permitted to be incurred by this Indenture;
(6) the incurrence by the Company or any of its
Restricted Subsidiaries of intercompany Indebtedness between or among the
Company and any of its Restricted Subsidiaries; provided, however, that:
(a) if the Company or any Guarantor is the
obligor on such Indebtedness, and such Indebtedness is held by a Restricted
Subsidiary that is not a Guarantor, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes, in the case of the Company, or the Subsidiary Guarantee of
such Guarantor, in the case of a Guarantor; and
(b)(i) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary thereof and (ii) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause (6);
(7) the incurrence by the Company or any of its
Restricted Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging (1) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be outstanding
or (2) exchange rate risk or raw materials price risk;
(8) the guarantee by the Company or any of its
Restricted Subsidiaries of Indebtedness of the Company or a Restricted
Subsidiary of the Company that was permitted to be incurred by another provision
of this covenant;
(9) the shares of Class A Convertible Preferred Stock
outstanding as of the date hereof;
(10) the incurrence by any of the Company's Foreign
Subsidiaries of Indebtedness in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred pursuant to clause (5) of this
paragraph to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (10), not to exceed $60.0 million at any time outstanding;
(11) the incurrence by a Securitization Entity of
Indebtedness in a Qualified Securitization Transaction that is Non-Recourse Debt
with respect to the Company and its other Restricted Subsidiaries (except for
Standard Securitization Undertakings); and
(12) the incurrence by the Company or any of its
Restricted Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to exceed $40.0 million.
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For purposes of determining compliance with this covenant, in
the event that an item of proposed Indebtedness meets the criteria of more than
one of the categories of Permitted Debt described in clauses (1) through (12)
above, or is entitled to be incurred pursuant to the first paragraph of this
covenant, the Company shall be permitted to classify such item of Indebtedness
on the date of its incurrence (or later reclassify such Indebtedness in whole or
in part) in any manner that complies with this covenant. In addition, the
accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock will not be
treated as an incurrence of Indebtedness; provided, in each such case, that the
amount thereof is included in Fixed Charges of the Company as accrued.
Notwithstanding the foregoing, any Indebtedness outstanding pursuant to the
Credit Facility on the date hereof will be deemed to have been incurred pursuant
to clause (1) of the definition of Permitted Debt.
SECTION 4.10. ASSET SALES
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company (or the Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of, as determined in good faith by the Company's Board of
Directors; and
(2) either:
(a) the Company (or the Restricted
Subsidiary, as the case may be) issues Equity Interests or transfers assets in
an exchange in connection with which the Company receives an opinion of counsel
that such exchange should qualify under the provisions of Section 351 or Section
368 of the United States Internal Revenue Code of 1986, as amended; or
(b) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
cash or Cash Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash:
(i) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any Subsidiary
Guarantee) that are assumed by the transferee of any such assets; and
(ii) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that within 90 days are converted by the Company or such Restricted
Subsidiary into cash (to the extent of the cash received in that conversion).
Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds at its option:
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(1) to repay Senior Debt (and to effect a
corresponding commitment reduction if such Senior Debt is revolving credit
borrowings);
(2) to acquire all or substantially all of the assets
of, or a majority of the Voting Stock of, another Related Business;
(3) to make a capital expenditure; and/or
(4) to acquire other long-term assets that are used
or useful in a Related Business.
Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph will constitute Excess Proceeds.
When the aggregate amount of Excess Proceeds exceeds $10.0 million, the Company
shall make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in Section 3.09 hereof with respect to offers to purchase or
redeem with the proceeds of sales of assets to purchase the maximum principal
amount of Notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer shall be equal
to 100% of principal amount plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis as set forth below. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are
no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $3.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies
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with this covenant and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors; and
(b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the provisions of the prior
paragraph:
(1) any employment, consulting or similar agreement
(including any loan, but not any forgiveness thereof) entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
or any payment of directors' and officers' insurance premiums;
(2) transactions between or among the Company and/or
its Restricted Subsidiaries;
(3) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company;
(4) dividends on or any repurchases of any shares of
any series or class of equity securities of the Company;
(5) Restricted Payments that are permitted by the
provisions of Section 4.07 hereof;
(6) any merger between or among the Company or any of
its Restricted Subsidiaries solely for the purpose of reincorporating the
Company or such Restricted Subsidiary in another jurisdiction for tax purposes;
and
(7) transactions in connection with a Qualified
Securitization Transaction or an industrial revenue bond financing.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, (1) assign or convey any right to
receive income on any asset now owned or hereafter acquired or (2) create,
incur, assume or suffer to exist any Lien of any kind securing Indebtedness,
Attributable Debt or trade payables on any asset now owned or hereafter acquired
or on any income or profits therefrom except Permitted Liens, unless the Notes
and the Subsidiary Guarantees, as applicable, are either (i) secured by a Lien
on such property, assets, income or profits that is senior in priority to the
Lien securing such other Obligations, if such Obligations are subordinated in
right of payment to the Notes and/or the Subsidiary Guarantees or (ii) equally
and ratably secured by a Lien on such property, assets, income or profits with
the Lien securing such other Obligations, if such Obligations are pari passu in
right of payment with the Notes.
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SECTION 4.13. SALE AND LEASEBACK TRANSACTIONS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company and any Restricted Subsidiary may enter into a sale
and leaseback transaction if:
(1) the Company or such Restricted Subsidiary, as
applicable, could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction under the
Fixed Charge Coverage Ratio test in the first paragraph of Section 4.09 hereof
and (b) incurred a Lien to secure such Indebtedness pursuant to Section 4.12
hereof; provided that the Lien to secure such Indebtedness does not extend to or
cover any assets of the Company or such Restricted Subsidiary other than the
assets which are the subject of the sale and leaseback transaction;
(2) the gross cash proceeds of that sale and
leaseback transaction are at least equal to the fair market value, as determined
in good faith by the Board of Directors, of the property that is the subject of
such sale and leaseback transaction; and
(3) the transfer of assets in that sale and leaseback
transaction is permitted by, and the Company applies the proceeds of such
transaction in compliance with, Section 4.10 hereof
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Subsidiary and (ii) the rights (charter and statutory), licenses and
franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of its Subsidiaries, if
the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) If a Change of Control occurs, each Holder of Notes shall
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of that Holder's Notes pursuant to the
Change of Control Offer. In the Change of Control Offer, the Company shall offer
a Change of Control Payment in cash equal to 101% of the aggregate principal
amount of Notes repurchased plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase. Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes on the Change of Control Payment Date specified in such
notice, pursuant to the procedures required by this Indenture and described in
such notice. The Company shall comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
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(b) On the Change of Control Payment Date, the Company shall,
to the extent lawful:
(1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to
the Change of Control Payment in respect of all Notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the Trustee
the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company.
The Paying Agent shall promptly mail to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change
of Control" covenant, but in any event within 90 days following a Change of
Control, the Company shall either repay all outstanding Senior Debt or obtain
the requisite consents, if any, under all agreements governing outstanding
Senior Debt to permit the repurchase of Notes required by this covenant. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
(d) Notwithstanding anything to the contrary in this Section
4.15, the Company shall not be required to make a Change of Control Offer upon
the occurrence of a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15, and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Senior Debt of the Company and senior in any respect in
right of payment to the Notes. No Guarantor shall incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinate or
junior in right of payment to any Senior Debt of such Guarantor and senior in
any respect in right of payment to such Guarantor's Subsidiary Guarantee.
SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES.
If, after the date hereof, the Company or any of its Wholly
Owned Domestic Restricted Subsidiaries acquires or creates another Wholly Owned
Domestic Restricted Subsidiary or a Significant Domestic Restricted Subsidiary,
including any other Domestic Restricted Subsidiary that at any time becomes a
Wholly Owned Domestic Restricted Subsidiary or a Significant Domestic Restricted
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Subsidiary, then that newly acquired or created Wholly Owned Domestic Restricted
Subsidiary or Significant Domestic Restricted Subsidiary shall, within 10
Business Days of the date on which it was acquired or created, execute a
supplemental indenture or other instrument evidencing its Subsidiary Guarantee,
in either case in form satisfactory to the Trustee, and deliver an Opinion of
Counsel to the Trustee.
SECTION 4.18. PAYMENTS FOR CONSENT.
The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
and is paid to all Holders of the Notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not, directly or indirectly: (1) consolidate
or merge with or into another Person (whether or not the Company is the
surviving corporation); or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of its properties or assets, in one or more
related transactions, to another Person; unless:
(1) either: (a) the Company is the surviving
corporation; or (b) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or the Person to which such
sale, assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Notes, this Indenture and
the Registration Rights Agreement pursuant to agreements reasonably satisfactory
to the Trustee;
(3) immediately after such transaction no Default or
Event of Default exists; and
(4) except in the case of a merger entered into
solely for the purpose of reincorporating the Company or any Restricted
Subsidiary in another jurisdiction, the Company or the Person formed by or
surviving any such consolidation or merger (if other than the Company) shall, on
the date of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning of
the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09 hereof.
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In addition, the Company shall not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. This Section 5.01 will not apply to a
sale, assignment, transfer, conveyance or other disposition of assets between or
among the Company and any of its Wholly Owned Restricted Subsidiaries.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes, whether or not prohibited
by Article 10 hereof;
(2) default in payment when due of the principal of or
premium, if any, on the Notes, whether or not prohibited by Article 10 hereof;
(3) failure by the Company or any of its Subsidiaries for 30
days after notice to comply with Sections 4.07, 4.09, 4.10 or 4.15 hereof;
(4) failure by the Company or any of its Subsidiaries for 60
days after notice to comply with any of the other agreements in this Indenture;
(5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, if that default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
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(b) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more;
(6) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by this Indenture, any Subsidiary
Guarantee(s) of any Guarantor that is a Significant Subsidiary or of any group
of Guarantors that collectively would constitute a Significant Subsidiary shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary or any group of Guarantors that collectively would
constitute a Significant Subsidiary, or any Person acting on behalf of any such
Guarantor or group of Guarantors, shall deny or disaffirm the obligations of
each such Guarantor under its Subsidiary Guarantee; and
(8) the Company or any of its Significant Subsidiaries:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; or
(9) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(a) is for relief against the Company or any of its Significant
Subsidiaries;
(b) appoints a custodian of the Company or any of its Significant
Subsidiaries or for all or substantially all of the property of the Company
or any of its Subsidiaries; or
(c) orders the liquidation of the Company or any of its Significant
Subsidiaries;
and the order or decree remains unstayed and in effect for 60
consecutive days.
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (viii) or (ix) of
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Section 6.01 hereof occurs with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
If an Event of Default occurs on or after January 15, 2004 by
reason of any willful action (or inaction) taken (or not taken) by or on behalf
of the Company with the intention of avoiding payment of the premium that the
Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, the
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee that an equivalent premium shall also become and be
immediately due and payable, to the extent permitted by law, anything in this
Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to January 15, 2004 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to January 15,
2004, then, upon acceleration of the Notes, the Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee that an
additional premium shall also become and be immediately due and payable in an
amount, for each of the years beginning on January 15 of the years set forth
below, as set forth below (expressed as a percentage of the aggregate principal
amount to the date of payment that would otherwise be due but for the provisions
of this sentence):
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1999.......................................................................111.503%
2000.......................................................................110.065%
2001.......................................................................108.627%
2002.......................................................................107.189%
2003.......................................................................105.751%
</TABLE>
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Liquidated Damages, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default
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or Event of Default and its consequences hereunder, except a continuing Default
or Event of Default in the payment of the principal of, premium and Liquidated
Damages, if any, or interest on, the Notes (including in connection with an
offer to purchase) (provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
result in the incurrence of liability by the Trustee.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the respective
due dates expressed in the Note (including in connection with an offer to
purchase), or to bring suit for the enforcement of any such payment on or after
such respective dates, shall not be impaired or affected without the consent of
such Holder.
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SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(i) or (ii)
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the
whole amount of principal of, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Notes and interest on overdue principal and, to
the extent lawful, interest and such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel) and
the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any, and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
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The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties
that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture but need
not verify the contents thereof.
(c) The Trustee may not be relieved from liabilities for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.04 or 6.05 hereof.
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(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) of this Section 7.01 and Section 7.02.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee shall be
under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such Holder shall have offered
to the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely and shall be fully
protected in acting or refraining from acting upon any document believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel of its selection and the advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection from
liability in respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties hereunder.
(h) Delivery of reports, information and documents to the
Trustee under Section 4.03 is for informational purposes only and the Trustee's
receipt of the foregoing shall not constitute constructive notice of any
information contained therein or determinable from information contained
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therein, including the Company's compliance with any of their covenants
hereunder (as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
(i) The Trustee shall not be charged with knowledge of any
Defaults or Events of Default unless either (1) a Trust Officer of the Trustee
shall have actual knowledge of such Default or Event of Default or (2) written
notice of such Default or Event of Default shall have been given to the Trustee
by any Holder or by the Company or any other obligor on the Notes or any holder
of Senior Debt or any representative thereof.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee may become the owner or pledgee of Notes and may
otherwise deal with the Company or any Affiliate of the Company with the same
rights it would have if it were not Trustee. However, in the event that the
Trustee acquires any conflicting interest it must eliminate such conflict within
90 days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes, it
shall not be accountable for the Company's use of the proceeds from the Notes or
any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after such Default or
Event of Default becomes known to the Trustee. Except in the case of a Default
or Event of Default in payment of principal of, premium, if any, or interest on
any Note, the Trustee may withhold the notice if and so long as a committee of
its Responsible Officers in good faith determines that withholding the notice is
in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA section 313(a) (but if no
event described in TIA section 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA section 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA section 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in
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accordance with TIA section 313(d). The Company shall promptly notify the
Trustee when the Notes are listed on any stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company and the Guarantors shall jointly and severally
indemnify the Trustee and its agents, employees, officers, directors and
shareholders for, and hold same harmless against, any and all losses,
liabilities or expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. At the
Trustee's sole discretion, the Company shall defend the claim with counsel
reasonably satisfactory to the Trustee, and the Trustee shall cooperate in the
defense at the Company's expense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company and the Guarantors under this
Section 7.07 shall survive the resignation or removal of the Trustee and/or the
satisfaction and discharge or termination of this Indenture.
To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or removal
of the Trustee and/or the satisfaction and discharge or termination of this
Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(viii) or (ix) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of administration
under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA section
313(b)(2) to the extent applicable.
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SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding Notes
may remove the Trustee by so notifying the Trustee and the Company in writing.
The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
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SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA section 310(a)(1), (2) and (5). The Trustee is subject to
TIA section 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA section 311(a), excluding any
creditor relationship listed in TIA section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA section 311(a) to the extent indicated
therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its Obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its obligations
under such Notes and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Notes to receive solely from the trust fund described in Section 8.04 hereof,
and as more fully set forth in such Section 8.04, payments in respect of the
principal of and premium, interest and Liquidated Damages, if any, on such Notes
when such payments are due,
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(b) the Company's obligations with respect to such Notes under Article 2 and
Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith and
(d) this Article 8. Subject to compliance with this Article 8, the Company may
exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company and each Guarantor shall,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
be released from their respective obligations under the covenants contained in
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18
hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to the
outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(iii) through 6.01(vii) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(a) the Company must irrevocably deposit, with the Trustee, in
trust, for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity thereof or on
the applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of Legal Defeasance, the Company must deliver
to the Trustee an Opinion of Counsel in the United States reasonably acceptable
to the Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the date of this
Indentures, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding
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Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance, and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of Covenant Defeasance, the Company must
deliver to the Trustee an Opinion of Counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance, and such Holders will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company must deliver to the Trustee an Opinion of
Counsel in the United States reasonably acceptable to the Trustee to the effect
that after the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights and remedies generally;
(g) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Notes over other creditors of the Company, or
with the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company must deliver to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States reasonably acceptable
to the Trustee, each stating that all conditions precedent provided for or
relating to Legal Defeasance or Covenant Defeasance, as applicable, have been
complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
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The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding,
the Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee (which may be the opinion
delivered under Section 8.04(a) hereof), are in excess of the amount thereof
that would then be required to be deposited to effect an equivalent Legal
Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
interest or Liquidated Damages, if any, on any Note and remaining unclaimed for
two years after such principal, and premium, if any, or interest has become due
and payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee
or Paying Agent is permitted to apply all such money in accordance with Section
8.02 or 8.03 hereof, as the case may be; provided, however, that, if the Company
makes any payment of principal of, premium, if any, or interest on any Note
following the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Notes to receive such payment from the
money held by the Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 hereof, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the Notes or
the Subsidiary Guarantees without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in
place of certificated Notes or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Company's or any
Guarantor's obligations to the Holders of the Notes by a successor to the
Company or a Guarantor pursuant to Article 5 hereof;
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not adversely affect
the legal rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in
accordance with the provisions set forth in this Indenture as of the date
hereof; or
(g) to allow any Guarantor to execute a supplemental indenture
and/or a Subsidiary Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company and
the Guarantors in the execution of any amended or supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations that may be therein contained, but the
Trustee shall not be obligated to enter into such amended or supplemental
indenture that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company,
the Guarantors and the Trustee may amend or supplement this Indenture (including
Section 3.09, 4.10 and 4.15 hereof), the Notes or the Subsidiary Guarantees with
the consent of the Holders of at least a majority in principal amount Notes
(including Additional Notes, if any) then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof,
any existing Default or Event of Default (other than a Default or Event of
Default in the payment of the principal of, premium, if any, or interest on the
Notes, except a
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payment default resulting from an acceleration that has been rescinded) or
compliance with any provision of this Indenture, the Notes or the Subsidiary
Guarantees may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes, if
any) voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Without the
consent of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Notes), no waiver or amendment to this Indenture may
make any change in the provisions of Article 10 hereof that adversely affects
the rights of any Holder of Notes. Section 2.08 hereof shall determine which
Notes are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of
its Board of Directors authorizing the execution of any such amended or
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02
hereof, the Trustee shall join with the Company in the execution of such amended
or supplemental indenture unless such amended or supplemental indenture directly
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class may waive
compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment or waiver under this Section 9.02 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or alter or waive any of the provisions with respect to the redemption
of the Notes, other than provisions relating to Sections 3.09, 4.10 or 4.15
hereof;
(c) reduce the rate of or change the time for payment of
interest, including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium or Liquidated Damages, if any, or interest on the Notes
(except a rescission of acceleration of the Notes by the Holders of at least a
majority in aggregate principal amount of the then outstanding Notes (including
Additional Notes, if any) and a waiver of the payment default that resulted from
such acceleration;
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(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, interest or Liquidated Damages, if
any, on the Notes;
(g) waive a redemption payment with respect to any Note, other
than a payment required by Section 3.09, 4.10 or 4.15 hereof;
(h) make any change in the foregoing amendment and waiver
provisions; or
(i) release any Guarantor from any of its obligations under
its Subsidiary Guarantee or this Indenture, except in accordance with the terms
of this Indenture.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in an amended or supplemental indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon an Officer's Certificate and an Opinion
of Counsel stating that the execution of such amended or
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supplemental indenture is authorized or permitted by this Indenture and that
such amendment is the legal, valid and binding obligation of the Company and any
Guarantors, enforceable against them in accordance with their terms, subject to
customary exceptions, and complies with the provisions hereof (including Section
9.03).
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note
agrees, that the principal of and premium, interest and Liquidated Damages, if
any, with respect to the Notes are subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment in
full of all Senior Debt of the Company (whether outstanding on the date hereof
or hereafter created, incurred, assumed or guaranteed), and that the
subordination is for the benefit of the holders of Senior Debt.
SECTION 10.02. CERTAIN DEFINITIONS.
"Designated Senior Debt" means:
(1) any Indebtedness outstanding under the Credit
Facility; and
(2) any other Senior Debt permitted under this
Indenture the principal amount of which is $10.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"Permitted Junior Securities" means: (1) Equity Interests in
the Company or any Guarantor; or (2) debt securities of the Company or any
Guarantor that are subordinated to all Senior Debt and any debt securities
issued in exchange for Senior Debt to substantially the same extent as, or to a
greater extent than, the Notes and the Subsidiary Guarantees are subordinated to
Senior Debt pursuant to Article 10 hereof.
"Representative" means the indenture trustee or other trustee,
agent or representative for any Senior Debt.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness permitted to be incurred
by the Company under the terms of this Indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a parity
with or subordinated in right of payment to the Notes or the Subsidiary
Guarantees; and
(3) all Obligations with respect to the items listed
in the preceding clauses (1) and (2).
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Notwithstanding anything to the contrary in the preceding,
Senior Debt shall not include:
(1) any liability for federal, state, local or other
taxes owed or owing by the Company;
(2) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of
this Indenture.
A "distribution" may consist of cash, securities or other
property, by set-off or otherwise.
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshalling of
the Company's assets and liabilities:
(1) holders of Senior Debt shall be entitled to receive
payment in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt) before Holders of the Notes shall be entitled to
receive any payment with respect to the Notes (except that Holders may receive
(i) Permitted Junior Securities and (ii) payments and other distributions made
from any defeasance trust created pursuant to Article 8 hereof); and
(2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, any distribution to which
Holders would be entitled but for this Article 10 shall be made to holders of
Senior Debt (except that Holders of Notes may receive (i) Permitted Junior
Securities and (ii) payments and other distributions made from any defeasance
trust created pursuant to Article 8 hereof), as their interests may appear.
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the
Trustee or any Holder in respect of Obligations with respect to the Notes and
may not acquire from the Trustee or any Holder any Notes for cash or property
(other than (a) Permitted Junior Securities and (b) payments and other
distributions made from any defeasance trust created pursuant to Article 8
hereof) until all principal and other Obligations with respect to the Senior
Debt have been paid in full if:
(i) a default in the payment of any principal or other Obligations with
respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
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(ii) a default, other than a payment default, on Designated Senior Debt
occurs and is continuing that then permits holders of such Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "Payment Blockage Notice") from a Person who may give it
pursuant to Section 10.12 hereof. If the Trustee receives any such Payment
Blockage Notice, no subsequent Payment Blockage Notice shall be effective
for purposes of this Section 10.04 unless and until (i) at least 360 days
shall have elapsed since the effectiveness of the immediately prior Payment
Blockage Notice and (ii) all scheduled payments of principal, premium and
Liquidated Damages, if any, and interest on the Notes that have come due
have been paid in full in cash. No nonpayment default that existed or was
continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived for a period of not less
than 90 days.
The Company may and shall resume payments on and distributions
in respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.04(ii)
hereof, 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
SECTION 10.05. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any
payment of any Obligations with respect to the Notes at a time when the Trustee
or such Holder, as applicable, has actual knowledge that such payment is
prohibited by Section 10.03 or 10.04 hereof, such payment shall be held by the
Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith
over and delivered, upon written request, to the holders of Senior Debt as their
interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which such Senior Debt may have been issued, as
their respective interests may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
With respect to the holders of Senior Debt, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Trustee shall pay over or distribute to or on behalf of
Holders or the Company or any other Person money or assets to which any holders
of Senior Debt
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shall be entitled by virtue of this Article 10, except if such payment is made
as a result of the willful misconduct or gross negligence of the Trustee.
SECTION 10.07. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Notes to violate this Article 10, but failure to
give such notice shall not affect the subordination of the Notes to the Senior
Debt as provided in this Article 10.
SECTION 10.08. SUBROGATION.
After all Senior Debt is paid in full and until the Notes are
paid in full, Holders of Notes shall be subrogated (equally and ratably with all
other Indebtedness pari passu with the Notes) to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders of Notes have been applied to the
payment of Senior Debt. A distribution made under this Article 10 to holders of
Senior Debt that otherwise would have been made to Holders of Notes is not, as
between the Company and Holders, a payment by the Company on the Notes.
SECTION 10.09. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of
Notes and holders of Senior Debt. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay principal
of and interest and Liquidated Damages, if any, on the Notes in accordance with
their terms;
(2) affect the relative rights of Holders of Notes and
creditors of the Company other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder of Notes from exercising
its available remedies upon a Default or Event of Default, subject to the rights
of holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay
principal of or interest on a Note on the due date, the failure shall
nevertheless be a Default or Event of Default.
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Debt to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
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SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to
holders of Senior Debt, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company
referred to in this Article 10, the Trustee and the Holders of Notes shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders of Notes for the purpose of ascertaining the Persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10.
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee may hold Senior Debt with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof,
authorizes and directs the Trustee on such Holder's behalf to take such action
as may be necessary or appropriate to effectuate the subordination as provided
in this Article 10, and appoints the Trustee to act as such Holder's
attorney-in-fact for any and all such purposes. If the Trustee does not file a
proper proof of claim or proof of debt in the form required in any proceeding
referred to in Section 6.09 hereof at least 30 days before the expiration of the
time to file such claim, the Representatives are hereby authorized to file an
appropriate claim for and on behalf of the Holders of the Notes.
SECTION 10.14. TRUSTEE'S COMPENSATION NOT PREJUDICED.
Nothing in this Article 10 shall apply to amounts due to the
Trustee pursuant to other Sections of this Indenture.
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ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. SUBSIDIARY GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby,
jointly and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Notes or the obligations of the Company hereunder or thereunder, that: (a)
the principal of and interest on the Notes, and Liquidated Damages, if any, will
be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of and interest
on the Notes, if any, if lawful, and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof; and (b) in case
of any extension of time of payment or renewal of any Notes or any of such other
obligations, that same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors shall be jointly and severally obligated to pay the same immediately.
Each Guarantor agrees that this is a guarantee of payment and not a guarantee of
collection.
The Guarantors hereby agree that their obligations hereunder
shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
Each Guarantor hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, protest, notice and
all demands whatsoever and covenant that this Subsidiary Guarantee shall not be
discharged except by complete performance of the obligations contained in the
Notes and this Indenture.
If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors or any custodian, trustee,
liquidator or other similar official acting in relation to either the Company or
the Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any
right of subrogation in relation to the Holders in respect of any obligations
guaranteed hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between the Guarantors, on the one hand,
and the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Subsidiary Guarantee.
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SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary
Guarantee pursuant to this Article 11 shall be junior and subordinated to the
Senior Debt of such Guarantor on the same basis as the Notes are junior and
subordinated to Senior Debt of the Company. For the purposes of the foregoing
sentence, the Trustee and the Holders shall have the right to receive and/or
retain payments by any of the Guarantors only at such times as they may receive
and/or retain payments in respect of the Notes pursuant to this Indenture,
including Article 10 hereof.
SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder,
hereby confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section
11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in EXHIBIT E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by an Officer
thereof.
Each Guarantor hereby agrees that its Subsidiary Guarantee set
forth in Section 11.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any other
Domestic Subsidiaries subsequent to the date of this Indenture, or if any
current or future Subsidiaries become Domestic Subsidiaries subsequent to the
date of this Indenture, if required by Section 4.17 hereof, the Company shall
cause such Subsidiaries to execute supplemental indentures to this Indenture in
accordance with Section 4.17 hereof, and this Article 11, to the extent
applicable.
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SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person) another corporation,
Person or entity whether or not affiliated with such Guarantor unless:
(a) subject to Section 11.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the Trustee, under
the Notes, this Indenture, the Registration Rights Agreement and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no
Default or Event of Default exists.
In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Notwithstanding clauses (a) and (b) above, nothing contained
in this Indenture or in any of the Notes shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor, or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
provided that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of this Indenture, including without
limitation Section 4.10 hereof. Upon delivery by the Company to the Trustee of
an Officers' Certificate and an Opinion of Counsel to the effect that such sale
or other disposition was made by the Company in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof,
the Trustee shall execute any documents
83
<PAGE> 92
reasonably required in order to evidence the release of any Guarantor from its
obligations under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor under this
Indenture as provided in this Article 11.
ARTICLE 12.
SATISFACTION AND DISCHARGE
SECTION 12.01. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall be discharged and shall cease to be of
further effect as to all Notes issued hereunder, when either
(a) all such Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust and
thereafter repaid to the Company) have been delivered to the Trustee for
cancellation; or
(b) (i) all such Notes not theretofore delivered to such
Trustee for cancellation have become due and payable
by reason of the making of a notice of redemption or
otherwise or will become due and payable within one
year and the Company or a Guarantor, has irrevocably
deposited or caused to be deposited with such Trustee
as trust funds in trust an amount of money sufficient
to pay and discharge the entire Indebtedness on such
Notes not theretofore delivered to the Trustee for
cancellation for principal, premium, accrued interest
and Liquidated Damages, if any, to the date of
maturity or redemption;
(ii) no Default or Event of Default with respect to this
Indenture or the Notes shall have occurred and be
continuing on the date of such deposit or shall occur
as a result of such deposit and such deposit will not
result in a breach or violation of, or constitute a
default under, any other instrument to which the
Company or a Guarantor, is a party or by which the
Company or a Guarantor is bound;
(iii) the Company or a Guarantor has paid or caused to be
paid all sums payable by it under this Indenture; and
(iv) the Company has delivered irrevocable instructions to
the Trustee under this Indenture to apply the
deposited money toward the payment of such Notes at
maturity or the redemption date, as the case may be.
In addition, the Company must deliver an Officers' Certificate
and an Opinion of Counsel to the Trustee stating that all conditions precedent
to satisfaction and discharge have been satisfied.
84
<PAGE> 93
SECTION 12.02. APPLICATION OF TRUST MONEY
Subject to the provisions of the last paragraph of Section
4.19 hereof, all money deposited with the Trustee pursuant to Section 12.01
hereof shall be held in trust and applied by it, in accordance with the
provisions of the Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to Persons entitled thereto, of the principal (and
premium, if any), interest and Liquidated Damages, if any, for whose payment
such money has been deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 12.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though such deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 13.
MISCELLANEOUS
SECTION 13.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA section 318(c), the imposed duties
shall control.
SECTION 13.02. NOTICES.
Any notice or communication by the Company, any Guarantor or
the Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company and/or any Guarantor:
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Telecopier No.: (937) 644-7136
Attention: Treasurer
85
<PAGE> 94
With a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, Ohio 43215
Telecopier No.: (614) 464-6350
Attention: Ronald A. Robins, Jr, Esq.
If to the Trustee:
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Fl.
Hartford, Connecticut 06103
Telecopier No.: (860) 244-1897
Attention: Corporate Trust Administration
With a copy to:
Brown, Rudnick, Freed & Gesmer, P.C.
CityPlace I
Hartford, Connecticut 06103-3402
Telecopier No.: (860) 509-6501
Attention: David E. Golden, Esq.
The Company, or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on the
register kept by the Registrar. Any notice or communication shall also be so
mailed to any Person described in TIA section 313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
86
<PAGE> 95
SECTION 13.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA section 312(c).
SECTION 13.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 13.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 13.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA section 314(a)(4)) shall comply with the provisions of
TIA section 314(e) and shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she
has or they have made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 13.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
87
<PAGE> 96
SECTION 13.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS.
No past, present or future director, officer, employee,
incorporator or shareholder of the Company or any Guarantor, as such, shall have
any liability for any obligations of the Company or such Guarantor under the
Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
SECTION 13.08. GOVERNING LAW.
THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 13.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 13.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 13.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 13.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
[Indenture signature page follows]
88
<PAGE> 97
[Indenture signature page]
DATED AS OF JANUARY 21, 1999 THE SCOTTS COMPANY
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Senior Vice President
<PAGE> 98
SCOTTS' MIRACLE-GRO PRODUCTS, INC.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: President
MIRACLE-GRO LAWN PRODUCTS, INC.
BY: /s/ G. Robert Lucas
Name: G. Robert Lucas
---------------------------
Title: Vice President
MIRACLE-GRO PRODUCTS LTD.
BY: /s/ G. Robert Lucas
Name: G. Robert Lucas
---------------------------
Title: Vice President
2
<PAGE> 99
OMS INVESTMENTS, INC.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: President
OLD FORT FINANCIAL CORP.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
HYPONEX CORPORATION
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
3
<PAGE> 100
EARTHGRO, INC.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
SCOTTS PRODUCTS CO.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
SCOTTS PROFESSIONAL PRODUCTS CO.
BY: /S/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
4
<PAGE> 101
REPUBLIC TOOL & MANUFACTURING CORP.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
SCOTTS-SIERRA HORTICULTURAL
PRODUCTS COMPANY
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
SCOTTS-SIERRA CORP. PROTECTION COMPANY
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: Vice President
5
<PAGE> 102
SCOTTS-SIERRA INVESTMENTS, INC.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: President
SWISS FARMS PRODUCTS, INC.
BY: /s/ G. Robert Lucas
---------------------------
Name: G. Robert Lucas
Title: President
6
<PAGE> 103
STATE STREET BANK AND TRUST COMPANY,
as Trustee
BY: /s/ Steven Cimalore
---------------------------
Name: Steven Cimalore
Title: Vice President
7
<PAGE> 104
EXHIBIT A-1
(Face of Note)
===============================================================================
CUSIP 810186 AA4
8.625% [SERIES A] [SERIES B] SENIOR SUBORDINATED NOTES DUE 2009
No. _________ $ ___________
THE SCOTTS COMPANY
promises to pay to Cede & Co
or registered assigns, the principal sum of ________________________________
Dollars on January 15, 2009.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
THE SCOTTS COMPANY
BY:
---------------------------------
Name:
Title:
BY:
---------------------------------
Name:
Title:
This is one of the
Global Notes referred to in the
within-mentioned Indenture:
(SEAL)
STATE STREET BANK AND TRUST COMPANY
as Trustee
By: Dated: January 21, 1999
-----------------------------------
Name:
Title:
================================================================================
A-1-1
<PAGE> 105
(Back of Note)
8.625% [Series A] [Series B] Senior Subordinated Notes due 2009
[INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE
INDENTURE]
[INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS
OF THE INDENTURE]
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Scotts Company, an Ohio corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 8.625% per
annum from January 21, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company shall pay interest and Liquidated Damages semi-annually on
January 15 and July 15 of each year, or if any such day is not a Business Day,
on the next succeeding Business Day (each an "Interest Payment Date"). Interest
on the Notes shall accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of issuance; provided that
if there is no existing Default in the payment of interest, and if this Note is
authenticated between a record date referred to on the face hereof and the next
succeeding Interest Payment Date, interest shall accrue from such next
succeeding Interest Payment Date; provided, further, that the first Interest
Payment Date shall be July 15, 1999. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is
1.0% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the January 1 or July 1
next preceding the Interest Payment Date, even if such Notes are canceled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
shall be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds shall be
required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust
Company, the Trustee under the Indenture, shall act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
A-1-2
<PAGE> 106
4. INDENTURE. The Company issued the Notes under an Indenture dated as
of January 21, 1999 ("Indenture") among the Company, the Guarantors and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb) (the "TIA"). The Notes are subject to
all such terms, and Holders are referred to the Indenture and the TIA for a
statement of such terms. To the extent any provision of this Note conflicts with
the express provisions of the Indenture, the provisions of the Indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$400.0 million in aggregate principal amount plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this Paragraph 5, the
Notes will not be redeemable at the Company's option prior to January 15, 2004.
Thereafter, the Notes will be subject to redemption at any time at the option of
the Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on January 15 of the years indicated below:
YEAR PERCENTAGE
- ---- ----------
2004....................................................... 104.313%
2005....................................................... 102.875%
2006....................................................... 101.438%
2007 and thereafter........................................ 100.000%
(b). Notwithstanding the foregoing, during the first 36 months after
the Issue Date, the Company may redeem up to 35% of the aggregate principal
amount of Notes originally issued under this Indenture at a redemption price of
108.625% of the principal amount thereof, plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more public equity offerings; provided that at least 65% of
the aggregate principal amount of Notes originally issued under the Indenture
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and provided,
further, that such redemption shall occur within 60 days of the date of the
closing of such public equity offering.
6. MANDATORY REDEMPTION.
Except as set forth in Paragraph 7 below, the Company shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
A-1-3
<PAGE> 107
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, the
Company shall make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of repurchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company shall be required to make an offer to all Holders of Notes
and all holders of other Indebtedness containing provisions similar to those set
forth in the Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Notes and such other Indebtedness that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture and such other Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
this Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Holders of Notes that are the subject of an offer to purchase will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest shall cease to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a
Note may be treated as its owner for all purposes under the Indenture.
A-1-4
<PAGE> 108
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (and Additional Notes, if any)
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (and Additional Notes, if any) voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Notes or the
Subsidiary Guarantees or may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or the Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the TIA, to provide for the issuance of Additional Notes in accordance
with the limitations set forth in the Indenture or to allow any Guarantor to
execute a supplemental indenture to the Indenture.
12. DEFAULTS AND REMEDIES.
Events of Default under the Indenture include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries for 30 days after notice to comply with the provisions of Sections
4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of
its Subsidiaries for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $10.0 million, which judgments are not paid, discharged or stayed for
a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
Guarantee(s) of any Guarantor that is a Significant Subsidiary or of any group
of Guarantors that collectively would constitute a Significant Subsidiary shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor that is a
Significant Subsidiary or any group of Guarantors that collectively would
constitute a Significant Subsidiary, or any Person acting on behalf of any such
Guarantor or group of Guarantors, shall deny or disaffirm the obligations of
each such Guarantor under its Subsidiary Guarantee; and (viii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Significant
Subsidiaries.
(b) If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and
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<PAGE> 109
payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, all outstanding Notes
shall become due and payable without further action or notice. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture, except a continuing Default or Event of
Default in the payment of interest on, or principal of, the Notes. The Company
shall deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company, upon becoming aware of any Default or Event of
Default, deliver to the Trustee a statement specifying such Default or Event of
Default.
13. SUBORDINATION. The Company agrees, and each Holder by
accepting this Note agrees, that the principal of and premium, interest and
Liquidated Damages, if any, with respect to this Notes are subordinated in right
of payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of the Company (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or shareholder, of the Company or any Guarantor, as such,
shall not have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantee or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entirety), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL
NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Notes under the Indenture, Holders of Initial Notes shall have all
the rights set forth in the Registration Rights Agreement or, in the case of
Additional Notes, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have the rights set forth in one or more registration rights
agreements, if any, between the Company and the other parties thereto, relating
to rights given by the Company to the purchasers of any Additional Notes.
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<PAGE> 110
19. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
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<PAGE> 111
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Telecopier No.: (937) 644-7136
Attention: Treasurer
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<PAGE> 112
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- ----------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ____________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- ----------------------------------------------------------------------------
Date:________________ Your Signature:____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:_____________________
SIGNATURE GUARANTEE:
---------------------------------
Signatures must be guaranteed by
an "eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition
to, or in substitution for, STAMP, all
in accordance with the Securities
Exchange Act of 1934, as amended.
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<PAGE> 113
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state
the amount you elect to have purchased: $________
Date:________________
Your Signature:_________________________
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No: _________________
SIGNATURE GUARANTEE:
_______________________________________
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may
be determined by the Registrar in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
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<PAGE> 114
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE1
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease of Trustee or
Date Of Exchange Global Note Global Note (or increase) Note Custodian
---------------- ----------------------- ---------------------- ---------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
- --------------------
1 Include only if Note is issued in Global Form.
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<PAGE> 115
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
===============================================================================
CUSIP 481014 AA7
8.625% SERIES A SENIOR SUBORDINATED NOTES DUE 2009
No. _____________ $_________
THE SCOTTS COMPANY
promises to pay to Cede & Co.
or registered assigns, the principal sum of
Dollars on July 15, 2009.
Interest Payment Dates: January 15 and July 15.
Record Dates: January 1 and July 1.
THE SCOTTS COMPANY
BY:___________________________________
Name:
Title:
BY:___________________________________
Name:
Title:
This is one of the
Global Notes referred to in the
within-mentioned Indenture:
(SEAL)
STATE STREET BANK AND TRUST COMPANY,
as Trustee
By: Dated: January 21, 1999
-----------------------------------
Name:
Title:
===============================================================================
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<PAGE> 116
(Back of Regulation S Temporary Global Note)
8.625% Series A Senior Subordinated Notes due 2009
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES
IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC") TO
THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903
OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES AND OTHER JURISDICTIONS.
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<PAGE> 117
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL
NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED
NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.
Capitalized terms used herein shall have the meanings assigned
to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. The Scotts Company, an Ohio corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at 8.625% per annum from January 21, 1999 until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages semi-annually on January 15 and July 15 of each year, or if any such day
is not a Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Notes shall accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be July 15, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1.0% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall be computed on the basis of a
360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for
one or more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. METHOD OF PAYMENT. The Company shall pay interest on
the Notes (except defaulted interest) and Liquidated Damages to the Persons who
are registered Holders of Notes at the close of business on the January 1 or
July 1 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Liquidated Damages, if
any, and interest at the office or agency of the Company maintained for such
purpose within or without the City and State of New York, or, at the option of
the Company, payment of interest and Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Liquidated
Damages on, all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Company or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
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<PAGE> 118
3. PAYING AGENT AND REGISTRAR. Initially, State Street
Bank and Trust Company, the Trustee under the Indenture, shall act as Paying
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Notes under an
Indenture dated as of January 21, 1999 ("Indenture") among the Company, the
Guarantors and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb) (the
"TIA"). The Notes are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of such terms. To the extent any provision
of this Note conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $400.0 million in aggregate principal
amount plus amounts, if any, issued to pay Liquidated Damages on outstanding
Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in subparagraph (b) of this
Paragraph 5, the Notes will not be redeemable at the Company's option prior to
January 15, 2004. Thereafter, the Notes will be subject to redemption at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on January 15 of the years
indicated below:
YEAR PERCENTAGE
- ---- ----------
2004 .......................................................... 104.313%
2005 .......................................................... 102.875%
2006 .......................................................... 101.438%
2007 and thereafter ............................................. 100.000%
(b) Notwithstanding the foregoing, during the first 36
months after the Issue Date, the Company may redeem up to 35% of the aggregate
principal amount of Notes originally issued under this Indenture at a redemption
price of 108.625% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the redemption date, with
the net cash proceeds of one or more public equity offerings; provided that at
least 65% of the aggregate principal amount of Notes originally issued under the
Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Company and its Subsidiaries); and
provided, further, that such redemption shall occur within 60 days of the date
of the closing of such public equity offering.
6. MANDATORY REDEMPTION.
Except as set forth in Paragraph 7 below, the Company
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
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<PAGE> 119
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, the
Company shall make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the date of repurchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset
Sales, when the aggregate amount of Excess Proceeds exceeds $10.0 million, the
Company shall be required to make an offer to all Holders of Notes and all
holders of other Indebtedness containing provisions similar to those set forth
in the Indenture with respect to offers to purchase or redeem with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes and such other Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Notes and such other
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other Indebtedness to be purchased on a pro rata basis. Upon completion of
such offer to purchase, the amount of Excess Proceeds shall be reset at zero.
Holders of Notes that are the subject of an offer to purchase will receive an
Asset Sale Offer from the Company prior to any related purchase date and may
elect to have such Notes purchased by completing the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Notes.
8.NOTICE OF REDEMPTION. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest shall cease to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a selection of Notes to be redeemed or during the
period between a record date and the corresponding Interest Payment Date.
This Regulation S Temporary Global Note is exchangeable in
whole or in part for one or more Global Notes only (i) on or after the
termination of the 40-day restricted period (as defined in Regulation S) and
(ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if
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<PAGE> 120
applicable) required by Article 2 of the Indenture. Upon exchange of this
Regulation S Temporary Global Note for one or more Global Notes, the Trustee
shall cancel this Regulation S Temporary Global Note.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note
may be treated as its owner for all purposes under the Indenture.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended
or supplemented with the consent of the Holders of at least a majority in
principal amount of the then outstanding Notes (and Additional Notes, if any)
voting as a single class, and any existing default or compliance with any
provision of the Indenture, the Notes or the Subsidiary Guarantees may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes (and Additional Notes, if any) voting as a single class.
Without the consent of any Holder of a Note, the Indenture, the Notes or the
Subsidiary Guarantees may be amended or supplemented to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Company's
or the Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the TIA, to provide for the issuance of Additional Notes in accordance
with the limitations set forth in the Indenture or to allow any Guarantor to
execute a supplemental indenture to the Indenture.
12. DEFAULTS AND REMEDIES.
Events of Default under the Indenture include: (i) default for
30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Notes (whether or not prohibited by the subordination provisions
of the Indenture); (ii) default in payment when due of the principal of or
premium, if any, on the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Subsidiaries for 30 days after notice to comply with the provisions of Sections
4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of
its Subsidiaries for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the Indenture, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more; (vi) failure
by the Company or any of its Subsidiaries to pay final judgments aggregating in
excess of $10.0 million, which judgments are not paid, discharged or stayed for
a period of 60 days; (vii) except as permitted by the Indenture, any Subsidiary
Guarantee(s) of any Guarantor that is a Significant Subsidiary or of any group
of Guarantors that collectively would constitute a Significant
A-2-6
<PAGE> 121
Subsidiary shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or any
Guarantor that is a Significant Subsidiary or any group of Guarantors that
collectively would constitute a Significant Subsidiary, or any Person acting on
behalf of any such Guarantor or group of Guarantors, shall deny or disaffirm the
obligations of each such Guarantor under its Subsidiary Guarantee; and (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Significant Subsidiaries.
(b) If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its consequences
under the Indenture, except a continuing Default or Event of Default in the
payment of interest on, or principal of, the Notes. The Company shall deliver to
the Trustee annually a statement regarding compliance with the Indenture, and
the Company, upon becoming aware of any Default or Event of Default, deliver to
the Trustee a statement specifying such Default or Event of Default.
13. SUBORDINATION. The Company agrees, and each Holder by
accepting this Note agrees, that the principal of and premium, interest and
Liquidated Damages, if any, with respect to this Notes are subordinated in right
of payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash or Cash Equivalents of all
Senior Debt of the Company (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer,
employee, incorporator or shareholder, of the Company or any Guarantor, as such,
shall not have any liability for any obligations of the Company or any Guarantor
under the Notes, any Subsidiary Guarantee or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for the issuance of the Notes.
16. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
17. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entirety), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL
NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Notes under the
A-2-7
<PAGE> 122
Indenture, Holders of Initial Notes shall have all the rights set forth in the
Registration Rights Agreement or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Definitive Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto, relating to rights given by the Company
to the purchasers of any Additional Notes.
A-2-8
<PAGE> 123
19. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Telecopier No.: (937) 644-7136
Attention: Treasurer
A-2-9
<PAGE> 124
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- -------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- -------------------------------------------------------------------------------
Date:_____________________
Your Signature:______________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No: ______________________
SIGNATURE GUARANTEE:
---------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the
Registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
A-2-10
<PAGE> 125
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
- -------------------------------------------------------------------------------
Date: __________________
Your Signature: ____________________________
(Sign exactly as your name appears on the
face of this Note)
Tax Identification No:______________________
SIGNATURE GUARANTEE:
---------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Registrar, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the
Registrar in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
A-2-11
<PAGE> 126
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S
Temporary Global Note for an interest in another Global Note, or of other
Restricted Global Notes for an interest in this Regulation S Temporary Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer
Amount of this Amount of this decrease of Trustee or
Date Of Exchange Global Note Global Note (Or Increase) Note Custodian
---------------- ----------------------- ---------------------- ---------- ----------------
<S> <C> <C> <C> <C>
</TABLE>
A-2-12
<PAGE> 127
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Attention: Treasurer
State Street Bank and Trust Company
Corporate Trust
Goodwin Square
225 Asylum Street, 23rd Fl.
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Re: 8.625% Senior Subordinated Notes Due 2009
------------------------------------------
Reference is hereby made to the Indenture, dated as of January
21, 1999 (the "Indenture"), among The Scotts Company, as issuer (the "Company"),
the Guarantors and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in
the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE
NOTE PURSUANT TO
B-1
<PAGE> 128
REGULATION S. The Transfer is being effected pursuant to and in accordance with
Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor
hereby further certifies that (i) the Transfer is not being made to a person in
the United States and (x) at the time the buy order was originated, the
Transferee was outside the United States or such Transferor and any Person
acting on its behalf reasonably believed and believes that the Transferee was
outside the United States or (y) the transaction was executed in, on or through
the facilities of a designated offshore securities market and neither such
Transferor nor any Person acting on its behalf knows that the transaction was
prearranged with a buyer in the United States, (ii) no directed selling efforts
have been made in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S under the Securities Act, (iii) the transaction is not
part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note, the Temporary
Regulation S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and
in accordance with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company
or a subsidiary thereof;
or
(c) [ ] such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an
Institutional Accredited Investor and pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or Restricted
Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of EXHIBIT D to the Indenture and (2) if such Transfer is in respect of
a principal amount of Notes at the time of transfer of less than $250,000, an
Opinion of
B-2
<PAGE> 129
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such Transfer
is in compliance with the Securities Act. Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the IAI Global
Note and/or the Definitive Notes and in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The
Transfer is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i)
The Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION.
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the Securities Act other than
Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
State of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will not be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
Dated: ____________, ____ _____________________________________
[Insert Name of Transferor]
By:__________________________________
Name:
Title:
B-3
<PAGE> 130
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP_________ ), or
(ii) [ ] Regulation S Global Note (CUSIP _________), or
(iii) [ ] IAI Global Note (CUSIP _______ ); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
(ii) [ ] Regulation S Global Note (CUSIP ), or
(iii) [ ] IAI Global Note (CUSIP ); or
(iv) [ ] Unrestricted Global Note (CUSIP ); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 131
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Attention: Treasurer
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Fl.
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Re: 8.625% SENIOR SUBORDINATED NOTES DUE 2009
-----------------------------------------
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of January
21, 1999 (the "Indenture"), among The Scotts Company, as issuer (the "Company"),
the Guarantors and State Street Bank and Trust Company, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for an
Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has
C-1
<PAGE> 132
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
(c) [ ]CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ]CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE
TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ]CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A
RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
C-2
<PAGE> 133
(b) [ ]CHECK IF EXCHANGE IS FROM RESTRICTED
DEFINITIVE NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In
connection with the Exchange of the Owner's Restricted Definitive Note for a
beneficial interest in the [CHECK ONE] [ ] 144A Global Note, [ ] Regulation S
Global Note, [ ] IAI Global Note with an equal principal amount, the Owner
hereby certifies (i) the beneficial interest is being acquired for the Owner's
own account without transfer and (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, and in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with the
terms of the Indenture, the beneficial interest issued will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the relevant Restricted Global Note and in the Indenture and the Securities Act.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
. By: _______________________________
Name:
Title:
Dated: __________, ____
C-3
<PAGE> 134
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
The Scotts Company
14111 Scottslawn Road
Marysville, Ohio 43041
Attention: Treasurer
State Street Bank and Trust Company
Goodwin Square
225 Asylum Street, 23rd Fl.
Hartford, Connecticut 06103
Attention: Corporate Trust Administration
Re: 8.625% SENIOR SUBORDINATED NOTES DUE 2009
-----------------------------------------
Reference is hereby made to the Indenture, dated as of January
21, 1999 (the "Indenture"), among The Scotts Company., as issuer (the
"Company"), the Guarantors and State Street Bank and Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
In connection with our proposed purchase of
$____________ aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or
any interest therein is subject to certain restrictions and conditions set forth
in the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a principal amount of Notes, at the time of transfer
of less than $250,000, an
D-1
<PAGE> 135
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
------------------------------------------
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE> 136
EXHIBIT E
FORM OF NOTATION OF SUBSIDIARY GUARANTEE ON NOTE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of January 21, 1999 (the
"Indenture") among The Scotts Company, the Guarantors signatories thereto and
State Street Bank and Trust Company, as trustee (the "Trustee"), (a) the due and
punctual payment of the principal of, premium, if any, and interest on the Notes
(as defined in the Indenture), whether at maturity, by acceleration, redemption
or otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes the Trustee, on behalf of such
Holder, to make such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
.
[Guarantor]
By:__________________________
Name:
Title:
E-1
<PAGE> 137
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture") dated
as of ____________________, among _____________________ (the "Guaranteeing
Subsidiary"), a subsidiary of The Scotts Company (or its successor), a
corporation organized under the laws of Ohio (the "Company"), and State Street
Bank and Trust Company, as trustee under the indenture referred to below (the
"Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of January 21, 1999,
providing for the issuance of an aggregate principal amount at maturity of
$400,000,000 of 8.625% Senior Subordinated Notes due 2009 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guaranteeing Subsidiary shall execute and deliver to the
Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary
shall unconditionally guarantee all of the Company's Obligations under the Notes
and the Indenture on the terms and conditions set forth herein (the "Subsidiary
Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without
definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby
agrees as follows:
(a) Along with all Guarantors named in the Indenture, to
jointly and severally Guarantee to each Holder of a
Note authenticated and delivered by the Trustee and
to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of
the Indenture, the Notes or the obligations of the
Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes
will be promptly paid in full when due,
whether at maturity, by acceleration,
redemption or otherwise, and interest on the
overdue principal of and interest on the
Notes, if any, if lawful, and all other
obligations of the Company to the Holders or
the Trustee hereunder or thereunder will be
promptly paid in full or performed, all in
accordance with the terms hereof and
thereof; and
F-1
<PAGE> 138
(ii) in case of any extension of time of payment
or renewal of any Notes or any of such other
obligations, that same will be promptly paid
in full when due or performed in accordance
with the terms of the extension or renewal,
whether at stated maturity, by acceleration
or otherwise. Failing payment when due of
any amount so guaranteed or any performance
so guaranteed for whatever reason, the
Guarantors shall be jointly and severally
obligated to pay the same immediately.
(b) The obligations hereunder shall be unconditional,
irrespective of the validity, regularity or
enforceability of the Notes or the Indenture, the
absence of any action to enforce the same, any waiver
or consent by any Holder of the Notes with respect to
any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce
the same or any other circumstance which might
otherwise constitute a legal or equitable discharge
or defense of a guarantor.
(c) The following is hereby waived: diligence
presentment, demand of payment, filing of claims with
a court in the event of insolvency or bankruptcy of
the Company, any right to require a proceeding first
against the Company, protest, notice and all demands
whatsoever.
(d) This Subsidiary Guarantee shall not be discharged
except by complete performance of the obligations
contained in the Notes and the Indenture.
(e) If any Holder or the Trustee is required by any court
or otherwise to return to the Company, the
Guarantors, or any Custodian, Trustee, liquidator or
other similar official acting in relation to either
the Company or the Guarantors, any amount paid by
either to the Trustee or such Holder, this Subsidiary
Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guaranteeing Subsidiary shall not be entitled to
any right of subrogation in relation to the Holders
in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the
Holders and the Trustee, on the other hand, (x) the
maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 of the Indenture
for the purposes of this Subsidiary Guarantee,
notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect
of the obligations guaranteed hereby, and (y) in the
event of any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not due and
payable) shall forthwith become due and payable by
the Guarantors for the purpose of this Subsidiary
Guarantee.
F-2
<PAGE> 139
(h) The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as
the exercise of such right does not impair the rights
of the Holders under the Guarantee.
(i) The obligations hereunder shall be subject to the
subordination provisions of the Indenture.
3. Execution and Delivery. Each Guaranteeing Subsidiary agrees
that the Subsidiary Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
4. Guaranteeing Subsidiary May Consolidate, Etc. on Certain
Terms.
(a) The Guaranteeing Subsidiary may not consolidate with or merge
with or into (whether or not such Guarantor is the surviving
Person) another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person
formed by or surviving any such consolidation or
merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in
form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the
Subsidiary Guarantee on the terms set forth herein or
therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein
as a Guarantor. Such successor corporation thereupon may cause
to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms
of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture,
and notwithstanding clauses (a) and (b) above, nothing contained in the
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or another Guarantor, or shall prevent any
sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
F-3
<PAGE> 140
5. Releases.
(a) In the event of a sale or other disposition of all of the
assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all to the
capital stock of any Guarantor, then such Guarantor (in the
event of a sale or other disposition, by way of merger,
consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in
the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the
applicable provisions of the Indenture, including without
limitation Section 4.10 of the Indenture. Upon delivery by the
Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the
provisions of the Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary
Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 11 of the Indenture.
6. No Recourse Against Others. No past, present or future
director, officer, employee, incorporator, stockholder or agent of the
Guaranteeing Subsidiary, as such, shall have any liability for any obligations
of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF
NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
8. Counterparts. The parties may sign any number of copies of
this Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
9. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in any
manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guaranteeing Subsidiary and the
Company.
F-4
<PAGE> 141
IN WITNESS WHEREOF, the parties hereto have
caused this Supplemental Indenture to be duly executed and attested, all as
of the date first above written.
Dated: _______________, ____
[Guaranteeing Subsidiary]
By: _________________________________
Name:
Title:
[TRUSTEE]
as Trustee
By:_________________________________
Name:
Title:
F-5
<PAGE> 1
Exhibit 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)
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
(THE SCOTTS COMPANY)
(Exact name of obligor as specified in its charter)
OHIO 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)
(8.625% SERIES A SENIOR SUBORDINATED NOTES DUE 2009)
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with the Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and
is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is on file
with the Securities and Exchange Commission as Exhibit 4 to the
Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference
thereto.
1
<PAGE> 3
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(b) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
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.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939,
as amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts,
has duly caused this statement of eligibility to be signed
on its behalf by the undersigned, thereunto duly authorized, all in the
City of Boston and The Commonwealth of Massachusetts, on the {APRIL 13, 1999}.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
2
<PAGE> 4
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture
Act of 1939, as amended, in connection with the proposed issuance by {THE SCOTTS
COMPANY} of its {8.625% SERIES A SENIOR SUBORDINATED NOTES DUE 2009}, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Steven Cimalore
NAME: STEVEN CIMALORE
TITLE: VICE PRESIDENT
DATED: APRIL 13, 1999
2
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking institution
organized and operating under the banking laws of this commonwealth and a member
of the Federal Reserve System, at the close of business MARCH 31, 1998,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act and in accordance
with a call made by the Commissioner of Banks under General Laws, Chapter 172,
Section 22(a).
<TABLE>
<CAPTION>
Thousands of
ASSETS Dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ................ 1,144,309
Interest-bearing balances ......................................... 9,914,704
Securities ................................................................. 10,062,052
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................... 8,073,970
Loans and lease financing receivables:
Loans and leases, net of unearned income .......................... 6,433,627
Allowance for loan and lease losses ............................... 88,820
Allocated transfer risk reserve ................................... 0
Loans and leases, net of unearned income and allowances ........... 6,344,807
Assets held in trading accounts ............................................ 1, 117,547
Premises and fixed assets .................................................. 453,576
Other real estate owned .................................................... 100
Investments in unconsolidated subsidiaries ................................. 44,985
Customers' liability to this bank on acceptances outstanding ............... 66,149
Intangible assets .......................................................... 263,249
Other assets ............................................................... 1,066,572
Total assets
38,552,020
===========
LIABILITIES
Deposits:
In domestic offices ............................................... 9,266,492
Noninterest-bearing ...................................... 6,824,432
Interest-bearing ......................................... 2,442,060
In foreign offices and Edge subsidiary ............................ 14,385,048
Noninterest-bearing ...................................... 75,909
Interest-bearing ......................................... 14,309,139
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................... 9,949,994
Demand notes issued to the U.S. Treasury and Trading Liabilities ........... 171,783
Trading liabilities ........................................................ 1,078,189
Other borrowed money ....................................................... 406,583
Subordinated notes and debentures .......................................... 0
Bank's liability on acceptances executed and outstanding ................... 66,149
Other liabilities .......................................................... 878,947
Total liabilities .......................................................... 36,203,185
EQUITY CAPITAL
Perpetual preferred stock and related
surplus .................................................................... 0
Common stock ............................................................... 29,931
Surplus .................................................................... 450,003
Undivided profits and capital reserves/Net unrealized holding gains (losses) 1,857,021
Net unrealized holding gains (losses) on available-for-sale securities ..... 18,136
Cumulative foreign currency translation adjustments ........................ (6,256)
Total equity capital
2,348,835
Total liabilities and equity capital ....................................... 38,552,020
-----------
</TABLE>
4
<PAGE> 6
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and 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
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Truman S. Casner
5
<PAGE> 1
EXHIBIT 99
LETTER OF TRANSMITTAL
THE SCOTTS COMPANY
OFFER TO EXCHANGE
ITS 8.625% SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FOR AN EQUAL PRINCIPAL AMOUNT
OF ITS 8.625% SENIOR SUBORDINATED NOTES DUE 2009
WHICH HAVE NOT BEEN SO REGISTERED
PURSUANT TO THE PROSPECTUS
DATED , 1999
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail or Hand or Overnight Delivery:
State Street Bank and Trust Company
Two International Place Fourth Floor Boston, MA 02110
Attention: Corporate Trust Department
Facsimile Transmissions: (Eligible Institutions Only) [______________]
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON _______, 1999, UNLESS THE OFFER IS EXTENDED.
Capitalized terms used but not defined herein shall have the same meaning given
them in the Prospectus (as defined below).
This Letter of Transmittal is to be completed by holders of Original Notes (as
defined below) either if Original Notes are to be forwarded herewith or if
tenders of Original Notes are to be made by book-entry transfer to an account
maintained by State Street Bank and Trust Company (the "Exchange Agent") at The
Depository Trust Company ("DTC") pursuant to the procedures set forth in "The
Exchange Offer--Procedures for Tendering" in the Prospectus and an Agent's
Message (as defined herein) is not delivered.
<PAGE> 2
Holders of Original Notes whose certificates (the "Certificates") for such
Original Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Original
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering" in the Prospectus.
DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF ORIGINAL NOTES TENDERED
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED OWNER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ON CERTIFICATE PRINCIPAL AMOUNT OF
ORIGINAL NOTE(S)) NUMBER(S)* ORIGINAL NOTES TENDERED **
- ------------------------------------------------------------------ --------------- --------------------------------
<S> <C> <C>
(If you need more space, attach a list and sign the list)
--------------- --------------------------------
--------------- --------------------------------
--------------- --------------------------------
--------------- --------------------------------
--------------- --------------------------------
TOTAL AMOUNT TENDERED:
- ------------------------------------------------------------------ --------------- --------------------------------
</TABLE>
- -------
* Need not be completed by book-entry holders.
** All Original Notes held shall be deemed tendered unless a lesser number
is specified in this column.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
/ / CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC
AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
--------------------------------------
DTC Account Number
--------------------------------------
Transaction Code Number
--------------------------------------
/ / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s)
--------------------------------------
Window Ticket Number (if any)
--------------------------------------
Date of Execution of Notice of Guaranteed Delivery
-------------------
Name of Institution which Guaranteed Delivery
------------------------
If Guaranteed Delivery is to be made by Book-Entry Transfer:
<PAGE> 3
Name of Tendering Institution
-------------------------------
DTC Account Number
--------------------------------------
Transaction Code Number
------------------------------------
/ / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED
ORIGINAL NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER
SET FORTH ABOVE.
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
-------------------------------------------------------------
Address:
-------------------------------------------------------------
<PAGE> 4
LADIES AND GENTLEMEN:
The undersigned hereby tenders to The Scotts Company, an Ohio
corporation (the "Company"), the above described principal amount of the
Company's outstanding 8.625% Senior Subordinated Notes due 2009 (the "Original
Notes") in exchange for a like principal amount of the Company's 8.625% Senior
Subordinated Notes due 2009 (the "Exchange Notes") which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), upon the
terms and subject to the conditions set forth in the Prospectus dated , 1999 (as
the same may be amended or supplemented from time to time, the "Prospectus"),
receipt of which is acknowledged, and in this Letter of Transmittal (which,
together with the Prospectus, constitutes the "Exchange Offer").Subject to and
effective upon the acceptance for exchange of all or any portion of the Original
Notes tendered herewith in accordance with the terms and conditions of the
Exchange Offer (including, if the Exchange Offer is extended or amended, the
terms and conditions of any such extension or amendment), the undersigned hereby
sells, assigns and transfer to or upon the order of the Company all right, title
and interest in and to such Original Notes as are being tendered herewith. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent as
its agent and attorney-in-fact (with full knowledge that the Exchange Agent is
also acting as agent of the Company in connection with the Exchange Offer) with
respect to the tendered Original Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), subject only to the right of withdrawal described in the Prospectus,
to (i) deliver Certificates for Original Notes to the Company together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to be issued in exchange for such Original Notes, (ii)
present Certificates for such Original Notes for transfer, and to transfer the
Original Notes on the books of the Company, and (iii)receive for the account of
the Company all benefits and otherwise exercise all rights of beneficial
ownership of such Original Notes, all in accordance with the terms and
conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Original Notes tendered hereby and that, when the same are accepted for
exchange, the Company will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and that the Original Notes tendered hereby are not subject to any adverse
claims or proxies. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Company or the exchange agent to be necessary
or desirable to complete the exchange, assignment and transfer of the original
notes tendered hereby, and the undersigned will comply with its obligations
under the registration rights agreement. The undersigned has read and agrees to
all of the terms of the exchange offer.
The name(s) and address(es) of the registered holder(s) of the Original
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Original Notes. The
Certificate number(s) and the Original Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above. If any tendered
Original Notes are not exchanged pursuant to the Exchange Offer for any reason,
or if Certificates are submitted for more Original Notes than are tendered or
accepted for exchange, Certificates for such nonexchanged or nontendered
Original Notes will be returned (or, in the case of Original Notes tendered by
book-entry transfer, such Original Notes will be credited to an account
maintained at DTC), without expense to the tendering holder, promptly following
the expiration or termination of the Exchange Offer. If the undersigned is a
broker-dealer holding Original Notes acquired for its own account as a result of
market-making activities or other trading activities, it agrees to deliver a
prospectus meeting the requirements of the Securities Actin connection with any
resale of Exchange Notes received in respect of such Original Notes pursuant to
the Exchange Offer. The undersigned understands that tenders of Original Notes
pursuant to any one of the procedures described in "The Exchange Offer --
Procedures for Tendering" in the Prospectus and in the instructions will, upon
the Company's acceptance for exchange of such tendered Original Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth
in the Prospectus, the Company may not be required to accept for exchange any of
the Original Notes tendered hereby. Unless otherwise indicated herein in the box
entitled "Special Issuance Instructions" below, the undersigned hereby directs
that the Exchange Notes be issued in the name(s) of the undersigned or, in the
case of a book-entry transfer of Original Notes, that
<PAGE> 5
such Exchange Notes be credited to the account indicated above maintained at
DTC. If applicable, substitute Certificates representing Original Notes not
exchanged or not accepted for exchange will be issued to the undersigned or, in
the case of a book-entry transfer of Original Notes, will be credited to the
account indicated above maintained at DTC. Similarly, unless otherwise indicated
under "Special Delivery Instructions," please deliver Exchange Notes to the
undersigned at the address shown below the undersigned's signature.
By tendering original notes and executing this letter of transmittal, the
undersigned hereby represents and agrees that (i) the undersigned is not an
"affiliate" of the Company, (ii) any Exchange Notes to be received by the
undersigned are being acquired in the ordinary course of its business, for the
undersigned's own account, for investment and not with a view to or for sale in
connection with any distribution of the Exchange Notes, (iii) the undersigned
has no arrangement or understanding with any person to participate in the
distribution (within the meaning of the Securities Act) of Exchange Notes to be
received in the Exchange Offer, (iv) if the undersigned is not a broker-dealer,
the undersigned is not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities Act) of such Exchange Notes,
and (v) the undersigned will provide the Company with any additional
representations so requested in order for the Company to ensure compliance with
applicable state securities or "blue sky" laws. Any holder of original notes
which is not a broker-dealer, and which is using the Exchange Offer to
participate in a distribution (within the meaning of the Securities Act) of
Exchange Notes, is hereby notified (1) that it will not be able to rely on the
position of the staff of the Division of Corporate Finance of the Securities and
Exchange Commission (the "Staff") set forth in Exxon Capital Holdings
Corporation (avail. April 13, 1989) and similar letters and (2) that it must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of Exchange Notes.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. Any holder of Original Notes which is a broker-dealer by
tendering Original Notes pursuant to the Exchange Offer and executing this
letter of transmittal, represents and agrees, consistent with certain
interpretive letters issued by the Staff to third parties, that (a) such
Original Notes held by the broker-dealer are held only as a nominee, or (b) such
Original Notes were acquired by such broker-dealer for its own account as a
result of market-making activities or other trading activities and it will
deliver the Prospectus (as amended or supplemented from time to time) meeting
the requirements of the Securities Act in connection with any resale of such
Exchange Notes (provided that, by so acknowledging and by delivering a
prospectus, such broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act). All resales must be
made in compliance with applicable state securities or "blue sky" laws. Such
compliance may require that the Exchange Notes be registered or qualified in a
particular state or that the resale be made by or through a licensed
broker-dealer, unless exemptions from these requirements are available. The
Company assumes no responsibility with regard to compliance with such
requirements. The Exchange Offer is not being made to, nor will the Company
accept surrenders for exchange from, holders of Original Notes in any
jurisdiction in which the Exchange Offer or the acceptance thereof would not be
in compliance with the securities or blue sky laws of such jurisdiction.
[Original Notes may only be tendered by holders in New Mexico and Pennsylvania
who are holders of the kind described in Appendix A hereto. By signing this
Letter of Transmittal, such holders will be deemed to represent that they are
holders of the kind described in Appendix A hereto.]
The Company has agreed that, subject to the provisions of the
Registration Rights Agreement, the Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Original Notes, where
such Original Notes were acquired by such broker-dealer for its own account as a
result of market- making activities or other trading activities, for a period
ending 90 days after the Expiration Date (subject to extension under certain
limited circumstances described in the Prospectus) or, if earlier, when all such
Exchange Notes have been disposed of by such broker-dealer. In that regard, each
broker-dealer who acquired Original Notes for its own account and as a result of
market-making or other trading activities, by tendering such Original Notes and
executing this letter of transmittal, agrees that, upon receipt of notice from
the Company of the occurrence of any event or the discovery of any fact which
makes any statement contained or incorporated by reference therein, in light of
the circumstances under which they were made, misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
broker-dealer will suspend the sale of Exchange Notes pursuant to the Prospectus
until the Company has amended or
<PAGE> 6
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented Prospectus to the broker-dealer
or the Company given notice that the sale of the Exchange Notes may be resumed,
as the case may be. If the Company gives such notice to suspend the sale of the
Exchange Notes, it shall extend the 90-day period referred to above during which
broker-dealers are entitled to use the Prospectus in connection with the resale
of Exchange Notes by the number of days during the period from and including the
date of the giving of such notice to and including the date when broker-dealers
shall have received copies of the supplemented or amended Prospectus necessary
to permit resales of the Exchange Notes or to and including the date on which
the Company has given notice that the sale of Exchange Notes may be resumed, as
the case may be. As a result, a broker-dealer who intends to use the Prospectus
in connection with resales of Exchange Notes received in exchange for Original
Notes pursuant to the Exchange Offer must notify the Company, or cause the
Company to be notified, on or prior to the Expiration Date, that it is a
broker-dealer. Such notice may be given in the space provided above or may be
delivered to the Exchange Agent at the address set forth in the Prospectus under
"The Exchange Offer -- Exchange Agent." All authority herein conferred or agreed
to be conferred in this Letter of Transmittal shall survive the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, legal representatives, successors and
assigns of the undersigned. Except as stated in the Prospectus, this tender is
irrevocable.
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Exchange
Notes or any Original Notes that are
not tendered are to be issued in the
name of someone other than the
registered holder(s) of the Original
Notes whose name(s) appear above.
Issue and mail:
/ / Exchange Notes to:
/ / Original Notes not tendered to:
Name(s):
-----------------------------------
(PRINT)
Address:
-----------------------------------
-----------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if
the Exchange Notes or any
Original Notes that are not
tendered are to be sent to
someone other than the
registered holder(s) of the
Original Notes whose name(s)
appear above, or to the
registered holder(s) at an
address other than that shown
above. Mail:
/ / Exchange Notes to:
/ / Original Notes not tendered to:
Name(s):
-----------------------------------
(PRINT)
Address:
-----------------------------------
-----------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------
TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NUMBER
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed either if (a)
tenders are to be made pursuant to the procedures for tender by book-entry
transfer set forth in "The Exchange Offer -- Procedures for Tendering" in
the Prospectus and an Agent's Message is not delivered or (b) Certificates
are to be forwarded herewith. Timely confirmation of a book-entry transfer
of such Original Notes into the Exchange Agent's account at DTC, or
Certificates as well as this Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature
guarantees, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at its addresses set
forth herein on or prior to the Expiration Date. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter of Transmittal. The term "Agent's Message" means a message,
transmitted by DTC to and received by the Exchange Agent and forming a
part of a book-entry confirmation, which states that DTC has received an
express acknowledgment from the tendering Participant, which
acknowledgment states that such Participant has received and agrees to be
bound by the Letter of Transmittal and that the Company may enforce the
Letter of Transmittal against such Participant. The term "book-entry
confirmation" means a timely confirmation of book-entry transfer of
Original Notes into the Exchange Agent's account at DTC.
Holders who wish to tender their Original Notes and (i) who cannot deliver
their Original Notes, this Letter of Transmittal and all other required
documents to the Exchange Agent on or prior to the Expiration Date or (ii)
whose Original Notes are not immediately available may tender their
Original Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set
forth in "The Exchange Offer -- Guaranteed Delivery Procedures" in the
Prospectus. Pursuant to such procedures: (a) such tender must be made
through an Eligible Institution (as defined below); (b) on or prior to the
applicable Expiration Date, the Exchange Agent must receive from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail, hand delivery or facsimile transmission)
setting forth the name and address of the holder, the certificate number(s)
of such Original Notes and the principal amount of the Original Notes being
tendered, stating that the tender is being made thereby and guaranteeing
that, within five business days after the applicable Expiration Date, the
applicable Letter of Transmittal together with the certificate(s)
representing the Original Notes (or Book-Entry Confirmation) and any other
documents required by the applicable Letter of Transmittal will be
delivered by the Eligible Institution to the Exchange Agent; and (c) such
properly completed and executed Letter of Transmittal, as well as the
Certificate(s) representing the tendered Original Notes in proper form for
transfer (or Book-Entry Confirmation) and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within five
business days after the applicable Expiration Date, all as provided in "The
Exchange Offer--Guaranteed Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by mail, hand delivery
or facsimile transmission to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice.
For Original Notes to be properly tendered pursuant to the guaranteed
delivery procedure, the Exchange Agent must receive a Notice of Guaranteed
Delivery on or prior to the Expiration Date. As used herein and in the
Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor
institution," including (as such terms are defined therein)(i) a bank; (ii)
a broker, dealer, municipal securities broker or dealer or government
securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency;
or (v) a savings association that is a participant in a Securities Transfer
Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE
TIMELY DELIVERY. THE COMPANY WILL NOT ACCEPT ANY ALTERNATIVE, CONDITIONAL
OR CONTINGENT
<PAGE> 8
TENDERS. EACH TENDERING HOLDER, BY EXECUTION OF A LETTER OF TRANSMITTAL
(OR FACSIMILE THEREOF OR AGENT'S MESSAGE IN LIEU THEREOF), WAIVES ANY
RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF SUCH TENDER.
2. Guarantee of Signatures. No signature guarantee on this Letter of
Transmittal is required if:
(a) this Letter of Transmittal is signed by the registered holder
(which term, for purposes of this document, shall include any participant in DTC
whose name appears on a security position listing as the owner of the Original
Notes) of Original Notes tendered herewith, unless such holder(s) has completed
either the box entitled "Special Issuance Instructions" or the box entitled
"Special Delivery Instructions" above, or
(b) such Original Notes are tendered for the account of a firm that is
an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. Inadequate Space. If the space provided in the box captioned "Description
of Original Notes Tendered" is inadequate, the Certificate number(s)
and/or the principal amount of Original Notes and any other required
information should be listed on a separate signed schedule which is
attached to this Letter of Transmittal.
4. Partial Tenders and Withdrawal Rights. If less than all the Original Notes
evidenced by any Certificate submitted are to be tendered, fill in the
principal amount of Original Notes which are to be tendered in the box
entitled "Principal Amount of Original Notes Tendered." In such case, new
Certificate(s) for the remainder of the Original Notes that were evidenced
by your old Certificate(s)will be sent to the holder of the Original
Notes, promptly after the Expiration Date. All Original Notes represented
by Certificates delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes pursuant to
an Exchange Offer may be withdrawn, unless theretofore accepted for
exchange as provided in the applicable Exchange Offer, at any time prior
to the Expiration Date of that Exchange Offer.
To be effective, a written or facsimile transmission notice of withdrawal
must be received by the Exchange Agent at its address set forth herein
prior to the Expiration Date. Any such notice of withdrawal must (i)
specify the name of the person having deposited the Original Notes to be
withdrawn (the "Depositor"),(ii) identify the Original Notes to be
withdrawn (including the Certificate number or numbers and aggregate
principal amount of such Original Notes), and(iii) be signed by the holder
in the same manner as the original signature on the applicable Letter of
Transmittal (including any required signature guarantees). All questions
as to the validity, form and eligibility (including time of receipt) of
such notices will be determined by the Company in its sole respective
discretion, which determination shall be final and binding on all parties.
Any Original Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be
issued with respect thereto unless the Original Notes so withdrawn are
retendered. Properly withdrawn Original Notes may be retendered by
following one of the procedures described in the Prospectus under "The
Exchange Offer--Procedures for Tendering" at any time prior to the
applicable Expiration Date.
Any Original Notes which have been tendered but which are not accepted for
exchange due to the rejection of the tender due to uncured defects or the
prior termination of the applicable Exchange Offer, or which have been
validly withdrawn, will be returned to the holder thereof (unless
otherwise provided in the Letter of Transmittal), as soon as practicable
following the applicable Expiration Date or, if so requested in the notice
of withdrawal, promptly after receipt by the issuer of the Original Notes
of notice of withdrawal without cost to such holder.
5. Signatures on Letter of Transmittal, Assignments and Endorsements. If this
Letter of Transmittal is signed by the registered holder(s) of the
Original Notes tendered hereby, the signature(s) must correspond exactly
with the
<PAGE> 9
name(s)as written on the face of the Certificate(s) or on a security
position listing without alteration, enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof or Agent's
Message in lieu thereof) as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing and must submit proper evidence satisfactory to the Company, in
its sole discretion, of such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Exchange
Notes are to be issued in the name of a person other than the registered
holder(s).Signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Original Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the
name or names of the registered owner(s) appear(s) on the Certificates,
and also must be accompanied by such opinions of counsel, certifications
and other information as the Company may require in accordance with the
restrictions on transfer applicable to the Original Notes. Signatures on
such Certificates or bond powers must be guaranteed by an Eligible
Institution.
6. Special Issuance and Delivery Instructions. If Exchange Notes are to be
issued in the name of a person other than the signer of this Letter of
Transmittal, or if Exchange Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Certificates for Original Notes not exchanged will be returned
by mail or, if tendered by book-entry transfer, by crediting the account
indicated above maintained at DTC. See Instruction 4.
7. Irregularities. The Company will determine, in its sole discretion, all
questions as to the form of documents, validity, eligibility (including
time of receipt) and acceptance for exchange of any tender of Original
Notes which determination shall be final and binding on all parties. The
Company reserves the absolute right, in its sole and absolute discretion,
to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to
the Company, be unlawful. The Company also reserves the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Conditions
of the Exchange Offer" or any conditions or irregularity in any tender of
Original Notes of any particular holder whether or not similar conditions
or irregularities are waived in the case of other holders. The Company's
interpretation of the terms and conditions of the Exchange Offer
(including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Original Notes will be deemed to have been
validly made until all irregularities with respect to such tender have
been cured or waived. Neither the Company, any affiliates or assigns of
the Company, the Exchange Agent, or any other person shall be under any
duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
8. Questions, Requests for Assistance and Additional Copies. Questions and
requests for assistance may be directed to the Exchange Agent at its
address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Exchange Agent or from your broker, dealer, commercial bank, trust company
or other nominee.
<PAGE> 10
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income tax
law, a holder whose tendered Original Notes are accepted for exchange is
required to provide the Exchange Agent with such holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the
Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50
penalty. In addition, payments to such holders or other payees with
respect to Original Notes exchanged pursuant to the Exchange Offer may be
subject to 31% backup withholding.
The box in Part 2 of the Substitute Form W-9 may be checked if the
tendering holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 2 is
checked, the holder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Exchange Agent will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Exchange Agent. The Exchange
Agent will retain such amounts withheld during the 60 day period following
the date of the Substitute Form W-9. If the holder furnishes the Exchange
Agent with its TIN within 60 days after the date of the Substitute Form
W-9, the amounts retained during the 60 day period will be remitted to the
holder and no further amounts shall be retained or withheld from payments
made to the holder thereafter. If, however, the holder has not provided
the Exchange Agent with its TIN within such 60 day period, amounts
withheld will be remitted to the IRS as backup withholding. In addition,
31% of all payments made thereafter will be withheld and remitted to the
IRS until a correct TIN is provided.
The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner
of the Original Notes or of the last transferee appearing on the transfers
attached to, or endorsed on, the Original Notes. If the Original Notes are
registered in more than one name or are not in the name of the actual
owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on
which number to report.
Certain holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these
backup withholding and reporting requirements. Such holders should
nevertheless complete the attached Substitute Form W-9 below, and write
"exempt" on the face thereof, to avoid possible erroneous backup
withholding. A foreign person may qualify as an exempt recipient by
submitting a properly completed IRS Form W-8, signed under penalties of
perjury, attesting to that holder's exempt status. Please consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for additional guidance on which holders are
exempt from backup withholding. Backup withholding is not an additional
U.S. Federal income tax. Rather, the U.S. Federal income tax liability of
a person subject to backup withholding will be reduced by the amount of
tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
10. Lost, Destroyed or Stolen Certificates. If any Certificate(s) representing
Original Notes have been lost, destroyed or stolen, the holder should
promptly notify the Exchange Agent. The holder will then be instructed as
to the steps that must be taken in order to replace the Certificate(s).
This Letter of Transmittal and related documents cannot be processed until
the procedures for replacing lost, destroyed or stolen Certificate(s) have
been followed.
11. Security Transfer Taxes. Holders who tender their Original Notes for
exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Exchange Notes are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of
the Original Notes tendered, or if a transfer tax is imposed for any
reason other than the exchange of Original Notes in connection with the
Exchange Offer, then the amount of any such transfer tax (whether imposed
on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the
amount of such transfer taxes will be billed directly to such tendering
holder.
<PAGE> 11
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
- ->
- --------------------------------------------------------------------------------
- ->
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: 1999
---------------
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Certificate(s) for the Original Notes hereby tendered or on a security position
listing, or by any person(s) authorized to become the registered holder(s) by
endorsements and documents transmitted herewith (including such opinions of
counsel, certificates and other information as may be required by the Company
for the Original Notes to comply with any restrictions on transfer applicable to
the Original Notes). If signature is by an attorney-in-fact, executor,
administrator, trustee, guardian, officer of a corporation or another acting in
a fiduciary capacity or representative capacity, please set forth the signer's
full title. See Instruction 5.)
Name(s):
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
---------------------------------------------------------
Address:
----------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.:
------------------------------------------
Taxpayer Identification or Social Security No.:
--------------------------------
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED - SEE INSTRUCTION 2)
FOR USE BY FINANCIAL INSTITUTIONS ONLY.
Authorized Signature:
----------------------------------------------------------
Name:
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
- --------------------------------------------------------------------------------
Dated: , 1999
-----------------------
<PAGE> 12
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX
AT RIGHT AND CERTIFY BY SIGNING AND DATING
BELOW.
- ----------------------------------------
Social Security Number or
Employer Identification Number
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN")
PART 2 -- Certification -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
PART 3 -- AWAITING TIN / /
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out item (2). (Also see instructions in the enclosed
Guidelines.)
Signature Date 1999
--------------------------------- --------------
<PAGE> 13
APPENDIX A
NEW MEXICO HOLDERS
Any "financial or institutional investor" (as defined below) or broker-
dealer. The term "financial or institutional investor" means any of the
following whether acting for itself or others in a fiduciary capacity other than
as an agent; depository institution (as defined), insurance company, insurance
company separate account, investment company as defined in the Investment
Company Act of 1940; an employee pension, profit-sharing or benefit plan (i) if
the plan has total assets in excess of $5,000,000, or (ii) if the investment
decisions are made by a plan fiduciary, as defined in the Employee Retirement
Income Security Act of 1974, which is either a broker-dealer registered under
the Securities Exchange Act of 1934, an investment adviser registered or exempt
from registration under the Investment Advisers Act of 1940, a depository
institution or an insurance company; a business development company as defined
in the Investment Company Act of 1940, a small business investment company
licensed by the United States Small Business Administration under Section 301(c)
or 301(d)of the United States Small Business Investment Act of 1958; or any
other financial or institutional investor as the Director of the New Mexico
Securities Division by rule or order designates.
The Director has designated the following additional "financial or
institutional investors": an entity, other than a natural person, which is
directly engaged in the business of, and derives at least eighty percent of its
annual gross income from, investing, purchasing, selling or trading in
securities of more than one issuer and not of its own issue, and that has gross
assets in excess of five million dollars ($5,000,000) at the end of its latest
fiscal year; an entity organized and operated not for private profit as
described in Section 501(c)(3) of the Internal Revenue Code with total assets in
excess of five million dollars ($5,000,000); a state, apolitical subdivision of
a state or an agency or corporate or other instrumentality of a state or a
political subdivision of a state; and an employee pension, profit sharing or
benefit plan, if the investment decisions are made by one or more plan
fiduciaries, as defined in the Employee Retirement Income Security Act of 1974,
so long as at least one of such plan fiduciaries is either a broker-dealer
registered under the Securities Exchange Act of 1934, an investment adviser
registered or exempt from registration under the Investment Advisers Act of
1940, a depository institution, or an insurance company.
PENNSYLVANIA HOLDERS
Any bank as defined, insurance company, pension or profit-sharing plan
or trust, investment company as defined in the Investment Company Act of 1940,
other financial institution or any person, other than an individual, which
controls any of the foregoing, the federal government, the State or any agency
or political subdivision thereof, any other person so designated by regulation
of the Pennsylvania Securities Commission, or any broker-dealer, whether the
buyer is acting for itself or in some fiduciary capacity. Entities so designated
by regulation include: (i) a corporation or business trust or a wholly-owned
subsidiary of the person which has been in existence for 18 months and which has
a tangible net worth on a consolidated basis, as reflected in its most recent
audited financial statements, of $10,000,000 or more; (ii) a college, university
or other public or private institution which has received exempt status under
section 501(c)(3) of the Internal Revenue Code of 1954 and which has total
endowment or trust funds, including annuity and life income funds, of
$5,000,000or more according to its most recent audited financial statements;
provided that the aggregate dollar amount of securities being sold to purchasers
in this category may not exceed 5% of the endowment or trust funds; (iii) a
Small Business Investment Company as that term is defined in section 103 of the
Small Business Investment Act of 1958 which either; (1) has a total capital
of$1,000,000 or more; or (2) is controlled by institutional investors as defined
herein; (iv) a Seed Capital Fund, as defined in section 2 and authorized in
section 6 of the Small Business Incubators Act; (v) a Business Development
Credit Corporation, as authorized by the Business Development Credit Corporation
Law; (vi) a person whose security holders consist solely of institutional
investors as defined herein or broker-dealers; or (vii) a qualified
institutional buyer as that term is defined in 17 CFR 230.144A (relating to
private resales of securities to institutions), or any successor rule thereto.
<PAGE> 14
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
8.625% SENIOR SUBORDINATED NOTES DUE 2009
OF
THE SCOTTS COMPANY
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
the procedures for delivery by book-entry transfer cannot be completed on a
timely basis (ii) certificates for the Company's (as defined below) 8.625%
Senior Subordinated Notes due 2009 (the "Original Notes") are not immediately
available or (iii) Original Notes, the Letter of Transmittal and all other
required documents cannot be delivered to State Street Bank and Trust
Company(the "Exchange Agent") on or prior to the Expiration Date (as defined in
the Prospectus referred to below).
This Notice of Guaranteed Delivery may be delivered by hand, overnight
courier or mail, or transmitted by facsimile transmission, to the Exchange
Agent. See "The Exchange Offer -- Procedures for Tendering" in the Prospectus.
The Exchange Agent for the Exchange Offer is:
STATE STREET BANK AND TRUST COMPANY
By Registered or Certified Mail or Hand or Overnight Delivery:
State Street Bank and Trust Company
Two International Place Fourth Floor Boston, MA 02110
Attention: Corporate Trust Department
Facsimile Transmissions: (Eligible Institutions Only) [______________]
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES.
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY
AN"ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE
GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON
THE LETTER OF TRANSMITTAL.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE> 15
LADIES AND GENTLEMEN:
The undersigned hereby tenders to The Scotts Company, an Ohio
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1999 (as the same may be amended or supplemented
from time to time, the "Prospectus"), and the related Letter of Transmittal
(which together constitute the "Exchange Offer"), receipt of which is hereby
acknowledged, the aggregate liquidation amount of Original Notes set forth below
pursuant to the guaranteed delivery procedures set forth in the Prospectus under
the caption "The Exchange Offer -- Procedures for Tendering."
Aggregate Principal Amount Tendered:
-----------------------------------------
Name(s) of Registered Holder(s):
---------------------------------------------
(PLEASE PRINT)
Certificate Nos.:
-----------------------------------------------------------
(IF AVAILABLE)
Address of Registered Holder(s):
----------------------------------------------
- ------------------------------------------------------------------------------
ZIP CODE
Daytime Area Code and Telephone No.:
----------------------------------------------
Check box if Original Notes will be delivered by book-entry transfer and provide
account number:
/ / The Depository Trust Company
DTC Account Number:
----------------------------------------------
Signature(s)
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
Dated:
----------------------------------
<PAGE> 16
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor
institution," including (as such terms are defined therein): (1) a bank; (2) a
broker, dealer, municipal securities broker, municipal securities dealer,
government securities broker, government securities dealer; (3) a credit union;
(4) a national securities exchange, registered securities association or
clearing agency; or (5) a savings association that is a participant in a
Securities Transfer Association recognized program (each of the foregoing being
referred to as an "Eligible Institution"), hereby guarantees to deliver to the
Exchange Agent at one of its addresses set forth above, either the Original
Notes tendered hereby in proper form for transfer, or confirmation of the
book-entry transfer of such Original Notes to the Exchange Agent's account at
The Depository Trust Company ("DTC"), pursuant to the procedures for book-entry
transfer set forth in the Prospectus, in either case together with one or more
properly completed and duly executed Letter(s) of Transmittal (or facsimile
thereof or Agent's Message in lieu thereof) and any other required documents
within three business days after the date of execution of this Notice of
Guaranteed Delivery. The undersigned acknowledges that it must deliver the
Letter(s) of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof) and the Original Notes tendered hereby to the Exchange Agent within the
time period set forth above and that failure to do so could result in a
financial loss to the undersigned.
Name of Firm:
-------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
(ZIP CODE)
AUTHORIZED SIGNATURE:
-----------------------------------------------------------
Name:
-------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Daytime Area Code and Telephone No.:
-------------------------------------------
Dated: , 1999
------------------------------------
NOTE: DO NOT SEND ORIGINAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
ACTUAL SURRENDER OF ORIGINAL NOTES MUST BE MADE PURSUANT TO, AND BE
ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
